Accounting is an especially crucial part of any business, dictating nearly every decision you make. If you're not a seasoned expert at managing money, handling taxes, or tracking cash flow, it may be worth the investment to hire an accountant or accounting firm to help.
Here's everything you need to know about third-party accounting, including tasks you can outsource and tips for finding the right provider.
[Read more: Accounting Basics Every New Business Owner Should Learn]
Why should you outsource your accounting?
It's nearly impossible to efficiently oversee every part of your company without a bit of outside help. While you might be hesitant to pay for accounting services on an already tight budget, doing so can actually save you money in the end.
"Outsourcing or hiring a highly qualified accounting or finance professional brings long-term savings and reliability, preventing issues before they arise and improving the business's financial health," explained Chris Rivera, Founder of The Ecommerce Accountants.
Aside from avoiding crucial accounting errors that may stem from trying to do your own books, here are a few reasons why you should consider outsourcing your accounting:
- You'll have more time to spend managing and growing your business.
- You'll pay only for the services you need rather than investing in a full-time, in-house employee.
- You'll have access to accounting technology that keeps your information secure, backed up, and readily available.
- Your accountant can analyze historical data and trends to offer expert recommendations for positive cash flow and future financial success.
Having a professional back you and your business while freeing you up so you can channel your strengths elsewhere can make all the difference.
Outsourcing or hiring a highly qualified accounting or finance professional brings long-term savings and reliability, preventing issues before they arise and improving the business's financial health.
Chris Rivera, Founder of The Ecommerce Accountants
Accounting tasks you can outsource
An outsourced accounting service can tackle various financial responsibilities, including the following.
Bookkeeping
Accurate bookkeeping is crucial to understanding your business's financial health and making decisions accordingly. Outsourcing this process to professionals can ensure your bookkeeping is accurate — which can be challenging for busy entrepreneurs, especially those without a background in finance.
"Business owners should almost always outsource their bookkeeping, as it's the most tedious task when running accounting in their business. It's also very technical and needs to be done correctly if you really want to make sound financial business decisions," said Christian Maldonado, Founder & COO of TaxAdvisor365.
An outsourced bookkeeping solution can handle various tasks, including accounts receivable and accounts payable management, bank account reconciliation, and financial reporting.
Payroll
While it's common for small business owners to handle their payroll in-house, outsourcing this to a professional can free up internal resources and reduce the likelihood of errors — which can quickly become costly.
"Payroll involves tax withholdings, regulatory compliance, and timely filings, which can be complex and time-consuming, especially for businesses without dedicated HR or accounting staff," explained Li Han Tan, Co-Founder and Principal Consultant of W.L.P. Group. "Delegating to an experienced professional ensures accuracy, helps avoid compliance issues, and saves time that business owners can use to focus on core operations."
Payroll service providers can manage various tasks on your behalf, including calculating employee wages and tax withholdings, processing direct deposits, and managing new hire reporting — all while keeping your business in line with current payroll regulations.
Financial planning and analysis
As the name suggests, financial planning and analysis (FP&A) encompasses budgeting and planning, analyzing financial data, and forecasting revenue. These tasks offer valuable insights into the business's financial health, allowing you to make more informed decisions.
Outsourced FP&A professionals have the necessary skills, tools, and experience to handle these tasks, providing a comprehensive overview of your business's strategic objectives. You might enlist help with data collection and validation, financial modeling, budgeting and forecasting, trend analysis and reporting, or scenario analysis.
Tax preparation and compliance
According to David Emmerman, Head of Enterprise Sales at Xero, tax compliance can quickly become complicated for small businesses, which is why it's a good reason to outsource it.
"[There are] numerous regulations and nuances that often go unnoticed by those not deeply involved in tax matters, [which] can cause undue stress and financial problems," said Emmerman.
"Taxes are hard, and if you don't have a knack for it, it can lead to costly mistakes," added Arham Ullah, Principal at Tangent Consulting. "You don't want to be on the 'IRS naughty list,' so having a professional alongside you can help you file accurately."
There are also many beneficial small business tax provisions that may be overlooked by owners who lack specialized tax knowledge, said Emmerman. A tax professional's insights and expertise can help you minimize your business's tax liabilities and improve overall profitability.
"Seeking expert guidance on tax issues can provide essential advice, helping small businesses establish a solid foundation from the start," Emmerman noted.
[Read more: 5 Time-Consuming Entrepreneurial Tasks You Can Outsource]
Choosing the right outsourced accounting partner
As with any business relationship, a good fit is crucial. Start by identifying your business's needs, then search for outsourced accounting partners who can meet those needs. Tapping your network for recommendations and reading customer reviews can help you start your search on the right foot.
After narrowing down your search, ask the following questions to determine whether a potential outsourced accounting partner is an ideal match:
- What training and qualifications do they have?
- What types of businesses do they work with? Have they worked with small businesses?
- Does their tech stack support/integrate with yours?
- How will they integrate with your internal team (if applicable)?
- What is the cadence of communication?
- What data security measures do they have?
- How do they stay updated on current regulations and financial standards?
Once you've found a partner who meets your criteria, maintain open lines of communication and continuously assess your needs to ensure a positive, mutually beneficial relationship.
[Read more: 10 Free Accounting Tools for Your Small Business]
This article was originally written by Sean Peek.
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