Outsourcing a company’s accounting services, or in other words, utilizing a virtual back office solution, is becoming a common practice among businesses in the United States. A majority of small to medium-sized enterprises, and big multi-nationals, are beginning to outsource to virtual back office accounting firms to manage their finances.
A virtual back office improves transparency on how capital is invested. It sheds light on what the main (and the weak) revenue streams of the company are. It also improves the performance of any type of business.
However, outsourcing a company’s accounting is a relatively new concept. Many people do not understand it – leading to numerous myths about the service. These common misconceptions have caused business owners to become reluctant to collaborating with accounting firms. Below, we are debunking some of the most common myths regarding outsourcing your accounting services.
Outsourcing your accounting leads to loss of control over the financials of the business
As the business owner, you’re the one who’s in control of business decisions and used to things working that way. Every owner wants to be in control, particularly over the finances of the company. This is understandable. In a recent study conducted by the Association of Chartered Certified Accountants, a majority of business owners acknowledged outsourcing their accounting services would reduce their costs. But they were concerned about losing control over the finances of the business.
A majority of business owners believe that by allowing an external accounting firm to manage their finances, they are essentially surrendering the internal control they possess. However, if you use a virtual back office for your accounting services, you will be able to keep your finances in order.
This will give you more control due to the fact that you will have a greater understanding of the financial position of your business. Having the correct information will enable you to make the best decisions for the company. Hence, giving you a competitive edge.
Outsourcing your accounting services is expensive and only the large companies can afford it
This is simply not true. Contrary to this misconception, using virtual back office accounting services first began as an option targeting smaller businesses. They could not afford hiring a full time internal accountant. More recently, this service has grown to become an option for big companies that are looking to cut costs.
In fact, outsourcing your accounting is beneficial, especially to small and medium-sized businesses. A virtual back office saves small businesses 40% to 60% (on average) compared to the costs of hiring someone in-house.
Sending information to a virtual back office accounting firm is not secure
This is considered to be partially true because technically, nothing is 100 percent secure. With this knowledge, accounting firms put the most watertight security measures in place. This ensures confidential information doesn’t get lost or leaked to the public or a competitor.
It doesn’t matter if you keep your financial data in your home office or in your business office. There is a chance for potential security breaches. So, to give your financial information the best security possible, store them with a reputable accounting firm.
Most virtual back office accounting firms have programs that digitally retrieve the files you send to them. They have their own in-built security system to keep the data secure.
QuickBooks should be adequate
QuickBooks is a great accounting software that is heavily used by many virtual back office accounting firms. However, it is not sufficient. Most business owners cannot use it to its full potential. Hiring accounting professionals with expertise using this software will guarantee it is fully utilized. You will, in turn, get factual and better financial reports.
The disadvantages of relying exclusively on QuickBooks include:
- Business owners are not sure if they utilizing this tool correctly.
- It tends to take the owner away from his business
- As the company grows, the systems will become more complex, and they will require more advanced QuickBooks skills, which the business owner doesn’t possess.
Sending files to a virtual back office accounting firm takes a long time
Basically, this will depend on how you have set up your business. If you are an entrepreneur who is technology savvy, you can easily and quickly send documents electronically through Dropbox or email.
Costs can get out of control
Your company is billed for the accounting services offered on either an hourly rate or according to the project. This is mainly dependent on the accounting firm or the contract you’re working with. This may sometimes make the final cost unpredictable for the business owner. However, if you hire a virtual back office that is reputable and professional they will do their job to ensure that you are only charged for actual services rendered to your company, and nothing more.
Some companies even have a fee system where they charge you monthly to keep your costs stable and concise. You also have the benefit of paying for only what you use. Your services can be personalized so you are not paying for more or less than what you need.
Even after utilizing a virtual back office, you will still require an internal accountant
Back office accounting services are designed in a way that they should take the cumbersome accounting job from your company. Therefore, freeing you and your staff so you can concentrate your skills where they are most required. When you collaborate with a professional accounting firm, you will not have any need for an internal accountant.
Outsourcing your accounting services is a complicated process
It is not a difficult process to get an accounting firm that is perfect for your needs. It is especially easy if you have been keeping a good record of the financials of your company. Or even if you haven’t kept the best financial records, an outsourced office can help you with your accounting needs. Normally, it takes about two weeks to get a great accounting firm and finalize all the paperwork.
Outsourcing your accounting services is only necessary when it is time for filing tax returns
While accounting is very vital when it comes to filing annual tax returns for a business… The truth is that accounting services are a necessity throughout the year. Your company is able to get specific services such as your own use of a CFO when you need one. You aren’t wasting money and resources on an in-house CFO that you may not be using all the time.
Hiring a virtual back office accounting firm enables you have an accurate picture of how your business is performing financially. This in turn helps you make the best decisions for your company!