Advantages and Disadvantages of Outsourcing Accounting


 Outsourcing of accounting services is the transfer of accounting of the organization to third-party specialists. This is done to optimize business processes - the company gets the opportunity to concentrate on the core business, reduce financial risks and, most importantly, reduce financial costs.

Sometimes outsourcing accounting is confused with hiring a freelance accountant. This is fundamentally wrong, since outsourcing is a transfer of regular functions, and a freelance accountant mainly performs occasional tasks.

Advantages of outsourcing accounting

Transferring accounting services to outsourcing has a number of significant advantages over having a full-time accountant or a freelance incoming employee:

1. Reducing the cost of maintaining accounting

For the work of even one full-time accountant, an equipped workplace is required, which implies the presence of a computer, telephone, and other office equipment, and the purchase and installation of accounting programs. When outsourcing, an accountant already has everything necessary, including software, which means that there will be no extra costs.

A full-time employee always has the right to count on the payment of wages, regardless of their presence at the workplace at one time or another (vacation, sick leave, and so on). In addition, it is necessary to constantly pay taxes and salaries. The transition to outsourcing can reduce costs by an average of 25-30%.

2. Quality of services

Since in companies specializing in the provision of accounting services, all business processes have long been worked out, the solution to both complex and routine issues is much faster. At the same time, the outsourcer offers its client the simultaneous support of several specialists on the staff: lawyers, specialists in tax law, and labor law. To improve the quality, the work of the accounting specialist is controlled and checked by the head of the department and the auditor of internal control.

Prompt response to changes in legislation and possession of modern packages of legal and accounting programs also improve the quality of services provided and guarantee the correct and timely execution and reporting.

3. Responsibility for the result

In the case of transferring accounting to outsourcing, the company is protected by the provisions of the contract, according to which the outsourcer is responsible for causing harm in the provision of accounting services as a result of errors, omissions, loss, and damage to documents, unintentional violation of the law.

Usually, a well-written contract always spells out the nuances of interaction between the customer and the contractor. As a rule, the outsourcer assumes all the risks of compensation for damages from the payment of all fines and penalties imposed by the tax office, so they are interested in eliminating any possibility of their occurrence.

4. Privacy

Since the outsourcer and the client are business partners whose interests must coincide, an agreement is concluded between them to keep secret any information received in connection with the execution of the contract in order to avoid losses and damage to the interests of the client. In order to ensure confidentiality, various interaction options can be used that exclude information leakage.

In the case of an incoming accountant, this problem is the most serious, since they have no interest in the prosperity and development of a particular firm. As a rule, such an accountant keeps records in several organizations and there is a possibility that information will be transferred to competitors.

Disadvantages of outsourcing accounting

With the undoubted advantages of accounting outsourcing, you should also be aware of the risks associated with it:

  • Reputation risk. It may be related to the unsatisfactory provision of services by the outsourcing company.
  • Risk of information leakage. When transferring accounting functions to a third-party organization, one way or another, there is a security problem associated with the loss of confidentiality.
  • operational risk. It can also be caused by the incompetence of the outsourcer or the use of imperfect technologies.
  • Risk of decreased responsiveness. In some cases, a delayed response to the appearance of problems in accounting is possible.

To avoid these risks, it is recommended to be very careful when choosing an outsourcing company, and when concluding a service contract, take into account all possible nuances in it.

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Thursday, 28 September 2023