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Are there drawbacks to outsourcing your accounting services? The pros and cons

There are countless reasons why small and medium enterprises (SMEs) would want to outsource their accounting services. A lot of business processes can be outsourced, and accounting ranks pretty high up on the list of difficult, complex, and frustrating business responsibilities.

Outsourcing is great because you get to reduce costs, get access to expert advice, and, most importantly: free yourself from bookkeeping-induced headaches. In some ways, it seems like it might just be too good to be true.

Like many business owners, you might be wondering: are there any reasons why an SME should be wary of outsourcing their accounting practices? 

The answer is yes, of course. You can’t simply sign away such a critical aspect of your business to a random service provider and hope for the best. If you haven’t been able to decide whether to book that free consultation, you aren’t alone. Here are some of the most common concerns that business owners have when thinking about outsourcing.

Concern #1: What if I lose control over my accounting processes?

When you’ve got an in-house team of accountants, you can raise concerns with them in an instant. But what if you’re outsourcing? You can’t see them directly, you can’t supervise them—wouldn’t that make it much tougher to ensure they’re doing their job correctly?

The answer: First, SMEs may not have the spare funds to invest in a team of accountants. Making even a single full-time hire is expensive—entry-level accountants in Singapore with less than one year of experience can expect a yearly salary of about S$34,380, or $2900 a month.

Then you’ve got to deal with managing and training the new hires on your own. This requires onboarding, consistent overseeing, and multiple checks to ensure they’ve done their job correctly. 

Outsourcing is a lot more plug and play, and it costs much, much less (often just a few hundred dollars a month). In the long-term, it also provides greater control over your accounting processes. How so? Well—if you choose the right provider, you’re getting access to an entire team of experts. There should always be someone there to answer your question—and you won’t have to deal with all the stress of hiring and maintaining that extra employee.

Concern #2: What if I get stuck with hidden costs?

Some firms may charge different fees for different services that you didn’t know about from the onset, or they may only offer a limited amount of services, and anything else may incur additional charges. Those add-ons can quickly add up, ballooning your initial cost predictions. If you find out too late, you might be trapped in a long-term agreement, paying much more than you can afford per month.

The answer: Look for providers who offer retainer pricing rather than billing by the hour. (More on this later.) They should also share their pricing strategy from the start. Harvest works on a retainer basis so we charge a flat monthly fee at the beginning of our partnership. No surprises and no time-based billing. We also offer a variety of services such as vendor payruns and employee expense claims management that you can add on and customise as required.

Concern #3: What if the service they provide isn’t of high quality?

Some firms simply see themselves as service providers, so it’s normal to feel concerned that they’ll skimp on quality or dedication. If they only collaborate with clients on an as-needed basis, then are you really getting your money’s worth? Traditional accounting firms only meet with clients twice a year: once to file and once at the financial year’s end. 

Yet, charging by the hour is an entirely different dilemma: there’s always that tiny worry that they might be slowing their work down to get more money.

The answer: Though this is a very valid concern, it’s important to remember that different service providers offer different levels of service quality. This offers you a lot of choice and control in determining the quality of your third-party accountant.

Whether you’re looking into secretarial, accounting, or payroll services, we recommend you always do your research. Look at media coverage and ask for real reviews. And take a look at their portfolio to see if you might recognize any names. Knowing that brands you trust have placed their confidence in a vendor can help make your decision easier.

Concern #4: What if they don’t mesh well with my business?

Even if you do get access to a professional, you may not always agree with their approach to managing your finances. Hiring a firm is basically like signing up for a long-term relationship, and you need to find a company that you can see yourself working with over the long-run.

The answer: Connecting to a third-party service provider (and indeed, to any kind of partner) can be tricky, but manageable. It’s important to get to know one another before you sign off on any contracts. 

Seek information about their values and take a closer look at how they do business. Are they communicative? What do their business processes look like? How do they interact with you? How long do they take to get back to emails? From the moment you first get in touch with a vendor, you can get clues as to how a future working relationship with them might look like.

Tips and tricks to find success when outsourcing

Remember: not all firms are created equal, but that doesn’t necessarily mean that you need to shell out the big bucks to get the best quality service. The key is to find accounting firms that are digital-first, with an open, transparent approach to doing business. 

There are a few other tips and tricks to select a vendor.

Look for a provider with a welcoming, proactive attitude

The ideal partner will be open to collaboration. Rather than just providing a service, they’ll go above and beyond to drive growth. This can come in the form of monthly engagements and check-ins. 

At Harvest, for example, we spend a lot of time upfront in the exploration and onboarding phase to ensure there are no surprises for our clients and for us. We don’t just focus on the annual accounting: we also digitise and streamline the entire accounting workflow to reduce inefficiencies and redundancies. 

Align your values with theirs

To succeed in these modern times, you’ll have to remain laser-focused on core business activities that directly contribute to growth and income. Ideally, the vendors you engage won’t just free up your precious time—they’ll help you identify key business opportunities.

Though the values of the vendors you select don’t have to be identical, it’s important that you can synergise well with them. Some vendors might cherish a human-centric and service-centric approach; others are focused solely on cost. 

Understanding if and how your values overlap can help you build more positive and productive working relationships. 

The difference between a solutions provider and a true business partner are shared values, goals, and commitments. When you share these important aspects, your business connection can thrive over the long-term. And the insights from a seasoned vendor who is invested in your success allow you to broaden your relevance and avoid potential pitfalls. 

Discuss your budget

One of the best reasons to invest in outsourced accounting services is because it saves time and money. That means you should definitely discuss the budget sooner rather than later. Nothing is more disappointing than feeling like you’ve found the right fit, only to be battered with high fees and surprise charges.

If possible, create a comparison table to help you understand what you might be gaining or missing by choosing one accountant over another. This table should include information such as:

  • Their pricing ranges
  • How they calculate pricing
  • What those fees include
  • Extra charges and why they might be incurred 
  • Costs for the most common integrations—such as Xero

In contrast with hourly billing, some providers go to the other extreme and offer standard pricing packages—based on a fixed amount of transactions or even revenue. We feel this approach doesn’t account for unique business needs. At Harvest, we prefer to spend more time up front to get to know your business and craft a bespoke package that fully meets your requirements. 

The more we can help to automate your financial operations, the more time we’ll save for the both of us, and the lower our fees might be!

Good luck in your search!

Like we’ve already said before—though there are potential drawbacks to outsourcing, these can be avoided with a careful approach during the vendor search process.

At Harvest Accounting, we utilise technology to make our processes more efficient so we can be better partners to your business; we automate the tedious bits so we can put humans first in everything we do. If that’s the kind of partnership you’re looking for, then we should talk. Get in touch with us here.

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