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Featured Article
By: Peter J Kusterer, NvestNtech Inc, February 27, 2004
The outsourcing of accounting is seen by many as a reduction in staff and the loss of local knowledge and experience in the operation of a business. However, it can become a means to increase growth in the company, and in turn employment within the firm.
In the early days of most any size company, retaining accounting practices in-house appears to make sense; often at this point in their growth, the company has the luxury to be self-sufficient and perform all support operations in-house. However, as the company grows in size, segments their markets, and adds locations, the need for greater “production" (productivity) efficiency quickly comes to the forefront. The incentive to focus on the products and services to remain competitive and grow puts a burden on any non-critical aspect to production of the company's products or services. Market pressures and customer needs will force many companies to consider outsourcing to remain profitable and vibrant.
Outsourcing accounting does not mean a complete turnover of the operation at hand; contrary to what some may perceive as a negative event, outsource accounting can be a means by which you subcontract the activity or task in much the same way as companies subcontract production and delivery of their goods or services. Those who see this view quickly realize that an activity like accounting is not critical to their product's competitive advantage; they quickly determine they do not need to perform this activity in-house.
To focus on doing all things under one roof can lead to lower productivity, a decline in quality, and a distraction from the organization's capability in their product or service. In terms of subcontracting their accounting requirements and systems, organizations relieve the burden of the financials to focus on their area of expertise, or superior product. Said another way, outsource accounting is more than just a cost reduction move; capacity and quality will rise through outsourcing both expertise and information systems.
An example of a firm that is able to deliver a complete outsource accounting solution is Thomas, Judy & Tucker, P.A. a local CPA firm in Raleigh, NC. This firm has an Outsource Accounting division that provides Business Process Outsourcing (BPO) for companies that generate high volumes of transactions. They provide the information systems, staff, and business processes for the traditional accounting department in most any size company. Their customers realize an immediate gain in productivity, and a reduction in overhead and cost.
By moving this responsibility to an outsource accounting firm (i.e., more than just bookkeeping), companies receive increased quality of information and efficiencies otherwise difficult to obtain within the limitations of their current staff and information systems. But, they do not lose control of their financials; only the tasks and activities to get them done are outsourced. In this example, the outsource accounting firm will focus on the "production" of financial requirements in partnership with the organization (client); in many cases, an outsource accounting firm can become the CFO.
Affording a company the opportunity to focus on the production and efficiency of their product or service can provide a competitive advantage, and in turn, more business. Additional business means growth, and within that growth, more jobs. So, outsource accounting can be a decision that provides more efficient staffing, and higher productivity that is essential to growth and continued success of the business.