Read this bookkeeping cost reduction case study of Amanda and try to apply it in your business.
Amanda is a business owner in California, USA. She owns a software company that specializes in providing cloud services. The business is going good, revenues are rising at over 35% a year, but her profit margins are not rising that steadily. When she glanced at the reasons, she came to know that the overheads in her business were high. She had to reduce those costs or control them.
Amanda had an in-house accountant who used to maintain the books of accounts for the company. Amanda was not an expert, and to decide upon something, she had to research a lot. Employing an accountant was costly, especially in California. She had a thought, to outsource the non-core business processes to specialized agencies, so she can concentrate on her business and also reduce her costs while getting clean and efficient services. After a few months, Amanda noticed that her costs were down and profit margins were up. The reasons for the same are:
An analysis of the costs of accounting before and after outsourcing it revealed that the costs of keeping an accounts department were higher than the costs of outsourcing it. Employees’ salaries and other costs related to them made keeping an accounting department in-house unattractive.
Amanda was an expert in the Cloud business, but not in the business of accounting. As she could focus more on her core business, the sales of their products and services shot up. More revenue came, costs decreased and profits increased. Her efforts were yielding results as she now spends her time on productive pursuits. Outsourcing bookkeeping to a specialized agency helped her increase her productivity.
Amanda often received complaints that she can improve her financial statements in many ways. She finds it true after hiring a suitable accounting firm. The statements were now more clear, were accurate and could pass the eyes of the best investors. The company could also improve the timing of reporting the statements. Earlier, there were delays in reporting the statements because of various reasons. Now the users of the statements are happy. The quality of the statements is also much better. Accounting firms know the current best industry practices and can provide the best quality services.
When a company handles its accounting operations on its own, they employ a lot of resources to it. More than anything, it burdens the management to find out if the accounting is being done properly. When they outsource bookkeeping services, professionals will handle all the work, so they need not worry about it. Instead, they can focus on their core process, which is running the business, handling sales, etc.
Hiring a professional firm to do your bookkeeping would help an organization get their work done in a professional manner. When in-house employees do the bookkeeping and accounting work, it may not be of the highest quality. Employing an external agency to take up the accounting work on an outsourcing basis would ensure that the work is done by a professional organization with expertise and experience. You do not have to deal with the hassles of being updated with the ever-changing rules and regulations of accounting. You will not have to be updated on new laws, software and services being used by the industry. It also saves costs on buying the required software to do bookkeeping in the house.
Specialized firms offer their services not only in bookkeeping but also in Payroll management, Cost management, Taxation management, consultancy, wealth management and a host of other services.
There can be errors in reporting of financial statements. The errors can be simple but the consequences of those errors can be huge. Endless oversight, litigations, loss of face and trust with investors, suppliers and other stakeholders can be devastating. Why take such risks? By outsourcing bookkeeping and accounting services, you also outsource the risks of these statements being true and fair to the firm. It places risks on them and this can limit the chance of losses to your company
There is no sudden disruption in accounting services for the firm. An employee can live the organization anytime and this can create a big burden for the firm. It happens rarely with accounting firms. If you do not wish to continue with the current firm, you can always switch to a new firm. We cannot say this about having an in-house bookkeeping department.
We will come up with more bookkeeping cost reduction case studies, stay tuned with us.