Pros & Cons of outsoucing your Finance & Accounting function

Are you surrounded by piles of receipts and invoices? your eyes glaze over as you stare at a never-ending spreadsheet? No more boring spradsheets and endless calculations. Lets understand how outsourcing f&A function can actually spice up your financial game. It can be the light at the end of the tunnel. In fact, it’s like having a magical unicorn take care of all your financial woes while you sit back and sip on a pina colada. Okay, maybe not exactly like that, but outsourcing can provide a range of benefits, from cost savings to improved efficiency, leaving you with more time to focus on the things that matter.

Finance and accounting are critical functions within any organization, but they can also be time-consuming and complex. As businesses look for ways to streamline their operations and focus on core competencies, many are turning to outsourcing their finance and accounting functions. Outsourcing these functions can provide a range of benefits, including cost savings, improved efficiency, and access to specialized expertise. However, outsourcing finance and accounting functions also comes with its own set of challenges and risks. In this article, we will explore the pros and cons of outsourcing finance and accounting, and provide guidance on how to manage the process effectively.

Here is a run down of the pros and cons to keep in mind when you are deciding whether to hire or outsource your F&A function.

1. Save on costs.  Outsourcing bookkeeping services are generally less than hiring a full-time bookkeeper, but when you add in Controller and CFO services the spend gap widens greatly between hiring full time resources and outsourcing.  An outsourced team can easily save you 50% on your current F&A spend.
2. Work with experts.  How confident are you in your ability to assess a Controller skill set for hire?  Although the average founder excels in many areas, accounting is not generally one of them.  It can take a long time to realize when you have made a bad hire in F&A, and unfortunately the costs can be tremendous.
3. Only pay for what you need. It’s generally easier in an outsourced relationship to limit the scope of an engagement and if you choose a modern service provider they will certainly be leveraging the latest accounting tools cutting down on resource time and improving data accuracy.
4. Timely reporting.  One of the most common complaints about in-house accounting departments is that they are too slow and financial reporting is not being circulated every month.  For whatever reason, it seems extra challenging for business owners to hold their F&A department accountable.  An outsourced firm has the duty to deliver or risk contract termination so it drives consistent performance.
5. Affordable CFO guidance.  Business owners are increasingly seeking a CFO to help them co-pilot their business.  An outsourced F&A that includes CFO expertise can provide a small business owner with a financial co-pilot for making strategic plans and decisions.
6. Minimizing the great resignation impact.  It’s well known that we are in the era of the “Great Resignation” and business owners have to weather the expense and stress this impact has on their business.  If you choose to outsource, this is one less area of burden.  Although your outsourced provider may experience turnover of their own, it will be their responsibility to manage accordingly and ensure your service impact is minimized
7. Improved business focus.  The savings from outsourcing F&A can be reinvested into customer acquisition initiatives to grow your revenues.

There are some cons to consider as well.  

1. Divided attention.  When you have adhoc requests it may take more time for you to hear back from your external teammate because you likely aren’t their only client.
2. Slower turnaround time.  A benefit of an in-house team is that you can easily drop by for greater response times on adhoc requests. 
   
3. Out-of-scope costs.  Over time business owners may want to add more reporting and services to the relationship which can lead to scope creep and increased costs.  To contain spend you’ll want to ensure additional costs are discussed in advance to avoid nasty surprises when the bills come in.
4. More control. When hiring an in-house team, you can direct how the work is performed and exactly what the reports look like.  When engaging with an outsourced provider, you get to clarify what information you want, but generally the vendor essentially decides how the work is performed, including reporting design, etc.
5. Unmet Expectations = Frustration.  Outsourcing F&A does not mean you will eliminate all frustrations.  There will still be errors from time to time and the frustration can sometimes feel greater for those who thought that outsourcing a business process would result in complete elimination of all departmental issues.
6. Choosing the right vendor.  All outsourced F&A providers are not created equal.  Ensuring you select a reputable service provider with the right expertise for your business will ensure a better experience.

If you are considering outsourcing your finance function keep these pros and cons in mind and be sure to do your research on the F&A provider before engaging to ensure they are the right fit for your business.

If you’d like to have a conversation with a us at Finout.in about outsourcing your finance contact us today.

Author: Suneetha Thammineedi