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Are you wondering whether to outsource your accounting but need some convincing before taking the leap? You're in the right place. Accounting takes up considerable time for an eCommerce business. A lot of small business owners start off managing their accounts themselves. But as their business grows, time (or a lack of) necessitates a change in approach.
From here, you have two options; hiring an accountant as an employee or outsourcing accounting services. As you can probably tell from the title of this post, we're rooting for outsourced accounting services over the internal option. Blending outsourced accounting with automated eCommerce bookkeeping software, makes for a smooth and efficient bookkeeping system.
Key Takeaways from this Post
Outsourcing your accounting and bookkeeping tasks will save you money, enhance business efficiency, and give you flexible access to expertise and services you might not get when hiring an accountant. The internet provides a huge choice of accounting professionals offering a variety of services.
There are some potential downsides to outsourcing accounting though, including hidden costs, less control of your books, and challenges with communication. However, all these can be overcome relatively easily.
The ideal accounting setup pairs professional outsourced accounting services with a powerful (yet affordable) bookkeeping automation software like Link My Books. This software connects seamlessly with your sales channels and transfers your data to your accounting software. No accountant needed!
But why should you opt for outsourcing accounting rather than onboard an accountant into your company? I'm going through 6 compelling reasons to take the leap.
What Does it Mean to Outsource Accounting?
Outsourcing accounting means to work with an external accounting firm, or individual accountant, to manage one or more aspects of your accounting process. The third party organisation works with multiple businesses simultaneously and can sometimes have expertise in a specific area of accounting. For example, eCommerce.
The alternative to outsourcing accounting services is to hire an accountant as an employee within your company. In this case, it would be your responsibility to ensure you adhere to the applicable laws and regulations of employing an accountant.
Bookkeeping VS Accounting
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Although bookkeeping and accounting are often used interchangeably, they're not the same thing. Bookkeeping involves collecting, storing, and managing financial data in a way that's organised and understandable. Bookkeepers record the data and perform bank reconciliations.
Accounting involves interpreting the data into financial reports and forecasts. Accountants look at all the available data and use it to advise a business on financial matters. Accountants also manage tax returns and routinely perform audits within a company to ensure everything is consistently above board.
Bookkeeping is a part of the accounting process. And an accountant can take on bookkeeping responsibilities. But, an accountant's role is much broader than a bookkeeper's as they have to look at the bigger picture to be able to advise clients effectively.
Areas of Accounting you can Outsource
There are a number of areas of accounting that you can outsource to a third party organisation:
- Payroll
- Financial reports and projections
- Financial analysis
- Bookkeeping
- Tax management and filing
- Accounts payable and receivable
You can outsource services to complete one or more of these responsibilities. You can choose, for example, to do bookkeeping yourself but work with a professional for tax management and filing.
Top 6 Benefits of Outsourced Accounting Services
- Save money and reduce overheads
- Get accounting expertise
- Accurate reporting
- Scalable and flexible
- Reduces fraud risks
- Save time and enhance business efficiency
1. Save Money and Reduce Overheads
Outsourcing your accounting services will save you money and reduce overheads. Employing an accounting individual or team in-house will come with considerable costs; wages, benefits, payroll taxes, to name a few. Outsourcing absolves you of these costly responsibilities.
When you outsource accounting services, you know what you're paying for. And, you only pay for the work done. You'll agree on a rate beforehand, per hour or per job for instance, and you can stop using the services when you choose.
2. Get Accounting Expertise
Working with accountants outside of your organisation allows you to be selective about who manages your accounts. You don't have to stick with one person or hire a team of experts to cover all your bases. Outsourcing allows you to tap into the accounting expertise you need without any long-term commitments or expenses.
eCommerce accounting, for example, is different from traditional accounting. If you're an eCommerce business, you need an accounting expert who's familiar with the complexities of eCommerce accounting. This includes managing and interpreting large volumes of data coming in from different sources. Plus, because eCommerce sellers often sell globally, you'll need an expert on managing tax liabilities in different jurisdictions.
