Outsourcing Accounting Increases Cash Flow?

Did you know that in 2003, the United States Congress declared April as the month of Financial Literacy Month?

We would like to contribute to this great cause by tackling the following topic: “Why Outsourcing Accounting Can Increase Cash Flow?”

The National Small Business Association’s member survey from 2017 showed that small business owners spend over 100 hours per year on federal taxes alone.  Further, small business owners say 40% of their time is spent on bookkeeping and taxes and those are the “worst” part of owning a small business. 

Based on our experience, many small businesses think that outsourcing accounting is a high cost and choose to have an in-house bookkeeper, accountant, or do it themselves. 

We can all agree that outsourcing accounting is an investment, but did you know that in reality, it saves businesses money and business owners are happier? Why? Because they have greater reliance on the financial reports, and accuracy of financial information, which means that at all time, they know whether they make money or not and how to strategize. 

If you are still on the fence, below are two top reasons, why outsourcing accounting is actually good for small businesses:

1. Saves Time & Increase Cash Flows

All those hours spent on tracing receipts, payroll, invoices, bank reconciliations, preparing reports and / or learning accounting software, or learning accounting can be invested in generating sales or managing more critical functions of a business. 

Thus, a good accountant knows the ins and outs of how to create efficient processes and rely on systems to automate accounting functions and be able to provide a small business owner with the right information at the right time.

Do you see the value in this? 

If not… think about it this way:

  • How many hours do you spend on accounting tasks?
  • How many hours do you spend on researching how to… record… categorize… income or expenses?
  • How much time do you spend at year-end preparing the accounting data for tax purposes?
  • Do you have financial reports available if you need to make a loan, go into a new venture, or strategize?
  • How about changes in regulations? Do you know the underlying business or accounting impact?

2. Affordable Cost

Depending on the business size, most accountants charge a flat fee or a per hour fee. In my experience, this does not add up to the salary of an in-house accountant. Here is why:

  • Businesses only pay for the hours they work
  • There are no employer taxes
  • There are no benefits paid such as healthcare, vacation, sick time, retirement plans  and the list can go on.
  • They are efficient as they work with many businesses and the likelihood is that when you bring up a new regulation or issue, they know how to tackle it and do not spend hours on trial and error
  • They do not need additional equipment to do their job (desk, laptops, chairs, pens, paper etc.)

If you are on the fence of outsourcing your accounting tasks, think about the above points and whether this is valuable to you.

References:

How Much Time Do Entrepreneurs Spend on Accounting and Taxes? (indinero.com)

National Small Business Association, 2017 Small Business Taxation Survey, http://www.nsba.biz/wp-content/uploads/2017/04/tax-survey-2017.pdf

Show 2 Comments

2 Comments

    • Jenny

      It could if it is done right. From my experience, this could happen in a few different ways:
      1. It improves reporting and business owners know where their winners and losers are and how to strategize. Like in everything, timeliness is key to ensure business success
      2. Saves $$$ as many times having an in-house accountant is more expensive, and you roughly get the same results.
      3. Outsourced accountants also are more on top of regulations changes and their impact, which can lead to cash flow issues if not properly managed.

      The list can go on. Of course, it depends on the business type, complexity etc. But I am firm believer that the businesses I work with save money by outsourcing their accounting to me versus having an in-house person.

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