The Importance of Outsourcing Accounting Services for Small Business

In layman’s terms, outsourcing is when your business hires another company to perform some of its internal tasks. For example, a hotel hires a cleaning service to maintain the cleanliness of the hotel rooms, lobbies, and other facilities instead of hiring in-house cleaners and managing the staff directly. Outsourcing is quite widespread  in accounting services as well. As a business owner, outsourcing accounting services for small businesses can be a great solution to access specialized expertise and save time, money, and resources.

Maybe you’re wondering how you can outsource your accounting services in Canada. Keep reading and you’ll find out why accounting firms and bookkeepers are the best places to start if you’re thinking of outsourcing accounting needs.

Outsourcing Your Accounting Services

Generally, business owners have two options when outsourcing their accounting – an accounting firm or a bookkeeper.

So what are the differences between the two? Accounting firms are a group of accounting professionals, CPAs and non-CPAs, that offer a wide range of accounting services, from tax planning and preparation to business advisory — they typically offer the most common “bread and butter” accounting services. 

On the other hand, a bookkeeper is a non-CPA professional with a background in finance and accounting. A bookkeeper’s role is to keep complete transaction records, such as purchases, receipts, sales, and payments. Some bookkeepers may have a special bookkeeping designation – the Certified Professional Bookkeeper (CPB) – while many have no formal certifications.

So generally, you can choose to outsource accounting services to an accounting company or a bookkeeper.

From our point of view, after having to clean up an innumerable number of messy company files and redo countless year ends, the peace of mind that comes with working with a registered accounting firm makes this a better option if you are thinking about outsourcing any part of the accounting function in your business. 

READ MORE: 10 Questions to Ask Your Accountant Before You Hire Them

What Are The Benefits of Outsourcing Accounting Services For Small Businesses?

If you are still making up your mind about looking for an accountant who will work solely for your business or outsourcing your accounting services, knowing the benefits of the latter option will help with your decision.

Here are the benefits of outsourcing your accounting services:

1. 1. Cost savings

Most small business owners think outsourcing accounting services for small businesses is much more expensive than hiring an in-house small business accountant in Canada. But in reality, it is not always the case. There are several areas where outsourced accounting firms are much more affordable.

• • Labor cost

There are accounting firms who offer lower accounting rates because of the low labor cost in their locations. Again, it all depends on the area of your chosen firm.

Moreover, you can also reduce your cost by not shouldering the salaries, taxes, and benefits of the accountants working on your project. That is the responsibility of the firm. Remember, you are only paying for the services themselves, not idle time.

• • Training

No, you don’t have to train your outsourced accountants, unlike in-house small business accountants, except for an initial orientation or helping familiarize the accounting firm staff with your accounting needs and processes.

• • Overhead costs

You also don’t have to provide computers and laptops, office supplies, and most accounting software when you outsource your accounting services. When you consider that some of these preferred accounting software licenses, particularly for corporate tax, run for thousands of dollars per user, this can be a significant area of savings.

2. 2. Scalability

One of the less enjoyable aspects of being a small business owner is having to cut costs and scale down operations when needed, which can mean laying off employees. Outsourcing accounting services can avoid this bitter experience.

Your accounting firm can much more easily scale up or scale down its provision of services to your business and re-assign staff to other clients. 

Outsourcing can also help greatly when scaling up. If you’re growing quickly, it can be difficult to find enough qualified staff to keep up with your business needs. Don’t worry about uploading job postings and interviewing candidates since your accounting and bookkeeping firm can easily assign additional staff to help your business grow.

3. 3. Time-efficiency

You can save a lot of time when you have an in-house small business accountant but more time when you outsource one!

Instead of managing your finance and accounting work, you can focus on running your small business while your in-house or outsourced accountant deals with the current accounting and finance tasks.

But here is the catch; hiring an accountant will definitely benefit you, time-wise, in the long run, but finding and onboarding one can be a bit of a pain. 