3. Comprehensive, Thorough, and Accurate Reporting
Your reports are the commodity that'll help your business make advantageous financial decisions. Which can ultimately, of course, help your business grow. You might not need to onboard someone to provide bookkeeping services if you have the time to record your financial data yourself.
But if you want to interpret that data into useful reports that give you critical business insights, you'll need to onboard an accountant that knows how to do it. A knowledgeable accountant will look at your business as a whole. They'll be thorough and articulate at creating a range of reports and advise you on things like budgets and business plans. Equally, cash flow forecasts can help you manage your business finances.
4. Scalable and Flexible
Another benefit of using outsourced accounting services is that they're scalable and flexible. You can choose who you work with. And when you need someone with more skills, or you need to work with multiple accountants, it's relatively simple to adjust your services as required. Or, choose another firm to accommodate you.
With an in-house accounting team, it would be your responsibility to upskill your accounting team if needed. You're quite stunted when it comes to scalability and flexibility. As you develop your business, you'll need to hire more employees to handle your workload. Or you might need to train existing accountants if they're unfamiliar with certain requirements. For example, managing payroll or taxes across different countries.
5. Reduce Fraud Risks
Internal fraud is, unfortunately, a real threat for small businesses. When you entrust your accounting tasks to one person without appropriate accountability in place, you leave your business open to potential fraudulent activity. For example, creating fake expenses or purposefully recording inaccurate profit data. This is often caused by financial pressures and the fact that it's all-too easy to manipulate accounting records.
When you outsource accounting services, there are multiple layers of security control. The firm providing the outsourcing services will have different people overlooking reports and transactions to ensure everything is accurate and above board. The firm will have a reputation to uphold and will want to provide a professional service.
6. Save Time and Enhance Business Efficiency
Outsourcing bookkeeping and accounting will save your business time and enhance the efficiency of business operations. Instead of hiring, training, and managing an accounting team yourself, you can offset these responsibilities to another firm. This will save you a lot of time and effort, and you'll be able to concentrate on other areas of your company.
With this outside help, your business will run more efficiently. You don't need to worry about financial reporting, sales ledger processing, purchase ledger processing, or any other accounting functions if you don't want to. Each time consuming task that's associated with accounting is taken care of by an outside organisation who'll keep you in the loop and advise you as needed.
4 Potential Downsides of Outsourcing Accounting Services
There are potential downsides of almost everything you do, and outsourcing accounting services is no exception:
1. Hidden Costs
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While it's true that working with an outsourced accounting firm can save you money, you have to be careful of hidden costs. Many accountants charge more for completing certain tasks, or using different software and tools. You need to be made aware beforehand what your charge covers and of any potential additional charges.
You must insist on transparency throughout the process so you don't get any nasty surprises when it comes to paying your bill.
2. Less Control
When you outsource an accounting team, you're effectively handing over control of your books to a third-party organisation. Naturally, this necessitates a hands-off approach on your part. Hiring an accountant affords you more control over their day-to-day tasks; what they work on and when.
An outsourced team will have their own way of doing things and they wont necessarily change this for you.
3. Challenges With Communication
Communication can be challenging when you're outsourcing services. Not least because the specialised accounting firms are likely to not be local to you. Therefore, you'll have to communicate remotely on the most part.
To mitigate this, you can hold regular meetings to discuss your accounts and finances with the accounting team. These could be face-to-face if convenient. Or, remote meetings through Zoom, for example. However, it's also important that you don't feel like you have to wait for the meeting to ask questions.
4. Security Concerns
Outsourced accounting firms usually work with many businesses. Therefore, there's always the chance that things could get lost in a sea of documents and data. If there are lots of different companies that the outsourced accounting firm works with, you have to trust that the firm has strict data management and privacy policies in place and adhere to these at all times.
