When you started your organization, it probably wasn’t because you wanted to keep track of your payroll, expenses and other financial considerations. It was because you had a dream to serve those who need you.
But it’s a lot of work to manage day-to-day operations, much less tend to the growth of your organization. Many executive directors and managers have little time to spend on overseeing the bookkeeping process, other than monitor cash in the bank and sign weekly checks.
And now in the age of COVID-19, proper bookkeeping and financial management are more important than ever. Between dealing with declining revenues, properly using Paycheck Protection Program (PPP) loans, and finding qualified employees for this work, you face a whole new set of accounting challenges.
For these and other reasons, it might be time to consider outsourced accounting services.
What is outsourced accounting?
Outsourced accounting services (OAS) generally means a third party is responsible for your accounting operations. They handle paying your bills and reconciling your deposits and provide financial statements and monthly reports on your activities. (In other words, they’re essentially your off-site accounting department.) They can also help you analyze your accounting operations for efficiency.
OAS services can be limited to certain functions, or they can cover all accounting needs. As long as you (or someone in your company) can handle the daily activities of coding invoices and deposits, all other duties are handled for you.
How can it help me?
As your organization grows, you need internal control systems in place to track your revenue and provide data for strategic plans and budgeting. Some organizations grow so much in a short time that their processes and people can no longer their bookkeeping and payroll. Others simply do not have the resources needed in the first place.
In the current pandemic, having knowledgeable accounting professionals by your side is critical to weathering the storm. They’re more likely to know about new legislation, available funding and guidance on using and reporting those funds. Our team has worked strategically with our OAS clients on balancing their budgets, obtaining PPP loans and otherwise guiding them through these difficult times.
Who typically provides outsourced accounting services?
OAS is offered by both accounting firms and bookkeeping companies. Accounting firms usually have CPAs involved in various aspects of the service. They ensure the financial statement presentation is in accordance with standards set forth by the accounting profession. Accounting firms also have a long-term plan for continuity of those services for you. A few key things to consider when selecting a service provider include:
- How long have they been providing these services, and does their experience include similar industries as yours?
- What level of personnel will be associated with your work (CPAs, experienced bookkeepers, etc.)?
- Do they guarantee a date for completion of each task or monthly reports?
- Will they give you references to contact? (Questions to ask include accessibility, responsiveness and accuracy.)
- Are their fees too low to provide quality service based on your knowledge of the work required?
- Do they use technology to enhance the level of service (such as cloud-based software, file-sharing capabilities, dashboards for management)?
How much does outsourced accounting services cost?
The cost will vary based on the amount of work that will be performed. The more transactions and reconciliations that are required, the higher the cost. Most providers will estimate the amount of time that is needed and base their fees on an average cost per hour to come up with a monthly fee. To quote a reasonable fee, they need to understand how your organization operates and the timing of payments, receipts and reporting.
To analyze whether this is a viable option for you, consider the following as it relates to your internal costs:
- Salaries and benefits of accounting employees (benefits include insurance, employers’ portion of social security taxes, unemployment tax and insurance, paid time off and any other benefits paid by the company – normally 20% or higher)
- Workspace costs (computers, office space, supplies)
- Training costs for employees
- Management’s time for supervision
- Costs related to recruitment and retention
More often than not, you’ll find that the costs to outsource will be similar to in-house costs. Never has this been more important than in the face of COVID-19. Reducing payroll and benefits costs by outsourcing your accounting could be a prudent financial decision.
Yet you’ll gain expertise to help you manage your organization more successfully. Accounting firms have highly skilled professionals who continuously update their knowledge and keep abreast of best practices in the industry. Having this expertise on your side results in more effective financial management for your organization – and greater peace of mind for you.
If you replace your bookkeepers or accounting staff regularly, spend a significant amount of time managing your accounting processes, or if you are just growing at a pace that is difficult to keep up with, consider outsourcing your accounting needs. You might be surprised by how much extra time you have to focus on serving the needs of the community and improving other areas of your organization.
All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.