Saturday, December 18, 2010

Outsourcing your back office...The good, The bad, The ugly & The end result.

This is a guest post by Bert Doerhoff CPA of 
Bert runs Accubiz which provides outsourced accounting services for small businesses.

Before I start this post, let me give you the fine print disqualifier. Our firm specializes in using US employees to outsource complete administrative back office duties for small businesses. Therefore understand my viewpoint may be somewhat slanted.  

The Good:

1. It doesn't cost-it pays to outsource - The biggest thing most people have to get past is that outsourcing isn't always additional overhead. In many cases it is a significant savings. When you look at such things as workers comp insurance, only paying for the time you need rather than hiring full time, the cost to recruit, train and hire, etc. It costs the average business several thousand dollars in lost productivity, training, etc. every time you hire a new employee. Not to mention, every time you lose an employee, there is one more person out there who knows all about your business. 

2. Hiring & training - As a small business owner it is tough to hire, train and monitor someone to handle accounting issues you yourself have no training in. The outsourcing firm specializes in this work and only hires experienced experts to handle your account.

3. Embezzelment - The majority of embezzlement issues come from trusted employees who handle the cash and the accounting records. Having an outside party handle the accounting gives a separate third party control to monitor those in your office who handle cash.

4. Current accurate financial information - Often your accounting records become the lowest priority for someone in your office and so they are generally not current. When you outsource, the accounting is always current. When information does not flow you will be the first to know.

5. Access to experts that don't charge for every phone call - Most small business people are afraid to call their professional advisors for fear of getting a bill every time they call. When you outsource, you have access to those advisors on an ongoing basis.

6. Don't just plug the numbers - Most small business owners try to train a clerical person to handle the accounting records. When you outsource you deal with people who are trained to spot errors and problems so they catch things when they don't make sense. 

7. Backup of your business records in event of disaster - As a part of outsourcing all your accounting records and supporting documents are converted to electronic images and are stored offsite on secure servers. If you have a flood or fire, the effect on your business will be minimized because the business of business can continue without interruption. 

8. Fringe benefits, vacation & sick leave & who covers the business -The firm that handles your outsourcing is an independent contractor so you don't pay health insurance, don t pay payroll taxes and all the other fringe benefits on them. When your bookkeeper is out on vacation in a small office it can be a crisis because there is no one there to handle payroll or respond to customer inquiries. With outsourcing those issues are covered every business day.

9. Reduced computer software and update costs - Your business has to buy software to track all your accounting records and then every year you have to pay update fees to make sure you have correct payroll tax tables, access to new features, etc. When you outsource those costs are all paid by the outsource firm because they already invest in those items.

(The bad, the ugly & the end result - in the next post)

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