12 accounting outsourcing mistakes to avoid

by Andy Nguyen
Accounting Outsourcing Mistakes

Accounting has and will continue to be one of the essential business operations for any company. The financial statements about income and expenditures are pivotal for making informed business decisions. 

And when it comes to making this business operation more efficient, the key strategies often revolve around accounting automation and outsourcing

That said, when outsourcing accounting to an external firm, even the most seasoned business owner or entrepreneur can make mistakes. 

Want to know what those are? 

In this article, we’ll cover the 12 most common accounting outsourcing mistakes that business owners make and how you could easily avoid them. 

Let’s begin!

12 common accounting outsourcing mistakes that you should avoid

Here are the common accounting outsourcing pitfalls that a CFO (Chief Financial Officer) or business owner should keep in mind: 

1. Not defining your outsourcing goals

The first and the most common mistake is not clearly defining your business needs and how you plan to benefit from outsourcing accounting. You should know whether your accounting outsourcing goal is to save costs, access specialized services, or save effort on time-consuming accounting functions like bookkeeping. 

If you don’t have a well-thought-out plan and go about outsourcing accounting just to get services at lower rates, you may not get the desired results. 

You should also decide whether to outsource a single accounting service like accounts receivable and accounts payable or outsource the entire accounting function to a firm, including bookkeeping services and payroll. 

For example, outsourcing a single process can help you get expert service at lower costs than hiring the same talent in-house, which is more expensive. On the other hand, outsourcing the accounting process completely (including bookkeeping) can free up your in-house team to focus more on other crucial business functions. 

Ultimately, the type of accounting outsourcing services you avail of should depend on what you’re trying to achieve from the arrangement. 

2. Letting the outsourcing company tell you what you need

If you’re new to business process outsourcing (BPO), certain firms may push you for outsourcing services that you don’t necessarily require. This is a common outsourcing mistake and quite a relatable one. 

However, you should understand that you know what’s best for your business. A good and experienced outsourcing company should be able to listen to client requirements and craft an accounting solution that helps you meet your outsourcing goals.

And while they may suggest solutions that can help you address issues related to outsourcing, you needn’t force yourself into an arrangement that you aren’t comfortable with. This includes using unfamiliar accounting software, exceeding your outsourcing budget, or signing up for anything that doesn’t add value to your business. 

3. Not screening the outsourcing company thoroughly 

Even if the Linkedin profile of an outsourcing accounting firm looks promising or you receive a referral from a friend, you must screen the company via formal interview. 

After all, you wouldn’t want to share your confidential financial data with a company simply based on online reviews. 

The best way is to start with a written interview via email. Try to find out if it’s a CPA firm (Certified Public Accounting Firm) or a specialized outsourced bookkeeping service. 

Once you’re satisfied that it can meet your accounting needs, arrange for a telephonic conversation. 

Here’s what you should try finding out at this stage:

  • How many outsourced accountants do they have on their team and how many will be servicing your company. 
  • The company policies, processes, and contingency plan the accounting firm has for employee attritions. 
  • Their industry experience and if they understand the nuances of your business’s domain. 
  • The type of technology or cloud accounting software they’ll use to support your financial department.
  • How do they ensure the accuracy of financial statements?

Finally, arrange for a video interview or visit the outsourcing company to understand their work culture, employees, and the systems and processes. 

4. Opting for the lowest cost solutions

One of the common objectives of outsourcing for any big or small business is to save money. But it may not necessarily mean that you’ll get good service by paying less. 

In fact, considering cost as your only hiring criteria or hiring an accounting freelancer to save money can be one of the biggest outsourcing mistakes. 

Wonder why? 

For instance, when you hire an accounting freelancer instead of a professional accountant, they may only be trained to take up a part of your accounting work. Consequently, their services may be subpar, and your financial reports can get delayed. 

Similarly, an outsourced accounting and bookkeeping firm that advertises too-good-to-be-true prices may charge extra money later in the form of additional fees and hidden costs. 

You may also face issues like: 

  • Inaccuracies in financial data like cash flow errors.
  • Non-compliance and regulatory concerns.
  • Lack of transparency.
  • Lack of proper communication.

Bottomline – instead of going for cheap accounting and bookkeeping services, look for a reputable outsourcing firm with a certified public accountant. Go for a firm that offers multiple and customized accounting services, even if it means spending a little extra. 

5. Outsourcing the most difficult task

If you’re a small business owner, you may want to outsource the most challenging tasks to your outsourced accounting company. 

However, it isn’t the smartest move. Outsourcing your most complex accounting work without testing the water first can bring your entire accounting process to a standstill.

Instead, you should start by outsourcing more standardized, process-driven, and time-consuming accounting operations. This way, you can quickly optimize the generic processes before moving on to more complex tasks. 

6. Not prioritizing cultural fit

It’s common for technical proficiencies to take precedence over soft skills. However, while outsourcing your accounting function, you and your accounting firm should match culturally. 

Any outsourcing contract is a long-term relationship, and your BPO company is ultimately an extension of your brand, sharing a common vision and core values. 

If you ignore the cultural fit, you’ll only end up reiterating your business goals repeatedly and may still not derive the value you’re hiring them for. 

The best way to understand if the outsourced company is a good fit for your business is to see how they treat their people. It’ll help you analyze factors like:

  • Productivity of your outsourced accountants.
  • How long will the outsourced team stay in the company? 
  • The extent to which the team will go to support your business.

