Drowning in Detail

A Two Part Series:Why Outsourcing Accounting Makes Sense

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Have you ever heard the old phrase, “just because you can, doesn’t mean you should?” This is often the case with the internal accounting department. In this day and age, of technology and information as an asset, the internal accounting department is quickly becoming the epitome of something that, “just because you can, maybe you shouldn’t.” In my work with small to midsized companies, I often hear the complaint that it is much easier to have an in house accounting department. But, easier why?

Because it’s easy to hire accountants that say they have all of the experience you are looking for. If a business owner places an ad for an accountant in these economic times, odds are they will receive at the very minimum 100 to 150 resumes. I know I do and I place those ads in a relatively small market.

And how many of these business owners are accountants? As versed as they may or may not be in the financial aspects of their own company, do they know how to siphon through the accounting terms in a would-be employee’s resume? Bottom line, does that business owner know what questions to ask to determine what kind of skills this individual has to handle their money?

Maybe a better question for that business owner to ask would be, “While we need accounting, do we really need accountants?” Companies are at a point in their histories where cutting costs is not just a good idea, but a means to survival. Where owners aren’t taking paychecks so that they may cover overhead in their organizations as revenues decline. Labor, including that of the accounting function, is almost always the largest line item in overhead and the line item that can be cut the most when scrutinized. The chit chat by the water cooler is no longer an expense that the business owner is willing or able to absorb.

In the grander scheme of things, a small to midsized business does not, even if they have “accounting” in house, have the wherewithal to employ the various levels of expertise that allow them to have a full spectrum of accounting knowledge such as a CFO, controller, accounting manager, or clerk level employees. Also, small to midsized companies are notorious for lacking internal controls within their accounting function thus making themselves twelve times more likely to suffer an embezzlement from internal accounting staff.

By having access to higher level financial expertise that can be obtained by outsourcing the internal accounting function, a company can gain all levels of accounting and finance as well as put in place, through that outside firm, a sound set of internal controls that leave them much more protected from the risk of employee dishonesty. Higher level financial expertise means less meaningless details and more answers for business owners. So, does outsourcing your accounting make sense? Next time, I’ll talk about basic functions that your accounting department should fulfill whether in house or outsourced. I’ll also have some tips that you can use to find the right outsource firm.