Finance and accounting are a core function for an organization. In small business, accounting refers to tasks encompassing maintaining a general ledger – your books — and preparing financial statements. Beyond the world of small business accounting, there are different facets of accounting. While reduced cost comes across as a primary motive for outsourcing accounting services, several firms are now leveraging outsourcing to focus on the management side of the business.
Accounting outsourcing can help CPAs accelerate the ability to identify, prioritize, deliver value for clients, and make informed decisions. It is now going from transactional to management. In this blog, we will provide a list of types of accounting services that can be outsourced to gain a competitive edge.
Types of Outsourced Accounting Services
Cost accounting is an essential and integral part of accounting that determines the actual cost associated with product manufacturing or rendering a service. In a relatively understandable or straightforward term, this type of accounting deals with the cost of items for sale.
It’s useful in complex industries such as manufacturing or construction were several dozens of innumerable components are purchased and assembled together to make the items that are put for sale. Cost accountants account for and evaluate costs to determine high or low to make repricing or purchase products differently. The information derived from cost accounting can help identify which products, departments, or services are generating profit and need improvement.
Fraud or Forensic Accounting:
A highly specialized or niche role in accounting. Forensic accountants can assist a company that has been victimized by fraudulent activities. Forensic accountants can reconstruct the records of a destroyed business, restore fraudulent documents, and much more. Professionals in this field are likely to be involved in the insurance industry, legal support, or within a specialty practice of an audit firm. There are services available to help reduce the possibility of fraud.
Tax accounting can involve several functions:
This field deals with the process of gathering and deciphering accounting information for internal operations reporting. It involves different areas as cost accounting and target costing. Managerial accounting focuses on internal numbers and how the organization can reach its goals in the future. It’s is more comprehensive than cost accounting, but there are certain elements that overlap.
Financial accounting is preparing financial reports for external use and involves providing financial statements. Requiring detailed knowledge of frameworks such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), Financial accounting is about the aggregation of commercial information and converting into external reports.
In case the company is publicly held it is critical to understand and adhere to rules issued by the government entity accountable for public company reporting such as the Securities and Exchange Commission (SEC) in the US.
Checklist to Make Accounting Outsourcing Work
Accounting outsourcing services provide CPAs access to a team of highly qualified specialists for the management of accounts. Considering functional expertise allows companies to leverage provider’s expertise, best practices, and efficiencies which are the core focus areas for accounting outsourcing.
Once your business is ready to hire an outsourced accounting firm, it is vital to ensure that the process is seamless. Everything boils down to planning and preparation. When you hire an outsourced accounting firm, it is advantageous to plan about 2 to 4 weeks before things get the ball rolling. It could be a tad complicated if your books are lagging.
The checklist mentioned below should be followed for efficient risk mitigation before getting into a contract of any kind.
Set Clear Service Level Agreement:
It is crucial to understand and identify what to expect and clearly define performance metrics in terms of service delivery benchmarks. Specially, design and implement management and reporting structures to ensure the smooth functioning of the process. All the services needed from the service provider should align with and mapped clearly in Service Level Agreement (SLA). This ensures effective risk mitigation and streamlines operations.
Point to consider here are:
Align Offshore Accounting Team:
Your offshore service provider should work as an extension of the organization. It is essential that all the processes are clearly outlined and the knowledge is conveyed to the service provider before the commencement of work. The knowledge transfer also includes the use of accounting software, accounting practices, and reporting so that the process works in the right direction to achieve growth.
There are business vertical specific finance / regulatory compliances to adhere to. Ensure that all agreements are mapped in the service charter, and knowledge is imparted to the service provider before the commencement of work.
Industry Best Practices:
Don’t cut corners and ensure that you partner with a professional accounting firm following industry best practices in payroll processing, bookkeeping, and taxation. When outsourcing a company’s accounting services, factors such as transparency, integrity, performance, and efficiency should be a top priority.
Data security plays a very crucial role. Strict processes need to be in place to ensure that every transaction is secure. Remember, you are dealing with sensitive data recording various transactions of business, trade, and finance. There is no room for complacency in outsourcing accountant services. Always, check the outsourcing service provider protocols set in place for every client that they are handling.
Risk Mapping and Mitigation:
Ensure that there is a contingency plan in place before the contract for all the following is signed:
Accounting outsourcing can help increase efficiency and streamline processes. It is important to keep a checklist ready to ensure smooth transition.