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Accounting is time-consuming and tedious for businesses with limited expertise and resources. That’s why outsourcing has become an increasingly strategic option for companies looking to streamline financial management, reduce costs, and enhance efficiency in their operations.
Despite outsourcing’s many benefits, it also comes with its own challenges and risks that business owners must consider. This article tackles common accounting outsourcing challenges and provides actionable steps for overcoming them.
Common Accounting Outsourcing Pitfalls and Their Solutions
If you’re wondering how to improve your accounting department, the best solution is to hire experts. Accounting outsourcing involves hiring external professionals to handle your company’s financial management tasks, such as bookkeeping, payroll processing, tax preparation, and more. Some businesses find outsourcing helpful as they typically can’t maintain an internal accounting team.
However, let’s face it: no outsourced solution is 100% perfect. You are bound to experience challenges along the way. Fortunately, you can better prepare for these finance outsourcing risks when equipped with the correct information. Here’s what to expect and what you can do to overcome them:
Limited or Loss of Control Over Financial Processes
The Challenge: One of the biggest concerns for business owners when outsourcing is the perceived loss of control over financial data and processes. It’s a common misconception that outsourcing means the provider takes the reins entirely, with you having no say in it. Ideally, you should work with a provider that you trust enough not to have to supervise consistently. At the same time, you should still feel like you can provide direction and have some level of involvement should the need arise. They still work for you and are still paid for by you. You still have the final say when it comes to important financial decisions.
The Solution: Before engaging a provider’s services, agree on how often you can do check-ins and “hypercare” calls—that includes you, your stakeholders, and a representative of the partner firm’s team. Establish clear communication channels and expectations with your outsourcing partner. You can also request access to real-time financial data through cloud-based accounting software to have visibility. Choosing a provider that offers transparency and collaboration ensures that businesses stay informed about their financial status at all times.
Quality and Accuracy
The Challenge: One of the most problematic accounting outsourcing challenges that businesses fear is not getting the results they expect. Inconsistent service quality or errors in financial reporting can have serious consequences, from compliance penalties to poor business decisions based on incorrect data.
The Solution: Before selecting an outsourcing partner, businesses should thoroughly vet potential providers by reviewing client testimonials, case studies, and certifications. Setting realistic expectations and keeping communication channels open ensures that everyone is on the same page and working on achieving the same results. You can utilize performance metrics to monitor and assess the quality of the outsourced work.
Unfit Outsourcing Partner
The Challenge: You probably already know, but it’s worth mentioning that your outsourced accounting services will only ever be as good as the provider you hire. Choosing the right outsourcing firm requires due diligence and might involve hours of research. Partnering with a provider like Eastvantage that already has a track record of working with businesses worldwide as a premier business process outsourcing company.
The Solution: To ensure that you’re hiring a dependable provider, check if they have experience and expertise in your industry. You can also ask for case studies and testimonials from their previous clients. Hopping on discovery calls with outsourcing firms will also help you gauge their credibility.
If you’ve already engaged a provider’s services but you’re still not getting the results you expect after a considerable period, it’s a sign that the arrangement might not be a great fit. It’s time to reassess your existing professional relationship and discuss the next steps. If you can’t reach a compromise, seriously consider terminating the service.
Time Zone Differences and Language Barriers
The Challenge: Many outsourced accounting firms are located offshore. While it’s inexpensive to outsource from countries outside your geographical location, communicating your needs and expectations can be more challenging due to time zone differences and language barriers. Communication delays can be frustrating and slow down your business.
The Solution: Choose a provider who is culturally affine with your country and proficient in your language. Set acceptable response times and use collaboration tools like Slack, Zoom, or project management platforms to facilitate real-time communication. You can also use an overlap system where the provider works mid- and night shifts.
Compliance and Security
The Challenge: Different countries have different financial regulations and tax laws. Businesses may face legal or financial repercussions if an outsourced firm is unfamiliar with local compliance requirements. Data security is also one of the most pressing finance outsourcing risks. Financial data is highly sensitive, and outsourcing accounting functions to an external provider increases the risk of data breaches or unauthorized access.
The Solution: Take a proactive approach to regulatory compliance and security by working with a provider that adheres to stringent data protection protocols and international security standards. The outsourcing firm must also be up-to-date with the latest finance and accounting outsourcing trends.
Budget Constraints
The Challenge: Traditionally, outsourcing administrative and repetitive tasks is more affordable than maintaining an in-house team since you won’t have to shoulder salaries, benefits, overhead costs, and ongoing employee training. However, some outsourcing providers may have pricing structures that include hidden fees, making budgeting difficult for businesses.
The Solution: Before signing a contract, businesses should request a transparent breakdown of costs and ensure no unexpected charges. Fixed-fee models or service level agreements (SLAs) that outline deliverables and pricing can help avoid financial surprises.
Turning Accounting Outsourcing Challenges Into Opportunities
At its core, businesses that outsource understand the stark differences between in-house vs. outsourcing accounting and get the most value out of the latter option. While accounting outsourcing comes with challenges, it can be effectively managed with the right approach and a trustworthy service provider. Work with an outsourcing firm that is as invested in your success as you are and sees these pitfalls as opportunities for growth, not failures.
Eastvantage is just the partner you need. We help businesses navigate financial complexities with confidence. Contact us to learn more about the great things we can achieve together.
