Outsourcing the Accounting Function | Pros and Cons of Accounts

Pros and Cons of Outsourcing Accounting Function

Outsourcing Accounting Function:

Handling the accounts is one of the main work-area that every entity is required to do. As, finance is a key need for every business. and to maintain the books of accounts properly a qualified and skilled accountant is needed. And to maintain the professional or the accounts department in the organization extra costs have to be born by the company itself. But with the modern changes in the business world, outsourcing certain functions of the business has become common and essential too. When an organization lets an external organization specializing in accounts and services, handle its accounts and related functions; it is known as Outsourcing Accounting Functions. In this, the accounts are maintained by the external service provider while providing other facilities in outsourcing of accounting services. It is a great way to let the accounts related work up-to-date and maintained by experts that will also help the business firms in areas where they need help. It also lets the business to focus on other key areas and operations that require attention, now that their accounting function is outsourced, saving them lots of time.

Pros of Outsourcing Accounting Function:

The business houses are at an advantage while outsourcing accounting function. These benefits are as follows-

  • The method is Cost-effective and cost saving– When accounting is outsourced, a business organization hardly needs to set up a particular department for carrying on the functions related to accounts and to maintain all affairs of the business related to economic area. With outsourcing accounting function, a firm is just responsible for making payments for the work it is getting done by the outsourcer or external accountant, which makes paying for the services cost saving as well as reasonable.
  • The job is contractual– When an organization no longer requires external accounting services, they can end up the outsourced function as per the need. As such services are purely contractual and not permanent.
  • Saves time– If a business has been outsourcing accounting function to an accountant then it is a waste of time to worry about getting the accounts books done perfectly. With this way, companies get effective results and the work done in return is value for the money paid. All that is needed to be done by the business house is just to mention a specific time duration to the outsourcer and the work is done within the set time limit. This also, waves off the worries regarding timely completion of the work.
  • Confidentiality is maintained– The entity is worry free about the confidentiality of their accounts and that it will get revealed outside as highly qualified and professional employees maintain the accounting function.
  • Assistance from experts– The outsourcing employees have high experience and have good hold over their profession. This ensures that good quality work will be provided. They assist the company too, as and when required.

Cons of Outsourcing Accounting Function:

In spite of lots of benefits outsourcing accounting functions to third party companies, can have certain cons as well. These disadvantages are-

  • Lack of communication- When accounting function is outsourced, the business entity is not able to communicate with the outsourcer on regular basis which can sometimes bring a sense of misunderstanding between the two and their work.
  • Distance– The organization cannot see how their accounting work is being done by the outsourcer even, if they are getting excellent work and top-class services of outsourcing accounting function.

There are multiple benefits of outsourcing the accounting function for a business organization, but its disadvantages cannot be ignored as well. But in the long run the business houses are benefitted by these services, especially, small and medium enterprises, as they can use the financial resources for other important functions instead od developing an accounting department.

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.