One of the most crucial aspects of any SME is finance and accounting which need to be streamlined and meticulously organized for sustainable growth. Contrary to the belief that this is something to be handled at the financial year-end, finance and accounting should be a continuous and year-long operation and must be carried out with much expertise and accuracy.
While some SMEs choose to have their finance and accounting operation in-house, this often becomes difficult due to frequent regulatory changes and revisions in compliance policies, new accounting rules, and financial regulations, and last but not the least, increased operating costs for internal accounting teams due to recruitment and training cost, employee salaries, taxes, incentives, and bonuses. Higher operating costs, in most instances, put SMEs in a tighter spot because of their limited budgets and monetary resources.
Surveys reveal that outsourced accounting services are an industry trend and one of the most popularly outsourced functions for SMEs. Businesses benefit a lot from outsourced finance and accounting services due to lower operating costs, improved accuracy and effectiveness of finance and accounting data, better financial decision making, and zero regulatory non-compliance. It is projected that over the next 4-5 years, the market for finance and accounting outsourcing globally would grow to USD 53.4 billion at a CAGR of 5.9%.
Today new age digital technologies have significantly eliminated most of the manual accounting tasks and made finance and accounting processes more simplified and automated. When outsourced, SMEs can have access to such technologies at a lower cost than arranging infrastructure and resources internally for the needed technological tools. Most of the IT services are outsourced by banking and financial institutions and toward upgrading and automating finance and accounting functions.
Outsourced accounting and finance can result in huge monetary savings for SMEs besides saving time, reducing financial paperwork, and better utilization of human capital. The top benefits of outsourcing accounting services are detailed below.
Reduced Cost
When reputed and professional services are hired; recruitment, training and operating expenses, employee benefit expenses, maintenance, infrastructure costs, and other overheads are significantly lowered. Such outsourced services are scalable, and the cost of services can be optimized based on needs.
Enhanced Reputation and Goodwill
Accurate and transparent financial statements prepared by independent and qualified professionals as CPAs and complying with regulatory authorities enhance investors’ confidence and promote the credibility of SMEs.
Improved Cash Flow
Timely and proper accounting and readily available financial statements help optimize the accounts payables and receivables, the cash flow cycles and improve cash management and sustainability of a business.
Improved Tax Management
Managing tax often poses difficulties for many SMEs. Outsourced services are seasoned and expert tax professionals who help reduce tax liability, improve profits and eliminate penalties with their tax knowledge and sector-specific tax awareness.
Improved Management Decisions
Outsourced services provide and maintain accurate books of accounts continuously and help SMEs with visual data on financial trends and problem areas for timely and improved management decisions. Areas of cost escalations and cost reduction opportunities are easily identified, and quick actions are initiated.
Easier Fund Raising
Outsourced service providers make financial statements transparent and simple to attract potential investors as the investors can clearly understand all the risks and opportunities involved in the business.
Easier Access to Technology
Outsourced services by their knowledge and expertise can easily identify the technological requirements of SMEs and provide customized accounting software for simplifying and automating accounting and bookkeeping processes. Cloud-based software available with the outsourced services is upgraded at no extra cost and can speed up financial transactions saving money for SMEs.
Reduced Accounting Errors
Outsourced experts and experienced services with ready access to technology and regulatory requirements, can ensure error-free accounting quickly eliminating monetary sanctions.
Improved Payroll
Automated and seamless payroll procedures help HR focus on core functions improving value for the company. Timely payment makes employees happy and more productive.
Improved Security
Outsourced services use the latest software and carry out frequent audits of the accounts of SMEs ensuring no data breaches and financial fraud. The finance and accounting functions are on continuous supervision of outsourced services.
The Takeaway
Cash is the oxygen for a business and no company, even a profitable one, cannot survive without cash. The top reason why outsource accounting and finance are to manage and optimize cash flows and ensure the sustainability of an SME. The outsourced services also help generate cash through effective cost management and cost reduction initiatives.
Corporate Solutions 
IMC Group