Accounting automation and outsourcing is a fast-growing trend. Accounting is the heart and world of any business and needs particular concern to make an informed decision. Even when it comes to choosing the right outsourcing accounting service, many companies make some common outsourcing accounting mistakes during the process that ends up costing them in the long run.
Here we have compiled a list of expensive outsourcing accounting mistakes and how you can avoid them.
Mistake 1: Not Defining Your Goals
If you are outsourcing accounting with the idea of getting better service at low rates and minimum management, you should reconsider. You will not achieve anything out of outsourcing unless you have a proper plan. Moreover, you need to define your objective from outsourcing service.
You should determine if you want to just outsource the more complicated accounting tasks or the entirety of your accounting. If you choose to do the latter, you should consider a service that does bookkeeping & payroll as well. This will make sure the process is streamlined and all the accounting activities are being handled by professionals.
For example, if you outsource bookkeeping services, you will have enough time to focus on your business’s management and marketing aspects because bookkeeping takes a lot of time.
Mistake 2: Not Thinking About the Interview Process
Would you ever hire an in-house account in your company without a formal interview? If your answer is no, how can you hire an outsource company without a formal interview?
If you simply trust some online comments or referrals from your friend, please don’t commit this mistake and conduct a good interview session before hiring a professional accounting company.
Mistake 3: Hiring Cheap Solutions
While outsourcing accounting services is a cheap solution, it doesn’t mean you will get good services by paying less. Consequently, if you hire affordable accounting services or appoint an individual freelancer to handle your accounting operations at cheaper rates, it will be one of the biggest outsourcing accounting mistakes.
For instance, freelancers will take up only a limited amount of work and won’t even offer complete accounting services because they are trained in just one part of the accounting process.
On the other hand, if you hire a reputable accounting outsourcing company, you can use their multiple accounting services and support from highly professional accounting staff that consists of accountants, auditors, tax experts, and others.
Therefore, you shouldn’t get lured by the cheap accounting services offered by freelancers. Spend a little extra to get a flawless accounting service.
Mistake 4: Not Setting Expectations
You always need to be clear about your outsourced business partner’s expectations right from the beginning of the contract to avoid outsourcing accounting mistakes for your company and your new partner.
When you neither define your expectations nor legalize them through a written contract, you won’t be able to achieve your outsourcing goals.
Further, there are a lot of pointers you need to be fully clear about, like –
- Which mode of communication will you prefer?
- How would you be addressing issues? What are the problems for you, and what is an emergency situation?
- When do you want account work to be delivered, weekly, biweekly, or daily?
- What should you do if your internet goes down?
Mistake 5: Not Having Proper Communication
You don’t have to micro-manage every aspect of the work as the outsourced company’s manager will handle everything for you. However, this doesn’t mean that you can completely neglect your outsourced worker’s demands and get a report on their work progress without communicating to the project manager.
Consequently, if you allot work to a company and don’t follow up, this would be a massive outsourcing accounting mistake on your end. Nonetheless, the outsourcing accounting team might be thoroughly trained and experienced. Still, if you want to get the work done accounting to your style, you need to communicate with the team and guide them whenever they aren’t following your vision.
Always remember, regular communication is the key to success for a business organization, whether operations are handled remotely or locally.
Mistake 6: Not Understanding the Accounting Services You’ll Need
If you don’t define the scope of what you need accurately, most probably, you will end up with incomplete solutions that take time to integrate and complete. Always ensure that you have outsourced a complete process.
For instance, you may feel that you just need invoice scanning and data entry with software for routing for accounts payable management. However, it pays to think through how you spend your time throughout the process.
Further, most businesses find the biggest benefits come from a complete outsourced account payable management solution that includes automated routing for approval, exception management, vendor setup, and support for vendor payments as well.
A complete accounts receivable management solution will include:
- Customer billing.
- Cash application exceptions [Like dispute management and credit card expirations].
- Customer late payment reminders.
- Cash applications.
You must customize an integrated end-to-end accounting process to your needs based on your business rules for a successful outsourcing accounting solution.
Mistake 7: Letting the Providers Tell You What You Need
Let’s assume you are about to make a fairly common but relatively big-ticket personal purchase: you need a new car. You have done your research, made a list of must-haves and nice-to-haves. Moreover, since your kids are in college, you would like something sporty but fuel-efficient at the same time. Further, you wouldn’t mind a few bells and whistles, but safety is crucial. But wait, that’s not the thing.
Now imagine a salesperson listens intently, tells you that they have the right car for you. That leads you to a big minivan without a safety rating, and as far as bells and whistles go, it has heated seats and satellite radio. Practically nothing in this vehicle is right for you. In contrast, they keep you assuring this is the one and trust them, and they have been selling cars for a long time. What’s the problem now?
You would not buy this car. However, companies may sometimes be drawn into this same situation when they are shopping for vendors. This is a huge mistake, but it is an understandable one. After all, you are new to outsourcing. Nevertheless, this doesn’t fall under scrutiny.
You know best what your business needs. A quality accounting company will listen to those needs and create a solution that meets them. Along with this, they should act as a guide to the ins and outs of outsourcing. Besides, they should suggest ways to address other issues that you didn’t realize or improve alongside your initial concerns.
Finally, there is no need to force your company or project into parameters that you didn’t use yourself. Or use a technology you are unfamiliar with or sign on something that doesn’t serve you.
Mistake 8: Half Knowledge is a Dangerous Thing
We are all aware of the fact that knowledge is power, and research is all about creating new knowledge. Outsourcing accounting work that is outside your core competency is a viable option.
Consequently, before deciding on outsourcing the task, a company should have a properly analyzed report of the eligible companies’ list on whom you can trust and hand over your company’s financial data.
For instance, you won’t need to hire a firm that keeps sending the newsletter in your mailbox as there are automated tools available for newsletters. Rather, you should go for a company only when you have complete knowledge about the process you are to outsource and how it will help you to transform the business work style in a contemporary manner.
Mistake 9: Trusting Words and Not Actions
Companies should never believe the words of any outsourcing accounting company unless they have not scrutinized their action. Nowadays, the dependency of all generic companies upon outsourcing accounting companies is vast.
However, you should keep a separate coordinator who keeps in touch with the outsourcing company and observes their working efforts as in the end, the result speaks.
Interestingly, outsourcing is not a straightforward solution to your problems. You should understand the concept of mastering your strengths while outsourcing your weaknesses. Every industry should have a deep knowledge of outsourcing their financial tasks to a reliable company at an affordable cost with good service quality.
Outsourcing accounting mistakes can have a significant impact on the goodwill of your company. Hence, you should remember the goal of outsourcing is reducing the inefficiencies and delivering quality services to be more focused on other day-to-day business activities.