Outsourcing is a ‘one size fits all’ remedy that seems to help with cost-cutting initiatives in major corporations to small enterprises. It was the Fortune 500 Companies that first demonstrated that organizations could focus on customer service if they outsource non-core accounting activities. With communication and technology becoming more affordable, accounting outsourcing has become the new normal.
Since a big bulk of accounting can be outsourced, it is easier to consider the core accounting processes that must not be outsourced. These include:
- Business processes that require close engagement with senior management (for example, budgeting)
- Business processes that require close engagement with customers (for example, follow-up on collections); and
- Business processes that require on-site presence (for example, inventory audits)
Apart from these operations, companies can handover the rest of the accounting to outsourcing companies. It is important to note here that the handover is to be carried out in a phase-wise manner, and the service provider must be chosen after careful deliberation.
So how does an organization choose the ideal accounting outsourcing service provider? Here are a few important metrics to consider while making this decision:
Proven Track Record
Does the outsource accounting firm have a proven track record that spans over a reasonable period?
To ensure this, companies must look at the firm’s track record, right from the time of the company’s inception. Experienced service providers carry with them more experience and lesser chances of messing up. Certain service providers may not have the requisite years of experience, but if they can offer quality management, they are worth considering.
Key Performance Indicators Adopted
To check the efficacy of the accounting outsourcing company, you need to first outline the key performance indicators (KPI) to monitor and measure their performance. This KPI depends on the accounting product that is being outsourced.
Quality Workflow and Processes
Given that there will be internal and external staff involved, the workflow will have to be modified accordingly. Further, communication channels between the two will also have to be established to ensure a seamless transition from one team to another. If there are creases along the way, it may result in a finished product that is not in line with the client’s expectations.
Competency of Service Providers’ Team
One of the most crucial factors would involve assessing whether the outsourced service provider has skilled staff that is capable of handling and designing processes that can give you an unfair advantage over your competitors.
If the outsource accounting service provider has experts on their team who are capable of offering more than standard accounting tasks like book-keeping, then they are more likely to be value for money. Additionally, they are not only capable of handling a diverse set of tasks such as financial analysis but are also capable of scaling up according to your requirements as your company expands.
Handling accounts could expose the team to sensitive information, which might demand the maintenance of confidentiality. Hence, service providers should be capable of substantiating their claims of operating over secure information technology systems. It is important that they conform to ISO 27001 standards, as it lays down stringent guidelines on maintaining security by the service provider.
Budget and Cost Advantage
When availing the services of an outsource accounting service provider, your company’s budget plays an important role in this decision-making process. A service provider that offers his services at abysmally low prices may not necessarily be the best option. Conversely, a company making unreasonably high demands may not be capable of coming through on their promise. In some cases, paying a little extra in lieu of additional services could give you the cost advantage.
Hence, the best way to assess a service provider would be by carrying out checks on the quality of the service provider and negotiating terms until it suits both the parties. Further, the pricing structure shall have to be reviewed periodically.
With the above-mentioned points, you will be capable of selecting an accounting outsourcing service provider that meets your requirements and your budget. Upon taking care of these factors, you can ensure that your firm makes a wise decision on choosing the right service provider that will help you extract the maximum benefits.
OHI is a specialized finance and accounting outsourcing service provider with over thirteen years of finance and accounting outsourcing experience. We have strong functional outsourcing expertise in end to end accounting processes covering daily accounting activities, month end and year-end account finalization processes, employee reimbursements, payroll processing, management reporting and financial analysis.
OHI serves close to 300+ clients across USA, UK and Canada. We invite you to experience finance and accounting outsourcing through us.