Be sure to ask what the firm's policies are. They should be safeguarding your data with different measures like:
- Backing up data
- Providing proper staff training
- Using firewalls and anti-virus software
- Encrypting files when storing and sending
- Ensuring their network is secure
Where Can You Find a Reputable eCommerce Accountant?
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eCommerce accountants are becoming less rare as more accountants realise the importance of learning these skills in the modern world of commerce. Link My Books has a page dedicated to finding a reputable accountant or bookkeeper according to your needs. Find your expert here.
Use the filter options on the left-hand side to find the right accountant for your business. Filter search results by advisor type, sales channel expertise, and country, among other criterion. The accountants listed in our directory are carefully vetted for their expertise, reputation, and quality of their services.
More still, Link My Books provides a 'Get matched' service. With this service, our expert team will find your ideal accounts outsourcing solution. We'll ask you a series of question via an online form. Your answers will enable us to match you with the perfect accounts outsourcing solution according to your annual revenue, location, and sales channels, to name a few criterion.
We also take into account your accounting system and whether you want a full accounting service, for example with management accounts. Or a basic bookkeeping service.
Automate Your eCommerce Bookkeeping With Link My Books
Link My Books is an automated bookkeeping software that lets you put your eCommerce bookkeeping on autopilot. Connect your sales channels and the software will automatically transfer financial data to your accounting software. Your accountants that are dealing with your accounts outsourcing services can access Link My Books too so they can manage your data effectively.
Key Features
Daily Summaries
With Link My Books, your financial data is transferred automatically over to your accounting software in the form of clean daily summaries. These include a clear breakdown of revenue and expenses. View sales, refunds, shipping costs, platform fees, and advertising costs, for each statement period.
Additionally, this information is synced with Link My Books so you can view it all in the platform itself and choose whether to automatically or manually transfer your data.
Accurate Tax Calculations
When you set up your Link My Books account, you'll be take through the Guided Tax Wizard. Here, you'll answer a few questions that'll let the software know what tax rates to apply to your products. Once set up, Link My Books will apply the correct tax rate to every item you sell, regardless of where you sell it. This tax calculation is then included in your daily summaries and sent to your accounting software. Link My Books' Guided Tax Wizard simplifies sales tax compliance and VAT compliance.
Profit & Loss by Channel
P & L by Channel is one of Link My Books' intuitive analytical tools. You can connect multiple sales channels and marketplaces to the software. And once you have, you can view side-by-side comparisons of financial data like sales, refunds, and fees. You can also filter data by dates.
This information will inform you on matters like which channels are performing the best, where your advertising budget is going, and which channel gets the most refunds.
Benchmarking
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Link My Books Benchmarking is an analytical tool like no other. It'll enhance the insights of your outsourced accounting experts and enable them to provide more specialist services with data-based insights. Link My Books Benchmarking applies a cohort analysis of businesses that are similar to yours. It then gives you a percentile ranking of where your business stands compared to the median results.
For example, it will give you a median refund ratio of businesses in your industry and platform, and of similar size. The graph will then give you a percentile ranking for refund ratio and pinpoint where your business is on a graph.
Are Your Ready to Outsource Your Accounting?
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Outsourcing your accounting tasks to a professional accounting practice can increase business efficiency and facilitate business growth. An accounting or bookkeeping outsourcing service can provide you with specialised services and expertise, reduce the risk of fraud, and save you the costs associated with hiring an accountant. It can also ensure thorough and accurate reporting.
For a comprehensive, improved accounting process that'll save you even more time, consider putting your bookkeeping on autopilot with Link My Books. This powerful software makes it simple to manage financial data coming from multiple eCommerce stores. Link My Books also ensures your tax calculations are consistently accurate, and it has some powerful analytical tools to encourage business growth.
Don't struggle with manual data entry. Try Link My Books for free for 14 days and see how it can make your life so much easier. Sign up for your free trial today and be up and running in just 15 minutes.
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