Why Outsourcing Finance and Accounting Processes Reduces Risk
In order to stay competitive in today’s business market companies are looking to many different strategies to increase efficiency. An increasingly common practice is to outsource finance and accounting (F&A) processes. At first thought one might react with uncertainty to handing over the financial reigns to another company, but there are reasons why outsourcing these roles may actually reduce risk.
A business is usually a result of an idea and the pursuance of that idea. Often accounting for the cash flow of the business is usually secondary, although necessary. As a result outsourcing finance processes of the business allows the focus to concentrate on the operation and growth of its product or service, thus increasing bottom line and reducing accounting errors as a result of inexperience.
Outsourcing can reduce financial risk in a few ways.
• If the managers of company are not fluent in financial and accounting practices, performing these tasks would take significantly more time to complete versus that of a resource that specializes in that function. The math is simple, less hours spent on these functions equals less money spent.
• Often times finance and accounting is a very small but necessary part of their business. As a result they may not require a full time staff member, thus when outsourced they only pay for the hours that they need. Again this equates to cost savings and reduction.
Commerce is governed by sets of rules and regulations. This is to ensure a level playing field for all companies. Such regulations can include GAAP, taxation laws and employment compensation policies. However, often times these requirements can be in depth and difficult to interpret. It’s true that many non-compliance issues are a result of honest mistakes, a case of being truthfully ignorant of one or many of these economic regulations. This is a large area of risk to business as these honest errors can translate in huge costs to the company in fines or corrections.
By outsourcing your finance and accounting roles to professionals who specialize in these functions you inherently reduce the risk of becoming non-compliant. These companies have built a reputation on marketing themselves as professionals in their industry (F&A), they strive and ensure they are up to date with all current regulations. This same level of attention may not be able to be afforded by in house staff who may not have the same experience or carry multiple responsibilities.
Instead of interviewing to hire a sole individual for a role you are hiring an organization that contains a collective of highly experienced individuals whom have already been pre-screened. In the event of holiday coverage or staffing changes, the outsourced professionals would be responsible for managing this, thus relieving the hiring company of this task. Instead of less or non-experienced cover offs within the business to account for these situations, the outsourcing company already has equally knowledgeable employees to step in seamlessly.
There are certainly many benefits to outsourcing F&A functions, however with any business decision it’s critical to do your research and ensure you have proper legal agreements in place. Many finance and accounting companies, such as us at Cushnoc, offer a variety of solutions for your business to support you in any area you may need.