THE PROS AND CONS OF OUTSOURCING YOUR FINANCE AND ACCOUNTING SERVICE
March 24, 2021
We preach about the importance of the cash flow forecast. It really is the best way to grow your business profitability, help with strategy and reduce your stress.
If you don't have one, you need to get one. And who should be responsible for overseeing it? It depends on the size of your business. Yes, size matters!
In large companies, a CFO is responsible for the cash flow forecast. Smaller companies may rely on a controller or even a bookkeeper. Many entrepreneurs manage it themselves, unfortunately. And some companies decide to outsource the finance and accounting function.
Is outsourcing right for your business? It's up to you. But here are a few things to think about:
The Pros of outsourcing your finance and accounting:
- Increase your capacity - Fast growing businesses require all hands on deck. Expanding departments like accounting can be complicated and use previous time that could be spent on other tasks.
- More time to focus on your strengths - Everyone has their strengths. For some entrepreneurs, innovation and drive for success make it hard to focus on the bottom line. Outsourcing can help to keep you focused on what you are best at doing.
- Books are done "the right way" - Most entrepreneurs start out managing the books because they think it's the only way to understand cash flow. They hang onto it longer than they should, and about 100% of the time the books are wrong. Outsourcing to a professional decreases your risk and minimizes mistakes.
- Saves you money- Rather than hiring an employee and the extra expenses that come with that, you can save money by using an outside accounting firm. The firm can determine what services you need and can afford, and can even save you operational costs with regular audits.
The Cons of outsourcing your accounting:
- Lack of business understanding - If an outsourced accounting or finance professional is not working in your business regularly, they may not have a true understanding of your business, your challenges and your opportunities.
- Less day-to-day control - Though weekly and monthly meetings are standard with outsourced accounting teams, some entrepreneurs want the ability to discuss day-to-day operations and decisions with their financial team. Outsourcing gives up some of the control you have.
- Strain on trust - Outsourcing can make some employees wonder about their own job security. If can impact the overall culture of the company. If you decide to outsource, ensure communication with your employees about the process, and exactly how it will affect their day-to-day.
For some business owners, the benefits of outsourcing accounting services outweigh the potential surprises the relationship can bring. For others, keeping the financials inside the company brings them peace of mind, and allows them to keep their operations local.
Do you outsource your finance and accounting functions, or handle it internally? Would you recommend it to a colleague? Share your experience on Facebook, Twitter and LinkedIn!
