Pros and Cons of Virtual Business [Paperless Business]August 20, 2019
What is Depreciation and its AccountingAugust 27, 2019
Amanda is a business owner in California, USA. She owns a software company which specializes in providing cloud services. The business is going good, revenues are rising at more than 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 somehow 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 she had to research a lot to make decisions. Employing an accountant was costly, especially in California. She had a thought, to outsource the non-core business processes to specialized agencies so that she is able to 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 as follows:
- Company’s costs got reduced
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.
- Her productivity increased
Amanda was an expert in the Cloud business, but not in the business of accounting. As she was able to focus more on her core business, the sales of their products and services shot up. More revenue came, costs decreased and profits increased. As a result of her time being spent in productive pursuits, her efforts were yielding results. Outsourcing bookkeeping to a specialized agency helped her increase her productivity.
- Reporting of the financial statements improved
Amanda often received complaints that her financial statements could be improved in many ways. After hiring a specialized agency, she found that that this was true. The statements were now more clear, were accurate and could pass the eyes of the best investors. The company was also able to improve the timing of reporting the statements. Earlier, there were delays in reporting of the statements due to 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 are able to provide the best quality services.
- Free up resources
When a company handles its accounting operations on its own, there are a lot of resources being employed. More than anything it presents tensions for the management who have to be involved to find out if the accounting is being done properly. When they outsource bookkeeping services, they would not have to worry about how this work is done as professionals would take care of the work. Instead, they can focus on their core process, which is running the business, handling sales, etc.
- Professional Services
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 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 everchanging rules and regulation of accounting. You will not have to be updated on new laws, software and services being used by the industry. You also save costs on buying the required software to do bookkeeping in the house.
- Provision to hire for other services
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.
- Minimize risk
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. Risks are placed on them and this can limit the chance of losses to your company.
- Continuity of services and choice of vendor
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. The same cannot be said about having an in-house bookkeeping department.