SmartBooks wrote the book on Small Business Finance - Literally. Learn More

Key Reasons Why Businesses Outsource Financial Functions

Outsourcing Business Financial Functions

While every business owner dreams about success, few approach a new venture with fantasies of financial reporting tasks, forecasting functions, tax challenges or accounting details. And it’s awfully difficult to get excited about growing the business when you’re mired in backlogged bookkeeping activities and complex financial compliance responsibilities. This is why some businesses choose to work with an outsourced financial services company. 

As businesses journey toward the kind of profitability that makes it both possible and effective to garner an entire in-house finance department working toward common goals and objectives, there remains a need to have financial functions accounted for in the smartest way possible. Here are some of the most common and compelling reasons why some businesses opt to outsource these financial services.

Overall Cost Effectiveness & Profitability

Outsourcing, like most business expenses, is an investment. What’s not always factored into that cost, however, is the potential for significant savings and profitability improvements from such an investment. It’s true what they say about having to spend money to make money, and the businesses that respect this philosophy often find that investing in outsourced financial services reaps valuable dividends down the road.

In fact, when you’re spending money on outsourced finance and accounting professionals with the knowledge, skills and experience to take an in-depth look at your financial health, you might be surprised to learn how much opportunity there is to improve your operations and tap into cost efficiencies.

Plus, it’s downright expensive to maintain in-house financial department operations. Often, the cost of hiring, training, paying and retaining accounting, bookkeeping and especially financial leadership staff is highly impractical. You’ve got to factor in not only wages, paid time off and overtime, but also office space, professional software and other overhead. Turning to outsourcing helps reduce these costs and scale a business’s resources effectively. Essentially, outsourcing means you can purchase the level of service your business actually needs and keep the costs predictable, manageable and aligned with your needs, regardless of any fluctuations the business experiences.

Maximum Productivity & Operational Efficiency

The benefits of outsourced financial functions are hard to overstate from a productivity and workflow efficiency standpoint. Although handling complex accounting, bookkeeping and other financial responsibilities in-house might be doable, it ties up one or more valuable employees with tedious chores like entering data, gathering documentation and facilitating reports. What’s more, some businesses find themselves subject to a single person’s skills, experience and availability, which can lead to financial errors and missed deadlines. 

So while it can be tempting for a business to take a “grit your teeth and muscle through” approach to these tasks, they often become a tangible time-sink. Regardless of a business’s size, the ongoing burden of financial management adds up, particularly as the company grows. By unloading these functions to an outsourced partner with a team of experienced professionals, there’s a wealth of productivity and efficiency to be gleaned. 

Doing so enables a smoother, more organized process to unfold and frees up key employees to focus their time on the revenue-generating aspects of the business. It gives businesses the opportunity to stay ahead of their financial functions so they’re in a better position to pivot from challenges quickly, find the most effective solutions and foster a more productive environment.

Proactive Financial Management

Many businesses struggle to establish good financial practices as they grow. From improperly tracking the age of receivables to failing to collect bad debts, issues like these can create downstream problems over time. Businesses that outsource their financial department are guided by experts who can help identify and eliminate such problems, allowing the company to take a more proactive approach to financial management.

Today’s outsourced financial services providers are staffed with more than just bookkeepers and accountants. Many are powered by finance professionals who bring years of industry experience to work for their clients. These experts usually operate across multiple companies and have insight into setting key strategic goals for improving efficiency, lowering costs and optimizing financial technology and systems. This is the basis of proactive financial management for any business. 

Remember that a business’s financial reports are the cornerstone of decision-making. But plenty of business owners don’t have the financial expertise to analyze this data and make the kinds of decisions that support profitability and growth. Outsourced professionals can discover and explain challenges, review data and frame issues in ways that make sense to the business owner. They can spot challenges ahead of time so the business is proactively addressing its financial realities instead of reacting to problems as they arise.

Expert Resources & Deep Experience

One of the major upsides of outsourcing financial services is the access to a team of professionals whose sole focus is to save the business money and keep its financial records straight. A qualified partner will have advanced knowledge of a business’s relevant tax structure and be able to offer financial advice that might otherwise be unavailable to them. 

Outsourced providers also work with the best financial services and technology available. Loads of businesses know the frustrations associated with employing financial technology of which users have only a rudimentary knowledge. An outsourced partner features not only access to the most capable software available, but also the time and skills to garner the best results from it, offering a level of expertise that results in direct benefits to each client’s business.

Outsourcing allows businesses to put their finances in the hands of the experts who have years of education, training and experience navigating the nuances of finance department goals and objectives. It doesn’t matter how good a business’s in-house employees are, they won’t be able to match the industry experience a dedicated firm can bring to the table. Outsourced financial services companies have established bookkeeping and accounting processes, top-shelf resource management tools, and a team of professionals with an unparalleled level of combined experience.

Compliance & Peace of Mind

Mistakes are inevitable at all levels of financial operations, and a business’s books get more complicated as the company grows. Unless your accounting is regularly reviewed by multiple, knowledgeable entities, some issues are bound to fall through the cracks. While some mistakes are harmless, others can lead to lost revenue, administrative inefficiency and even audits. Outsourcing offers the kind of approach that affords businesses complete peace of mind.

It can be incredibly freeing to offload your company’s complicated financials to someone who knows what they’re doing. Outsourcing the financial department means business owners no longer have to worry about budgeting, benchmarking, closing cycles or compliance, as all the heavy lifting is done by the financial gurus. Outsourced finance and accounting professionals stay up to date with the latest changes to GAAP, regulatory compliance and the evolving tax laws that shape business budgeting decisions. They are adept at finding errors and spotting patterns that may indicate fraudulent activities. And they establish consistent, healthy accounting practices that set businesses up for success, support stable company growth and prevent noncompliance penalties.

There’s no easier way to ensure compliance and peace of mind than handing a business’s financial functions over to experts with decades of industry experience. Outsourcing is a way to protect against audits and penalties, and it enables companies to work with professionals focused on ensuring better financial results from the business.

CTA-Infographic-The-Finance-Stack