Are you thinking of doing the accounting in-house for your start-up? Think again! You might think you’re being smart and saving money by doing things yourself, but you could end up over your head and waste a lot of precious time and money.
Here we’ll show you why you should outsource accounting department responsibilities, and then we’ll show you how to outsource your startup’s accounting department.
But first of all, let’s look at the definition of outsourcing and what it’s really all about. Basically, outsourcing is obtaining services or goods from an outside supplier instead of obtaining them internally.
Currently, “outsourcing” means the contracted services usually come from another country. The connotation, especially at the beginning of the outsourcing trend, was that outsourced goods and services were cheap and of low quality. Outsourcing had a reputation problem.
However, in the intervening years, outsourced services have become good and have a satisfactory quality to value ratio. In some cases, the quality of outsourced services has evolved to become outstanding. That alone makes outsourcing your startup’s accounting department worth investigating.
But before getting to how you can outsource your accounting, it’s necessary to determine why you should do it. Nobody should do anything without a reason, right?
Why Should You Outsource Your Accounting Department?
First of all, think of all your costs if you decide to keep your books yourself or have an in-house accounting department. Of course, it will be nice to have everything right there with you, but you need to factor in overhead (the space you need and the rent it will cost), office furniture, hardware, software, and employee salary. You’ll even need to consider all the coffee the accounting department will drink; you’ll need a coffee maker, a kettle, coffee beans, filters, sugar, and cream on top of everything else. That’s a lot of money – and a big headache.
By outsourcing, you’ll only need to keep one cost in mind; the fee you pay to the company that will keep your books for you. You won’t need to worry about overhead or the other costs again. You’ll save space, economize, and save your sanity!
The next thing that you have to consider is expertise. If you’re attempting to do the books yourself, do you honestly know what you’re doing? By trying to run a tight ship when it comes to costs, your book-keeping errors can seriously muddle things up and get you into financial or legal trouble. Don’t risk it; get experts who know accounting inside-out and that know your state’s laws. They’ll take care of your accounting tasks the right way the first time. Free of this worry, you’ll be able to fully focus on what’s important: improving and growing your startup.
Finally, if you outsource accounting department tasks and responsibilities, you’ll have more time to dedicate to running your business. When entrepreneurs take on accounting themselves, they burn out and lose the passion for their product or service. Some entrepreneurs will even go so far as to quit because the going gets so tough with all the extra tasks. Don’t let this happen to you – seriously think about outsourcing and free up some of your time – for your sake and your business’s.
How to Outsource Accounting Departments
Now that we’ve established why you should outsource, you might be asking yourself: “how do I outsource?” Here we’ll go over the steps so that you can start looking for vendors as efficiently as possible. As you’ll see, it’s not too complicated, but you will need to put in a bit of legwork.
Define your needs
Straight off the bat, you’ll need to define your startup’s needs. Some of the questions you’ll need to ask and answer are:
What size is my business? How many employees do I have or will have in the future? This is important because the accounting needs of a small business are very different from those of a large one. Furthermore, you’ll need to consider if your company will be growing – you always want to give yourself a bit of wiggle room. Don’t underestimate the size of your company, but don’t exaggerate its size either. You don’t want to hire an entire firm when the accountant down the street from you will do the job just fine.
Do I want basic book-keeping, or something more complex? In some cases, especially if you have a small business that you want to keep small, you might only need to hire an outside accountant part-time to look after the books. In others, where the business is bigger, you might want to outsource all of the accounting, payroll, and other such things to an accounting firm that will oversee the whole operation.
Do I want a local company or a foreign company for my accounting? Here, the choice is yours, but you must ensure that no matter who you hire, they must have expertise in your region/state/country’s laws. Don’t just consider price when it comes to outsourcing – a well-meaning but inept firm could spell disaster for you.
What sort of technology would work best for us? Do you want record-keeping to be cloud-based or on servers? Both have their advantages and disadvantages; what works best depends on your needs. If you’re unfamiliar with the technology, there are resources online that can get you up to speed.
What’s better, an online outsourcing service or an accounting firm? Again, this depends on you. There are plenty of medium to large-sized businesses that are comfortable using an online accounting service to oversee all of their accounting needs. However, while many are reputable, it might be tough to perform an audit or speak to a representative. Accounting firms, especially if they are based abroad, will also do everything online, but it might be easier to contact a live person who specifically works for your company. Their resources may not be as divided as those of an online service.
Find the right vendor
Once you’ve determined what your needs are, you can start your search for the right vendor. As usual, a search usually begins with Google and other databases. You might want to refresh your internet search skills so that you don’t lose time wading through thousands of results that are irrelevant to you.
Another way to find a vendor is the old-fashioned way: ask around. Ask people in a business that’s similar to yours who they use. You might be surprised at how they’ll be happy to provide you with information.
Next, after you’ve got the names of a few firms, you’ll want to read some reviews and do some due diligence. Research potential companies and see if they’ve got litigation problems, unhappy clients, or have caused legal problems for clients. Most importantly, make sure there are no language issues. If you can’t understand your accounting firm’s people in a remote meeting, you’re going to have problems.
Finally, when you’re searching for the right vendor, communicate, communicate, and communicate. Make sure their vision and values align with yours. And as mentioned before, make sure they’re familiar with your region’s laws.
Making the leap
Now that you’ve found the vendor of your dreams, or at least, the vendor who meets your needs, you can make the leap and open negotiations. You’ll need to ask what the outsourced department is offering, and you might need to do a bit of back-and-forth so that you get the deal that works best for you.
Before finalizing anything, have your legal team or a business lawyer look at the contract to ensure that everything is above-board and that there are no surprises buried in the small print. Then, when you’ve got the legal team’s approval, you can sign the necessary documents.
Once the contract is signed, do not hide information or make things difficult for the outsourced accounting department. Provide them with all the documents, files, and paperwork they need so that they can do their job. Be transparent and be helpful.
How hard can keeping books be? The answer is very hard – especially if you’re running on empty trying to get your startup off the ground. It’s not worth the risk; you can lose your passion, your money, and you can even find yourself in legal trouble if you make mistakes. Even having an in-house accounting department can be expensive and eat up precious space that can be used for something else. That’s why it is so important to consider outsourcing. Finding a vendor isn’t hard; all you need to do is put in a bit of work. Know what you need, do a bit of research, have a bit of chit-chat, negotiate, and your startup will be roaring along before you know it, with all of your passion for business intact.