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Outsourcing Accounting Services: 5 Pros and 5 Cons

It’s becoming increasingly common for firms, especially SMEs to outsource a portion of their financial and accounting procedures, from basic auditing and tax assessments, to financial planning and strategy.


Even larger accountancy firms are getting in on the act and making use of outsourcing in order to scale for large projects or mitigate against the ongoing talent shortage.

We thought we’d look at some of the pros and cons of outsourcing financial operations in the modern marketplace. If you’re thinking of outsourcing some or any of your finance or accounting work in the near future, here are some key factors you want to think about before you make your decision.

5 Reasons to Outsource Finance and Accounting Operations

Here are five advantages that firms may find in choosing to outsource some or all of their accounting and financial operations:

  1. Talent Shortage: There is an ongoing issue for firms securing top talent, cause by an education gap and an aging workforce. As this issue increases, it may make more sense for employers to outsource accounting and financial tasks rather than compete for talent by offering increasingly large salaries and benefits.
  2. Scale for Project Work: In an uncertain economy, long-term and retained contracts between businesses are decreasing. Much work is now project-based, meaning that levels of work and income fluctuate. Outsourcing provides an opportunity for firms to scale their operations to fit the required workload. This may ameliorate concerns about turning down large contracts based on current levels of capacity.
  3. Save on Associated Employment Costs: For firms with close margins, paying full-time accounting staff in fallow periods can be a significant drain on finances. Permanent employees receive holiday pay, sick pay and pension contributions, which can sting when there’s less work or revenue is sluggish. The slightly increased outlay, short term, that comes with outsourcing can pay dividends in quiet periods, as you never pay for more than the work required.
  4. Particular Expertise: In many businesses, especially SMEs, accounting staff may be asked to work in several capacities, and may become broadly proficient across a range of financial areas and task. However, sometimes what is called for is a particular specialised knowledge. This is where outsourcing can offer a specific guarantee of expertise perhaps not available to smaller firms.
  5. Cover Mundane Tasks: In the opposite direction, if you already have a financial talent on the books, you may find their time to be overly taken up by onerous or low-level tasks, when you feel it could be better spent elsewhere. One increasingly popular option for firms is to outsource monotonous or transactional tasks, freeing up in-house employees to focus on strategy or financial planning.

Don’t go rushing out to hire your outsourcers just yet, however. In the next section, we’ll take a look at 5 reasons to be cautious when considering outsourcing accounting services and financial operations.

5 Reasons to be Cautious About Outsourcing Accounting Services

In the previous section, we discussed 5 potential advantages to outsourcing accounting and financial operations. To balance the scales, here are 5 reasons to be cautious about outsourcing in the modern economy:

  1. Decreased Oversight: This first is the most obvious. Outsourcing almost necessarily removes a level of control and oversight from your financial operations. Key here is setting up lines of communication, processes and developing a mutual level of trust with any potential outsourced business relationship.
  2. Data Security: Another important concern is data security. Moving financial records to another business or a freelancer carries an inherent risk. Robust processes on either side of the relationship need to be guaranteed. Additionally, if the outsourcer is overseas, local data protection legislation may not comply with GDPR laws – a recipe for disaster if not fully addressed.
  3. Compatibility: If your business already uses accounting tools and software, then it’s vital that any potential outsourcer is able to use the same, or a variety of technological solutions. Choosing an outsourcer only to realise that working together requires a complete overhaul of current processes is likely to tilt the cost/benefit analysis significantly at the very last instant.
  4. Client Disclosure: A recent article from AccountancyAge made the excellent point that outsourcing comes with an important ethical question. If you hold data, particularly financial data, that relates to clients or customers, then you need to make a decision about whether you inform them of your intentions to share that data. Clients may be unhappy with the suggestion, but even less so to find out at some point in the future.
  5. Overseas Labour: Something that we’ve written about in previous posts is the alignment of company values and employee values, and how important this is for engagement. The same is true, of course, of clients and customers. It’s incredibly important, therefore, that any firm thinks twice about outsourcing overseas to take advantage of cheap labour. While this may make commercial sense for many businesses, it carries ethical implications that may have far reaching consequences.

So there you have it: 5 pros and 5 cons for outsourcing accounting services. What will make sense for one business, will not for another. This article simply provides a list of significant implications and considerations for any firm considering outsourcing financial operations.

Have you used outsourced accounting services? Or perhaps you offer them? Tell us about your own experience with outsourcing in the comments section below.