Additionally, you should try finding out how your accounting outsourcing partner treats its other clients. Does the company have more long-term clients, or if it suffers from a high turnover rate? 

Long-term relationships with other clients indicate the cultural harmony and the quality of the company’s outsourced accounting services. 

7. Not communicating your expectations 

Setting your outsourcing goals isn’t enough. You also need to communicate your expectations clearly to your outsourcing company.

Ideally, you should be doing so during your initial discussions and before closing the deal to avoid disrupting the outsourced accounting service. It’s also best to have the accounting services expectations legalized through a written BPO agreement

Here are some of the things your agreement for any accounting service should include: 

  • The frequency and the mode of communication you want to be used.
  • How often do you want the accounting books to be reconciled – daily, weekly, or monthly?
  • How will the issues related to accounting services be handled and who will be in charge?
  • The number of hours the outsourced accountants should spend on your account daily.
  • Is the outsourced accounting service provider allowed to hire a 3rd party in case of an emergency?
  • What are the protocols for security breaches, power/internet outages, etc.?

Not sure how to draft the contract?

Check out what exactly goes into a BPO agreement.

8. Not communicating regularly with your vendor 

Once you hand over your payroll processing or bookkeeping services, you needn’t micromanage every aspect of the outsourced job. Your outsourced accounting and bookkeeping team should be trained and experienced enough to complete the work independently. 

However, neglecting the task entirely and expecting perfect results at the end is a big mistake. 

You should check in from time to time to be aware of the work’s progress and address any concerns of the outsourced team sooner. 

Keeping in touch with your outsourced accounting team at every step can help you get the work done as per your style. You can also quickly guide and redirect the team to follow your company vision if and ever they digress. 

9. Not giving constructive feedback 

If the outsourced accounting and bookkeeping firm is experienced enough, you may quickly want to delegate the next task before providing any feedback on the first one. 

You may also want to rectify small accounting mistakes yourself to save time instead of asking the outsourced team to correct the financial reports. 

While this can work short-term, it can be detrimental to the functioning of outsourced bookkeeping and CPA firms. They could end up making the same accounting mistakes repeatedly, costing you both time and money. 

For this reason, it’s imperative to provide constructive feedback and improvement ideas at the end of every workflow. It’ll help you streamline the accounting work and confidently delegate the next job to the outsourced team. 

Remember, communication is key for getting the best results, whether the operations are in-house or outsourced to a distant location. 

10. Not having standardized systems and performance metrics

Your outsourced accounting team, especially an offshore team, may initially struggle to meet quality standards unless you define frameworks and systems for a specific accounting task. 

However, standardized workflows aren’t hard to build. There are several workflow and project management software like ClickUp and Trello to help you streamline and manage your outsourced functions effortlessly. 

Similarly, not setting up Key Performance Indicators (KPIs) can prevent you from measuring the performance and identifying shortcomings of your outsourced accounting team. 

But when you establish certain metrics-based KPIs, setting team productivity targets and managing individual employee productivity becomes pretty straightforward. You’re more aware of your team’s way of functioning and can take data-driven actions to change the day-to-day practices. 

But how do you measure these KPIs

A simple and effective solution is using software like Time Doctor

Time Doctor is a productivity management and performance enhancement tool used by large companies like Ericsson and small businesses like Thrive Market. 

You can use Time Doctor to:

But that’s not it. 

Check out the other incredible features offered by this tool. 

11. Not getting your in-house team and clients onboard

Sure, you must communicate regularly with your outsourced accountants. But your in-house accounting team should also be involved in the whole outsourcing accounting process, right from the initial talks.  

If your back office or accounting department doesn’t understand why you’re outsourcing accounting services and doesn’t follow your vision, there will be friction in the workflows sooner or later. 

But by managing this change proactively, both big and small business owners can ensure a more amicable relationship. 

Here are some of the steps you could take to get your in-house team on board: 

  • Make them understand how outsourcing accounting can help achieve your business’s vision sooner.
  • Allow your team to create a list of accounting tasks they think could be outsourced.
  • Reassure them their jobs are safe.

Similarly, it’s essential to have your client on board too. They should be able to accept global outsourcing as a part of your business model. Most clients will easily come on board once they see that the outsourced team will help add value to their company at a fair price. 

12. Not fully integrating the outsourced team members into your company

Even when you outsource accounting services to an offshore location, you must consider the team integral to your organization. Failing to do so will result in suboptimal cultures and poor outcomes.

Here’s how you can fully integrate your outsourced accounting employees into your organization: 

  • Ensure that your in-house team and your outsourced accountant know each other’s faces and names.
  • Share your company’s goals, vision, and mission with the outsourced bookkeeping or payroll team.
  • Recognize their important national holidays.
  • Celebrate important dates and birthdays of every outsourced employee.
  • Whenever possible, arrange visits for key staff to each other’s offices.
  • Set up a live video feed between offices to give them the vibe of working for one company and not two different firms.  

Not sure where to outsource? 

Here’s our guide on the top outsourcing countries

Wrapping up

Outsourcing accounting services, be it of any proportion, is a big decision and one that’s not to be taken lightly. After all, one small outsourcing mistake can significantly impact your company’s goodwill. 

Whether you’re a small business new to outsourcing or a big corporation, it’s easy to get carried away by the perks of outsourcing and make hasty decisions. 

The 12 common accounting outsourcing mistakes covered above can safeguard your business against costly losses and help you get the most out of your outsourcing relationship.

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