The recent outbreak of COVID-19 throughout the world has had a tremendous adverse impact on the economy and brought a massive shift in the way companies did business. SMEs and startups have been the hardest hit with insurmountable challenges of declining revenues, layoffs and salary cuts, and shifting workplaces with long-standing implications.
At this unprecedented time, outsourced cloud accounting services have come as a gift as companies strive to adapt to the new normal by lean operations, innovation and cost-cutting. The pandemic has played the role of a catalyst for the wide adoption of cloud-based accounting outsourcing due to cost savings, increased efficiency and remote working. The traditional business structure incorporating production, planning, advertising, marketing, sales, accounting, IT, HR, etc. have started becoming unviable for companies, especially for SMEs due to resource crunch and the dire need for value addition in business, and such companies are increasingly turning to outsourced finance and accounting solutions.
HOW MUCH DOES IN-HOUSE ACCOUNTING REALLY COST?
A team of a minimum of 3 employees is needed by an SME for its financial operations, each with varying roles. The size and business growth of the SME will decide if it needs to employ additional staff including the accounting manager, CFO.
Wages or salaries, plus the cost of benefits and overtime costs add up for computing employee costs. Besides, there can be other benefits that you may need to cash out from time to time. If there is a healthcare and pension plan, then the employee cost becomes higher still.
Apart from the employee cost, you need to take into account the cost of overheads as an in-house accounting department will need resources such as electricity, water, office space, supplies, computers, and other equipment. You will need to incur extra costs in hiring, training, and managing them as well.
For a company based in California City, USA the average yearly employee salary for an in-house accounting facility with 3 staff comes out to be,
Bookkeeper: $48,274
Staff Accountant: $61,715
Financial-Controller: $249,161
Therefore, a total of $359,150, median must be paid towards employee salary expenses.
Bureau of Labor Statistics data reveals that the average yearly cost of benefits per employee is $13k per year as of September 2021.
Most of us often forget to consider the intangible costs while choosing an in-house accounting department. However, every SME must critically analyze the time spent on handling accounting issues vis a vis the value that is generated. Employee turnover and time spent on hiring and training could be better used in increasing your overall productivity.
In addition to employee turnover; miscalculation and errors, fines and penalties due to changing compliance and regulation issues, overtime, embezzlement of funds are also some other hidden costs usually not taken into consideration.
Hiring ‘not so good and experienced’ accounting professionals can be a very bad idea and could be a real threat for any business. As inexperienced accountants are prone to making mistakes you may end up losing more as an opportunity cost.
WHY OUTSOURCED ACCOUNTING IS A COST-EFFECTIVE PROPOSITION?
The rates of accounting services providers vary depending on the business size, industry, and accounting & finance services needed. Professional and reputed finance and accounting services providers, on average, charge around $ 50K to $70K per annum for small and medium-sized businesses and provide huge cost benefits over in-house accounting.
As outsourced accounting services providers are seasoned professionals, they provide the most accurate and timely information to facilitate financial decision making. This helps in eliminating hidden costs associated with any accounting mistake. Secondly, the overhead costs are drastically reduced as there is no need for recruitment and in-house infrastructure. The outsourced accounting services cost is also scalable and gives you the cost advantage during any downturn in your business.
You are also relieved of frustrations from managing your businesses’ finances that keep you up at night and help you focus on more productive use of your time to achieve business growth.
HOW CLOUD ACCOUNTING CAN HELP SAVE MORE MONEY?
How does cloud accounting work is a frequently asked question and the answer is plain and simple. Cloud accounting is software and essentially works the same way as other cloud-based software. Files are stored online instead of hard drives and are always accessible. You can simply log into a service and perform accounting tasks on any computer from any corner of the world. As a business owner, you can take care of your business finances even from a smartphone anytime you desire or in case of emergencies.
If you ask why cloud accounting is good for business, the following points will throw light on its superiority as a system that can open up multiple avenues to realize higher cost benefits. Irrespective of being an SME or a global conglomerate, transitioning to cloud-based accounting software will increase the operating efficiency of your business with real-time visibility into financial performance.
- Software is always up to date and you don’t need to spend money upgrading your software.
- Minimum administration helps you save money as there is no need for backups and new software installations.
- The automated platform gives you the advantage of posting transactions to the proper ledger, producing recurring invoices, automatic calculation of taxes and discounts etc. and saves time and money.
- Ease of compliance helps you avoid overpaying taxes and avoiding fines.
- Scalability and flexibility help you save money on IT infrastructure as your business expands against desktop-based systems.
- High Accuracy helps match received invoices to payments and shipments, internal transactions to bank records and save you huge by flagging mistakes.
- Customization pays as you can personalize your dashboards for making the most accurate financial information.
BEYOND COST SAVINGS, WHAT ARE THE OTHER BENEFITS OF OUTSOURCED ACCOUNTING?
Besides cost savings, outsourced accounting also provides other benefits as described below.
- No burden of hiring and training of employees
- Getting rid of complex yet repetitive tasks
- No wasted work hours and no paying of unproductive employees
- Improved data security with minimal risks of fraud
- 24/7 accessibility and availability
- Possibilities of integrating other modules across the entire business, using the same database
- Easier collaboration
GLOBAL FINANCE AND ACCOUNTING OUTSOURCING SERVICES MARKET TREND
Rising demand for transparency and increased regulations are forcing companies to put their finance and accounting in order by way of standardization and adoption of best practices in financial management. The global economic crisis is also compelling many companies to opt for cost-cutting and business remodeling by outsourcing non-core business functions. All these recent developments are driving finance and accounting business process outsourcing (F&A BPO) services across the globe. Moreover, as many F&A BPO are switching to advanced technologies including artificial intelligence, accounting tasks are speeded up and productivity improved.
Report Linker, a France based professional search engine and an excellent resource for research information, in its recent report, said that the global finance and accounting outsourcing services market will touch $ 53.4 billion by the year 2026 growing at a CAGR of 5.9%.
