As many feel when they begin their accounting practice, having complete control and oversight of your clients’ accounting and bookkeeping tasks is the way to proceed. This is frequently short-lived. As your business expands, it is likely you will feel overwhelmed by the increasing number of clients and their demands for your time.
When you are overworked, it doesn’t take long before you are in a situation where your clients’ books are disorganised, raising the risk of errors or overlooking significant tax relief claims. This scenario can be pretty stressful. Bookkeeping is time-consuming and primarily a routine task that is frequently not profitable.
As a result, many accounting practices tend to outsource their clients’ bookkeeping services to a third-party service provider. This blog will help you understand why outsourcing bookkeeping is essential for your business.
Reasons outsourcing bookkeeping services makes sense for accountants:
Still in the dilemma of whether you need to outsource your client’s bookkeeping functions or not? Although no one-size-fits-all solution suits every accountant’s circumstances, different signs can indicate that it might be worth exploring.
1. High overhead cost
Accountancy practices may comprise a sole accountant or maintain a team of in-house accountants to offer comprehensive accounting services for clients. These are experienced accountants skilled in financial reporting, tax planning, business advisory services and, of course, bookkeeping.
However, having experienced accountants perform low-profit basic bookkeeping tasks can be inefficient, their expertise is not fully utilised, and they are expensive to retain. The mismatch between skill level and task also leads to high staff turnover. Trained accountants might find spending their time on basic bookkeeping tasks demotivating. This results in lower productivity, reduced job satisfaction, and enhanced turnover rates, thus contributing to higher overhead costs.
Many accounting practices outsource bookkeeping services to specialised service providers to address these challenges. Outsourcing reduces overhead costs, and as a result, in-house experienced accountants can focus on more strategic and profitable services such as tax planning and financial advisory. It can also improve staff morale and job satisfaction while reducing turnover rates.
2. Scalability concerns
As an accountancy practice grows, the number of clients also increases, causing the workload of your in-house bookkeeping team to shoot up simultaneously. What happens when your internal team struggles to manage the workload of your bookkeeping and core business functions? In that case, your accountancy practice will face significant issues in terms of scalability unless you take on additional staff and the resultant costs.
Outsourcing your bookkeeping services to a renowned third-party service provider is a sound consideration in these situations. Removing recurring tasks from your in-house team’s workload will help them focus on your core business, thus increasing your firm’s profitability.
3. Failure in service delivery
Bookkeeping is detail-oriented and requires a higher degree of accuracy. Sometimes, your in-house teams may need help maintaining quality and consistency, leading to mistakes in financial records.
These errors can lead to severe consequences, such as delayed financial reporting, inaccurate tax filing, and damaged client relationships. An accountancy practice may not be able to cope with these consequences.
Hence, in this scenario, it makes sense to outsource bookkeeping functions to experienced service providers. Outsourcing companies are always compliant with legal requirements and updated on the latest accounting best practices, improving service delivery quality and enabling you to operate on time.
4. More infrastructure costs
The cost of outsourcing bookkeeping services is typically 50% lower than that of similar services offered by an accounting practice. Maintaining an operational setup for efficient bookkeeping requires hardware, IT support, and specialised software with the latest technology.
You also need infrastructure to maintain the volume of work and data security. Investing in this infrastructure can be highly costly and might not make sound business sense if it does not deliver ROI (return on investment).
Opting for outsourcing is beneficial as you can access their current tech stack without the inherent costs. This means you don’t have to invest and tie up capital in maintaining in-house infrastructure, and can look at more financially viable investment opportunities.
5. Always in a time crunch
Do your bookkeepers often feel pressed for time? Though bookkeeping is not a critical function, it requires expertise and patience as it involves tracking and recording all your clients’ books. If your in-house team spends more time on the details of the actual bookkeeping process, they will not have time to improve service delivery.
Another reason your team may struggle is when bookkeeping demands suddenly rise, especially during the tax season and year-end; without additional staff, your in-house bookkeepers will always be in a time crunch to meet the deadlines. This can lead to enhanced stress, burnout, and decreased productivity.
Outsourcing bookkeeping solutions will free up resources to focus on higher-value tasks such as business development and financial analysis while the third-party service provider handles the routine tasks.
6. Concerned about data security
Accountancy practices handle highly confidential and sensitive financial data and information of their clients. This includes tax returns, bank data, transaction details, and many other confidential documents. Breaching data security can lead to severe consequences for your firm, such as financial loss, reputational damage, and identity theft.
Outsourcing bookkeeping services might be the best solution, as reputable businesses will have robust security solutions and secure data protection policies, such as ISO 27001, that comply with GDPR in the UK. Before you move to an outsourcing company, it is vital that you undertake your own due diligence regarding security certifications, data protection, data encryption, backup policies, and access controls. This way, you can protect your client data and focus on better customer service.
7. Difficulty in making informed business decisions
Despite being experts in financial management, accounting practices often find themselves bogged down in the intricacies and time-consuming nature of bookkeeping. This can significantly hinder the in-house team’s focus on making crucial business decisions.
Accurate financial data is vital for core business activities such as strategic planning, sound financial decisions, and identifying growth opportunities. By outsourcing bookkeeping functions to a reputed outsourcing company, accountancy practice can leverage particular expertise to free up your in-house team’s time for strategic analysis.
In this way, they can shift their focus from recurring bookkeeping tasks to strategic decision-making that drives profitability to the accounting firms.
8. Resource-saving
Outsourcing bookkeeping can offer substantial resource savings for accounting firms. By eliminating the need for hiring in-house bookkeeping staff, practices can significantly reduce salaries, benefits, office space, and equipment costs. It also eliminates the time and costs of recruiting, onboarding, retaining employees and training new staff. With outsourcing, you can get access to skilled bookkeepers while ensuring improved cash flow and efficient financial management.
Over to you
Identifying the signs that your accountancy firm should outsource bookkeeping services is crucial for your firm’s scalability. Outsourcing will also help you meet clients’ unique efficiency, accuracy, and compliance needs.
Stellaripe is a renowned outsourcing accounting service provider known for its excellent service delivery and client satisfaction. We understand our client’s problems so that we cater for their unique needs. At Stellaripe, our team of experts will take care of your bookkeeping needs while you focus on what you do best.
If you want to improve the quality of bookkeeping services you provide your clients and take your accounting practice to the next level, book a consultation with us.