To begin with, looking for an accountant may take a few days. It is hard to guarantee that someone will respond to your job posting on day one. Moreover, you filter through their resumes and interview your top candidates. Once you find one, you still have to onboard them and maybe provide training. The hiring and onboarding period could take weeks or months.

This is where outsourcing bookkeeping and accounting services will give you an upper hand. Firms  already have qualified CPAs and non-CPA accounting professionals ready to work with you and they might already have experience in your industry. So if you are looking for time efficiency, outsourcing accounting services is something you can consider.

4. 4. Access to tools

It is not a secret that accountants use various tools and cloud-based accounting software to help automate and optimize some of their repetitive processes. Fortunately, these tools are accessible to many small business owners who want to have efficient accounting processes. Many businesses pay for accounting and bookkeeping software for their in-house accountants to use.

Generally, the subscription cost is an additional expense. Outsourced accounting solutions have access to many of these tools and their staff is already proficient in using them. You can take advantage of this benefit and save time learning and navigating the software yourself.

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5. 5. Keeping up with tax laws and regulations

Accounting is not just about crunching numbers. It also involves keeping up and adhering to tax laws and regulations that change frequently. If you are a small business owner juggling running the business and doing the accounting, it could be challenging keeping up with the tax law and regulation changes and deadlines.

The good thing about working with outsourced accounting services is they are, by necessity, much more up to date when it comes to rule changes and training. Hence, compliance is much less of a worry, especially if your chosen firm has a strong reputation.

Furthermore, many accounting firms also have expertise in certain specialities, such as business advisory and forensic accounting. But remember, not all accounting firms offer these specialty services, so it is something you should also consider when looking for accounting firms.

6. 6. Round the clock operations

 If your accounting services are outsourced to a company in a different time zone, they work when you’re off the clock. This means your finances are managed 24/7, so you start your day with fresh updates. This is handy for urgent tasks or busy times.

7. 7. Improved focus

Outsourcing your accounting lets you save your time and energy for running your business. Whether it’s planning growth, improving what you offer, marketing, building customer relationships, or other tasks that help your business thrive. Basically, you concentrate on what you’re best at, and let experts handle the number-crunching.

8. 8. Reduced fraud

Outsourcing your accounting adds an extra set of eyes on your finances, which helps spot any fishy transactions that could be signs of fraud. As they’re an outside company, they can objectively review your finances and catch any unusual transactions that might be missed in-house. 

This deters any funny business because it’s more likely to be caught. These firms often have strict controls in place that further lower the risk of fraud. So, outsourcing doesn’t just help with managing your financial tasks, but also helps protect your business from potential wrongdoing.

READ MORE: How to Find a Small Business Accountant Near Me

What Accounting Services Can You Outsource?

There are numerous accounting services you can outsource for your small business, and most of them are considered the typical services that all accounting firms can provide. 

1. 1. Bookkeeping

1. 1. Tax preparation and planning

1. 1. Payroll processing

1. 1. Accounts payable and receivable management

1. 1. Financial statement preparation

1. 1. Audit and assurance services

1. 1. Budgeting and forecasting

1. 1. Accounting software support and implementation

1. 1. CFO/Controller services

When To Consider Outsourcing Small Business Accounting

Now that you have already weighed the benefits you can get from outsourcing your small business accountant and the accounting services your business needs, you may ask: when is the right time to outsource accounting services?

Here are some signs that you should consider outsourcing:

1. 1. Business growth

Congrats! You have achieved another milestone in the business! But leveling up means more challenges, especially with business expansion. You may need to acquire new properties to expand, hire more staff, and purchase more equipment to grow your business.

All of these things mean more transactions to handle and more payroll to manage. Doing these tasks yourself can take away your focus from running your business. Moreover, the amount of work may be beyond the capabilities of a short-staffed in-house accounting team.

An option for you is to outsource some of the accounting services. They can be year-round or seasonal, such as during busier times of the year if your business is cyclical. 

2. 2. Limited accounting expertise

Sure, most professionals can do basic accounting tasks such as bookkeeping, tracking your expenses, and calculating your gross margin. But things can get a little bit complicated along the way, especially if you don’t have a background in accounting or lack time to learn more about it.

