To cut to the chase: Yes, in fact, most companies save somewhere between 30% and 40%, but that’s not the big reveal you’ll get from it.
Outsourcing your financial operations not only saves you money, but it also saves you time, your finances are managed by trained professionals, and you can focus more on what you do best: Running your business.
All of this is important, but let’s take a quick look under the business back office microscope to see what it really looks like…
The hidden costs of in-house financial management.
Overhead Costs
For growing businesses, hiring enough people to complete the bookkeeping and accounting functions means a lot of extra work.
Typically, one person cannot and should not run your entire back office (stay tuned for the next point!). Unless you’re a tiny startup, growing a business requires more than one person to handle back-office operations, and segregation of duties is essential.
Put aside the cost of payroll, benefits, and office space – their training, knowledge, and skills will always be limited and transactional.
As your business grows, there are bigger issues to deal with: Collection issues, cash flow issues, timely, accurate monthly closings, economic fluctuations, etc.
Outsourcing saves you money, but more importantly, having access to an entire team of accounting and bookkeeping experts gives you invaluable peace of mind.
With in-depth experience and ongoing training, reliability, and knowledge of the latest industry trends and regulatory compliance changes, outsourcing your accounting to a reputable service provider gives your business a much greater advantage.
For a fraction of the cost of staffing your back office in-house, outsourcing allows you to access the power and potential of a knowledgeable finance department, its industry experts, and the best financial tools available.
Risk and internal fraud
As mentioned earlier, never should just one or two employees have full control over your back office. One reason (which we see 90% of the time) is the errors and penalties that come from having one person do all the work, and worse, manual processes that lead to consistent and significant errors. You put your business at risk if you don’t have segregation of duties and a second eye on your books.
Internal fraud is one of the biggest problems plaguing small and medium-sized businesses.
On average, businesses lose 5% of their annual revenue to internal fraud, with the average loss being $164,000.
Small businesses are much more likely to fall victim to internal fraud than larger businesses. This type of loss may be insignificant to larger companies, but losses of this magnitude pose serious financial problems for smaller companies.
Why are small businesses at such a high risk of internal fraud?
Small businesses typically do not have internal controls and sound accounting processes in place to prevent internal fraud from occurring. This is because not enough staff can be hired to adequately segregate authority and establish control mechanisms.
Since most small businesses work very closely together, owners often trust their employees too much. In addition, small business owners tend to focus more on their core competencies and are unaware of the tools and recommended processes available to implement secure financial systems.
With outsourced accounting services, small business owners can afford the robust accounting and bookkeeping systems that protect larger companies from internal fraud. With access to expert controllers and an experienced finance team, you can establish solid accounting systems and protect your small business from the risk of financial loss due to internal fraud, errors, and penalties.
The real cost: wasted resources and collateral damage.
In addition to potential internal fraud losses and overhead, there are indirect costs associated with the money and time spent to handle 100% of accounting and billing processes internally that are more difficult to calculate.
How much does internal accounting and bookkeeping really cost?
There are big opportunity costs here. Outsourcing accounting and bookkeeping services can help you reclaim valuable time and improve productivity. Imagine what you could accomplish if the number of dollars and hours spent on manual back-office processes was spent developing, improving, and strengthening your core competencies.
If you have an in-house accountant that you’ve outgrown but don’t want to lose, you could promote that employee who knows your business into a more profitable role or sharpen his or her human resources skills.
