Accounting Outsourcing For Smaller Companies too

Finance and Accounting Outsourcing in the early days was considered only for large organizations. Large corporations generally have the technical and management resource to manage outsourcing services, clearly identifying which part of finance and accounting functions to outsource, and select the process to choose the right service provider to fulfill their outsourcing needs.

But unlike large businesses, small businesses may not have the right resources to find suitable service providers to outsource their accounting business functions. Nevertheless small business too can successfully outsource their accounting needs and enjoy the benefits of outsourcing. This article elaborates the basic steps small businesses should follow to successfully outsource their accounting activities.

Identifying What Finance and Accounting Functions to Outsource

The first step involves in deciding whether you want to outsource your entire accounting process or some part of your accounting functions. If you are new to accounting outsourcing, start with outsourcing some part of your accounting functions to the service provider. Clearly identify which accounting function to outsource and which not to. Generally noncore accounting functions which would require minimum guidance to the service provider is ideal to start the process. Once the familiarity increases additional accounting functions could be outsourced to the service provider. A/P, A/R, Bank Reconciliations, payroll are some of the activities which can be a good starting point to initiate the outsourcing process.

Selecting the right accounting outsourcing service provider

The second step would involve in finding the right service provider. Some things to consider before choosing an accounting outsourcing service providers are:

1. You can search for vendor names through a Google/Yahoo search. This throws up multiple vendors with vastly varying capabilities. Prepare an initial list of 15-20 names
2. Study the outsourcer’s website for quality and comprehensiveness of information, ease of navigation, and clear explanation of services and capabilities. Study their client testimonials, case-studies and client profiles.
3. Shortlist about 8 names from the list for further questioning. Questions that can be asked include the following, how long have they been in business, do they have clients that you can do a reference check etc.

Pilot/Trial Project

Once you have selected your final candidates, begin with a pilot phase with the service provider. The pilot project is important to establish a working relationship and to test and check the capabilities of the service provider. It also provides an opportunity for you to understand the procedural activities involved in outsourcing (like transfer of data, reporting formats etc).

Finalizing and Contract negotiation

Once the service provider matches you expectations, finalization and contract negotiation is the final step.
A service agreement should cover the following:

1. Define the scope of work and level of quality
Define your project requirements up front. Give vendors as much information as you can about what you need and the way in which you need the work done. The level of the quality of services from the vendor should also be clearly defined.

2. Pricing
Depending on your needs you can either opt for hourly price or Full time. Hourly pricing works well where you have small projects that need to be completed on as and when needed basis. Fixed fee works well when you have regular monthly accounting requirements.

3. Payment Terms
You should pay your vendor as you do your staff or other vendors. Don’t accept demands for payment before the work is complete.

4. Length of the contract
Usually it’s a yearly contract that renews automatically unless notified otherwise by either service provider or client. You could negotiate for easier terms in the first few months, when the process is new.

5. Build flexibility into the contract.
As your business needs change, you will want to change the scope of the contract. Build in a process to resolve these issues as they arise. While the outsourcer shouldn’t charge you for every little change, recognize that changes cost money and you may need to pay for such changes as they arise.

Accounting is one of the most major processes in any business. It is the act of recording, verifying and reporting all the assets and liabilities of a company. It is of great use to decision-makers because it helps them take steps in order to reduce their costs and increase profit. Accounting is also a proof of a company’s goodwill and is referred to by auditors monitoring the financial dealings of a company. Always make sure that your accounting functions are in good hands.

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