Sooner or later, you may encounter tax reporting and filings which can get tricky really fast (corporate tax and GST/HST are good examples). 

You’ll have one less problem on your plate if you outsource the accounting work you need to a professional with subject matter expertise. When you do, you can realistically expect that the work is done to a high standard.

3. 3. Time constraints

As a small business owner, you should spend as much of your time as possible on important tasks that create the most value for your business. Indeed, accounting is critical to managing your business, but we always say that as a business owner, you should be the one reviewing financial reports, not preparing them yourself. 

Outsourcing to small business accountants in Canada can help you focus more on business management as they can crunch the numbers for you and enable you to make the important decisions to keep your business healthy and thriving.

4. 4. Need for specialized services

There may be a time when you will need services that you don’t usually get from your in-house small business accountant or learn from the books in a span of months. Examples of these things are business advisory, valuation or forensic accounting. 

Fortunately, some accounting firms offer these services. If ever you need these services for your business, you can consider retaining their specialized expertise. 

5. 5. The cost of in-house accountant

Hiring your own accountant might sound good, but remember, you’re not just paying their wage. You’d also need to cover extra things like their benefits, training, the cost of accounting software, and the space they’d use in your office.

On the other hand, having an outside company handle your accounting can often be cheaper. You usually get a whole team of accountants for less than the cost of one full-time accountant. Plus, you can choose to use more or fewer services from them as your needs change. This kind of flexibility can save you money.

So, if hiring your own accountant seems too pricey, it could be a sign to think about outsourcing your accounting work.

LEARN MORE: How to Find the Best Tax Accountant Near Me

Should You Outsource Your Accounting Services?

It all depends on your situation. Only you can determine whether it is the right time to outsource your accounting services. You can start by evaluating your business. Is the accounting work still manageable on your side? Or are you experiencing the signs we mentioned in the above section? Can you afford to outsource to accounting services company?

A good full time accountant is not cheap, so our rule of thumb is that until your business can support a full time hire, outsource your accounting work to a competent CPA firm. The work will be done right and your business can focus on what it does best. And remember, even if you have accounting staff, you will still likely need external accounting help when it comes to your annual financial statements and tax returns.

As a business owner, you can consider the pros and cons of outsourcing your accounting services in order to make the best decision for your business.

RELATED: 3 Truths About Growing Your Small Business From A CPA’s POV

How To Find Accounting Service Providers In Canada?

Finding accounting services in Canada can be a challenge, but we will guide you through this journey. We came up with the three most important factors you must consider when looking for an accountant.

• • Your business needs

Do you need someone who can help you with your financial planning or corporate taxes? Do you need monthly financial reporting or is quarterly sufficient?

• • CPA

CPA, or Chartered Professional Accountant, is an accounting designation that is only granted to accountants who achieve a certain level of technical proficiency. Among other benefits, CPAs must follow stringent professional standards and firms need to carry professional liability insurance to protect you.

• • Working style and reputation

Of course, it is not enough to find a CPA. You need to ensure that the working style of your chosen CPA is a good fit for you and your business. Check your accounting firm. How do they like to communicate and how frequently? Do they have positive reviews? Any disciplinary actions or sanctions? 

DISCOVER: The Ultimate Guide to Finding Accounting and Tax Services in Canada

Takeaway

Outsourcing your small business accounting can be beneficial in terms of cost, scalability, time efficiency, access to accounting tools, and compliance with current tax rules. But of course, it can be hard to decide if outsourcing is right for your business and when is the right time. 

There are a few factors you need to consider first before deciding whether outsourcing your accounting services is the right move. Is your business growing? Do you need more time on managing services? Are you in need of accounting expertise and specialized services?

If your answer to any of these questions is yes, let CPA Guide help you. With our wide network of the best CPAs in Canada, we can easily match you with the accountant and accounting services you need. 

Find your small business accountant today with CPA Guide.