Potential Disadvantages of Outsourced Accounting

Potential Disadvantages of Outsourced Accounting

In today’s economy, outsourced services have become a crucial operational component that provides organizations with specialized expertise, streamlined workflows, and recovered employee bandwidth. Some of the most impactful outsourced services relate to fields common across most businesses that require a dedicated department or full-time employee—such as accounting.
When you partner with an outsourced financial services provider, you add top-to-bottom insight and experience, from C-level jobs like forecasting, mergers and acquisitions, and securing capital investments to routine-yet-essential bookkeeping.
But nothing is ubiquitously good, right? So what are the potential disadvantages of outsourced accounting services?

5 Disadvantages to Outsourced Accounting

Any partnership is doomed when there is a serious misalignment between expectations or capabilities. And generally, that is where hiring an outsourced accounting services provider can cause the most problems.
For example, most small business owners take on their company’s accounting tasks in the early days. While it adds to your responsibilities, this is typically the smart move rather than immediately hiring someone. The bookkeeping is not too demanding on your time or in its complexity if you are still in those initial growth stages, so hiring an outsourced accountant is an added cost that simply makes no sense.
Broadly, there are five primary scenarios where this can happen with outsourced financial services.

#1 The Cost

First and foremost, an outsourced accounting partnership will add to your expenses. If your budget is already looking a little tight, that can cause obvious problems (or it could signify you have made a wise choice to bring in the experts).
However, it is not quite as simple as adding another line item. Often, businesses will hire outsourced financial services once they can no longer handle tasks in-house or for an interim solution following another employee’s departure. This makes the decision less about asking, “Can we afford this?” and more a consideration of “What else would we have spent this on?”
And in the case of departing employees or additional hires, your costs are more than their wages. Of course, there are obvious expenses like benefits, but what about the hiring process itself?
Per one LinkedIn study, the average timeline to hire an accountant takes around 37 days. And it only extends regarding more advanced or specialized roles. For example, if you’re looking to hire an in-house CFO, that process might last months. Throughout that time, you’ll be placing other responsibilities on the back burner to post openings, screen applicants, conduct interviews, and more.
Never forget the importance of opportunity cost from Econ 101; it always gets paid one way or another.

#2 Your Bandwidth

Recovering internal bandwidth is one of the most common reasons a business would hire outsourced accountants. Returning to the example above, sometimes it is a case where the business owner who has been handling these tasks no longer has the time. At that point, bringing in someone else is the right call.
But if your bandwidth is so strapped that you cannot accomplish the things your outsourced accountant needs from you between meetings, you’re really just paying them to hang around. What should have been a financial solution for your business becomes a stressful task permanently affixed to your to-do list and a waste of their time.
On the other hand, perhaps that means you actually need to hire more people for other roles. And if that’s the case, then an outsourced CFO or accountant might be the right decision anyway. They can help you assess your resources and see what additional hiring expenses you can afford.

#3 You Have Mandatory On-Premises Policies

Most outsourced financial services providers primarily work remotely, relying on video conferencing, phone calls, or email exchanges for the majority of their communications. Following the recent rise in remote work, this likely isn’t a problem for most businesses.
Still, if you require all roles to be on-premise for any reason (e.g., security, compliance), an outsourced accountant probably isn’t your ideal solution. But given that over 50% of today’s job applicants prefer working from home anyway, it might be something worth considering if your company can manage it.

#4 You Require Their Exclusive Attention

Aside from working remotely, many outsourced accountants or other financial services providers also manage numerous clients simultaneously—a role known as fractional accounting.
Depending on how much work you have for them, your outsourcing partner may not need the full 40 hours per week to complete it all. Instead, they spend some of that time with each of their clients as needed. So, if you are expecting them to constantly be on-call and immediately address your needs, that will probably not work. They might be tied up with another company’s for a few hours or days instead.
However, there are full-time outsourced professionals available (or a team of professionals) if your needs are that significant. At CFO Hub, we are confident we can find the right accountant or other financial specialists to handle anything from month-end closings to C-level tasks.

#5 You Lose (Some) Control

The advantages of outsourced accounting include adding a turnkey solution to your business’s operations, but some people may struggle with losing a small amount of control. Ultimately, you are trusting an outside party to safeguard sensitive records, accomplish crucial tasks, and provide insightful guidance.
Yet most of these concerns can be assuaged by considering your potential partner’s track record and their client testimonials. You can also ask them before signing the contract if they will put you in touch with another client so you can ask them directly.
If your outsourced accountant provides exceptional work and value to their clients, they will have a long line of other companies willing to speak on their behalf.

Overcome Any Outsourced Accountant Disadvantages with CFO Hub

Ultimately, the potential disadvantages of hiring an outsourced accountant circle back to seriously misaligned expectations or current capabilities. But if your business is at the right (or necessary) stage, it could prove to be your most beneficial partnership.

And at CFO Hub, our team of available CFOs and financial professionals allows you to avoid challenges like your outsourcer’s availability. Whether you’re seeking a CPA, controller, CFO, or another specialty, we’ll provide you with the expertise you need, when you need it.

Reach out to us to find out how we can help you reap only the advantages of outsourced accounting.

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