The Pros and Cons of Outsourced Accounting

Outsourced accounting covers a wide range of services, including everything from basic bookkeeping to comprehensive Chief Financial Officer (CFO) tasks and guidance. This flexibility allows businesses to tailor these financial services to match their exact operational needs.

But, as with any consequential business decision, hiring an outsourced financial team has both significant advantages as well as certain drawbacks. Understanding these pros and cons is essential for any organization considering this route and something we’ll explore in depth in later sections.

G-Squared Partners stands out in outsourced accounting services, bringing over a decade of expertise to cater to various sectors, from tech startups to commercial real estate. Connect with us today to kickstart a partnership that evolves with your business.

Pros of Outsourced Accounting

Outsourcing financial management to a team of professionals comes with some significant benefits. Here are a few of the key advantages of working with an outsourced accounting team to help business leaders better understand what operations might look like after they hand off these essential operations over to a third-party team.

Cost-Effectiveness

The median salary for an accountant in 2021 was around $77,000. If a business operates in an industry like finance, the costs related to hiring an in-house team can be even higher, and that’s not including benefits packages, taxes, and other related costs.

Outsourcing accounting functions can often be a more economically prudent option as this approach mitigates direct costs like salaries and benefits, as well as indirect costs such as office space and training. Moreover, outsourced accounting teams come equipped with the tools and software necessary to accomplish the job, shifting the burden of sourcing these tools away from the business. Besides, your business might not need a full-time accountant or accounting team. Outsourced accounting allows you to take a fractional approach to fulfilling your business’s needs. 

Expertise and Quality of Service

Outsourced accounting firms offer access to a pool of professionals with a diverse range of expertise and industry-specific knowledge. Businesses gain access to this high-quality expertise without the need to outcompete other organizations for in-house hires.

This level of knowledge and high-quality service often outperforms in-house options, bringing tried-and-tested frameworks and workflows to your financial infrastructure. The result is higher quality financial reporting and access to strategic decision-making at a cost reduction relative to in-house hiring.

Focus on Core Business Functions

One of the most significant advantages of hiring an outsourced accountant is that they take essential financial operations off the plate of in-house teams. This means business leadership and related departments can focus on core business activities and strategic growth without being held back by everyday financial administration tasks.

This reduced distraction leads to the better allocation of resources toward revenue-generating activities. Additionally, when financial operations are handled by qualified professionals, there is a general sense of stability and peace of mind that can free up mental space and time — especially for leaders.

Scalability and Flexibility

Outsourced accounting services can be scaled up and down to match the pace of business growth. This provides a level of flexibility that is hard to match with in-house hires. When business needs change, as they do during peak seasons, or during significant changes, like mergers or expansions, businesses enjoy the flexibility to upgrade their accounting and financial management support.

Many outsourced accounting firms offer tailored services, meaning organizations only pay for what they need, whether that’s basic bookkeeping or high-level financial planning. This level of flexibility is essential when changes in growth trajectory or unexpected events occur.

Cons of Outsourced Accounting

While the pros of outsourced accounting make it a popular option for businesses of all sizes and across various industries, every decision has potential downsides. Let’s take a look at some of the common cons of working with an outsourced financial team. 

Keep in mind that the firm a business decides to partner with makes all the difference here, so always choose wisely and properly evaluate a potential service provider.

Potential Hidden Costs

Outsourcing can sometimes lead to “scope creep.” This is when the initial scope of the work expands over time, which can lead to unforeseen expenses. There’s a risk of incurring additional costs for services that weren’t included in the original agreement or for requests outside the standard scope of work.

Always work with the outsourcing firm to better understand their pricing model before moving forward. While some outsourced accountants operate on a retainer or package model, the best service providers will cater their services in a custom fashion so there are no unwanted services or hidden charges.

Less Control and Direct Oversight

One of the key benefits of outsourced accounting is also a potential drawback. When businesses hand over financial management to an outsourced firm, they also hand over control and often direct oversight. While this frees up time and resources, it can be uncomfortable for some business owners.

There can be concerns about quality of work and timeliness. Additionally, businesses may feel that the outsourced firm lacks a firm understanding of their operations and specific financial practices. 

Communication and Cultural Differences

Outsourced firms can operate from virtually anywhere. While this can be an advantage, differences in time zones, languages, and business culture can pose communication challenges, which can lead to misunderstandings or delays.

The development of clear communication channels can also be a challenge. You won’t be able to walk across the office and check something quickly with your accountant – instead you’ll have to call or email them. It takes additional effort from both the firm and the business to ensure alignment. 

Dependency and Reliability Concerns

Last, relying on an external team can lead to dependency issues. This makes businesses vulnerable if the service provider encounters its own issues like staffing changes or financial instability. 

Financial management is not an insignificant task but a mission-critical effort. Businesses often have concerns about continuity and consistency of service, especially if the outsourced firm does not have an adequate backup plan or emergency resources. During critical periods, such as year-end reporting or tax season, an outsourced team may fail to meet deadlines or expectations — with consequences for the business.

G-Squared Partners: Your Outsourced Accounting Solution

While businesses should always weigh the pros and cons of a service before deciding to move forward, the specific business they partner with makes all the difference. This is especially true for outsourced accounting services. The cons we outlined above are not indicative of every outsourced firm — and they’re certainly not indicative of our approach at G-Squared Partners. 

In fact, a high-quality outsourced accounting team will develop a tailored approach to each client’s needs that often involve practices to help mitigate risks like communication issues, pricing concerns, work culture differences, and more. That’s precisely the approach we take at G-Squared Partners.

We work with your team to understand your financial needs and develop a strategy to meet those demands with transparency and reliability. Get in touch today and get started on your outsourced accounting journey.