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10 Accounting Outsourcing Mistakes to Avoid in 2023 and Beyond

10 Accounting Outsourcing Mistakes to Avoid in 2023 and Beyond

22 Sep 2023 10 Accounting Outsourcing Mistakes to Avoid in 2023 and Beyond

Managing finances continues to be one of the most crucial tasks for any business. The significance of financial statements detailing expenditures and income can not be overlooked when it comes to making informed business decisions. Enhancing the efficiency of business operations revolves around two strategies: accounting automation and outsourcing. Nevertheless, even the most skilled business owners or entrepreneurs make mistakes while outsourcing financial tasks to an external company. Let’s dive deeper into the blog to know what are common accounting outsourcing mistakes to be avoided.

Accounting Outsourcing Mistakes to Avoid

Here are some of the most common accounting outsourcing pitfalls that a Chief Financial Officer (CFO) or business owner should be mindful of: 

1: Not Defining Your Outsourcing Objectives

One of the most common mistakes that you, as a CFO or business owner, make is not defining your goals and how to take advantage of outsourcing accounting. You must know whether your goal is to access specialised services, save costs, or save efforts on time-consuming financial management tasks. You must also decide whether to outsource the whole accounting function to a company or just a single accounting service, such as Accounts Payable (AP) and Accounts Receivable (AR). If you do not have a good plan and go for outsourcing accounting only to get services at cheaper rates, you will not get the desired outcome.

2: Not Screening the Outsourcing Service Provider

It is important to screen the accounting outsourcing company through a formal interview, even if your friend has referred it or if its LinkedIn profile looks promising to you. You must avoid sharing confidential information with the firm by simply relying on online reviews. The best way to screen the firm is with a written interview through email. Check out if it is a Certified Public Accounting Firm (CPA) or a specialised outsourced accounting service. Once you feel like that it can fulfil your accounting requirements, go for a telephone conversation. After that, understand the company’s work culture, systems, processes, and employees through a video interview or visit the outsourcing firm in person. 

3. Choosing the Low-Cost Solutions

One of the main goals of outsourcing any company is to save money. But that does not mean you will get good services by paying less. For example, hiring a fresher instead of a professional accountant means you are narrowing down options for yourself as they will take up just a portion of your accounting tasks. Moreover, their services are outdated, and your financial management tasks can be delayed. Similarly, an outsourced bookkeeping and accounting company that sounds the lowest may charge you extra in the form of hidden costs and additional fees. Instead of opting for cheap outsourced accounting automation service providers, look for a reputable company with a certified accountant. Go for the service provider that offers customised and multiple services, even if you have to pay a little extra money

4. Not Prioritising Cultural Fit

Although technical expertise is prioritised, you must check that your and outsourcing accounting firms are culturally aligned. Ignoring the cultural fit means you will reiterate your goals repeatedly and can not get the value you are hiring the company for. One of the best ways to understand that the outsourced accounting automation solution provider is the best fit for you is to check out how nicely they treat their employees or clients. Moreover, try finding out how your outsourcing partner treats other customers. Does the firm have long-term clients, or does it have a greater turnover rate? Having long-term customer relationships shows cultural harmony and how good the firm’s outsourced accounting services are. 

5: Not Communicating Your Expectations

Just setting your outsourcing objectives is never enough. You must communicate what your expectations are to the outsourcing firm. It is good to have the financial services expectations authorised through a written Business Process Outsourcing (BPO) agreement. 

Below are a few of the things that your accounting service agreement should include: 

  • What is your preference regarding the accounting books reconciliation – daily, weekly, or monthly?
  • What mode and frequency of communication would you like to use?
  • How will any accounting services-related problems be handled, and who will take them?
  • How many hours the outsourced accounting professionals should spend on your task daily?
  • What are the company protocols for internet outages, security breaches, etc.?
  • Is the outsourcing service provider permitted to hire any third party in an emergency?
What accounting services can be outsourced?

6: Failing to Communicate Regularly with Vendor

As you delegate your accounting or bookkeeping tasks, there is no need to micromanage every part of the outsourced job. The outsourced accounting team should be skilled enough to get the job done for you independently. However, you are making a big mistake by neglecting the tasks and expecting the best results at the end. You must check in regularly to be aware of your task’s status and address concerns raised by the outsourced staff quickly. Communicating with your outsourced team at each step helps you get the job done as per your taste, redirecting the staff to follow your firm’s vision in case they digress.

7: Not Giving a Constructive Feedback

In many instances where you find the outsourced accounting firm is experienced enough, you just delegate other tasks without giving feedback on the previous one. This may work for a short time, impacting the functioning of outsourced accounting service providers. The team could end up making the same mistake again and again, costing you money and time. Thus, giving constructive feedback at the end of each workflow helps streamline the accounting tasks.

8: Lacking Standardised Systems and Performance Metrics

The outsourced accounting professionals may struggle to meet standards at the beginning unless you introduce them to frameworks for the tasks. Similarly, not establishing Key Performance Indicators (KPIs) can hinder your ability to check the performance of the accounting team. However, by setting up certain KPIs, you become aware of the team’s functioning and can change daily practices per your demand.

9: Not Getting In-house Team and Customers Onboard

Ensure that your in-house accounting team is also involved whilst communicating regularly with outsourced accountants. If your accounting department or back office does not know why you outsource the services, you will face workflow friction. However, managing this proactively can help small and big firms ensure an amicable relationship. Furthermore, it is important to have your customer on board too. 

10: Not Fully Integrating the Outsourced Accountants into Your Firm

Even whilst outsourcing accounting automation and bookkeeping services to any offshore location, viewing the team as an integral part of your company is crucial. Neglecting to do so will lead to suboptimal work cultures and poor results.

Here is how to fully integrate the outsourced accounting team into your firm: 

  • Ensure that the in-house team and the outsourced accounting professionals know each other.
  • Share your business’s vision, mission, and goals with your outsourced accounting team.
  • Recognise their national holidays.
  • Make visits to each other’s offices when possible.  

Where Does RecordMe Step in?

As you are looking to streamline your financial tasks through accounting outsourcing, avoiding common mistakes becomes paramount. This is where an AI-powered Financial Bot, RecordMe, fits in the puzzle, seamlessly integrating with your firm’s accounting needs. With RecordMe, you can outsource your accounting tasks whilst ensuring efficiency and accuracy. We help you optimise your accounting operations and foster a collaborative relationship between your in-house staff and our accounting professionals. Contact us to empower your accounting and bookkeeping future.