How to Know It’s Time to Outsource Your Accounting
Knowing when to outsource your business’s accounting is critical, yet many struggle to recognize the signs indicating the right time to make this strategic move.
CEOs and business owners often face a dilemma when deciding whether to grow their in-house team or seek third-party support. However, it’s not so easy to adjust in-house accounting staff. Accounting departments cover many critical tasks with limited resources. Moreover, leadership rarely has the time or resources to manage hiring and onboarding during a growth spurt.
Bringing on third-party accounting support is the competitive advantage many businesses need but don’t realize they’re ready for. Let’s explore six signals indicating it’s time to outsource your accounting.
1. Losing time managing accounting in-house
While recruiting accountants is challenging industry-wide, the difficulty is amplified in some industries, like manufacturing, due to the demand for specialized knowledge, such as cost accounting and inventory management.
In addition to understanding industry-specific processes and cost calculations, accountants and CFOs must handle broader financial responsibilities such as overseeing payroll, managing investments, and ensuring compliance with national financial regulations.
This dual requirement of industry-specific and general financial expertise makes accounting a burden for businesses with limited in-house resources. Furthermore, When an in-house accountant with specialized skills suddenly quits, it impacts the broader financial health of the business.
3. The business is in a growth cycle
During growth cycles, businesses encounter a critical red flag: their in-house accounting teams are already operating at full capacity and don’t have the resources to expand in time to keep up with the new volume of work.
This struggle is not just about handling a higher volume of transactions; it’s a warning sign. It points to potential operational issues, like delays in financial reporting or missed compliance deadlines, as the team can’t expand or adapt quickly enough.
The inability to scale in response to growth risks compliance lapses and opens the door to financial mismanagement.
2. Don’t understand how to set up ERP Software
Understanding how to effectively set up and utilize Enterprise Resource Planning (ERP) software is a significant challenge. The unique operational demands of the manufacturing industry complicate things further for many companies.
ERP systems like JOBBOSS require precise integration for supply chain management, production scheduling, inventory control, and connecting with QuickBooks. Experienced accounting partners understand how to calibrate specialized software, such as which version of QuickBooks you need for manufacturing integration.
This video explains more about the nuances of connecting JOBBOSS with QuickBooks. If your accountants don’t understand this, it’s a bright red flag you need external accounting support.
4. Messy financial records
Messy financial records are the result of overworked teams with limited resources, inadequate experience, or bad habits.
As already excessive workloads grow heavier for in-house teams, Gartner reports 59 percent of accountants make several errors every month. In the same study, 73 percent of accountants report their workload has increased because of new regulations. It’s easy to imagine the compounding effect this has on large companies managing thousands of customers, SKUs, and transactions.
Be on the lookout for the following signs your accounting practices may be larger than your in-house team can support:
- Lack of standardized accounting procedures
- Delays or inaccuracies in financial reporting
- Inconsistent documentation practices
- Unclear categorization of expenses
- Difficulty reconciling accounts
- Compliance issues
Messy financial records are early warning signs your business will benefit from third-party support.
5. Unprepared for an audit
Companies with messy books are also unprepared for an audit.
Failure to maintain proper segregation in financial processes and a lack of timely review and approval of financial transactions create oversight vulnerabilities. Additionally, the absence of regular internal audits to ensure the accuracy and completeness of financial records further exacerbates the risk.
Recognizing these red flags early on is imperative for businesses to ensure compliance with regulatory requirements and safeguard their financial standing.
6. Losing money despite good sales
Despite achieving good sales, businesses may face financial losses due to in-house accounting challenges.
Incorrect inventory management, billing inaccuracies, problems with supplier/vendor payments, and outstanding invoices are common reasons behind such losses.
Despite strong sales performance, these issues cut into profitability. Businesses must adopt a self-critical lens when assessing financial losses in order to rectify them.
When the loss stems from billing inaccuracies, payment issues with suppliers/vendors, and untimely invoice processing—it’s time to augment in-house teams with outsourced accounting and advisory professionals.
How to know when to insource or outsource accounting?
In William Shakespeare’s Hamlet, the main character asks the question, “When to insource or outsource?” Okay. Shakespeare did not write those words, but it is a valid question to examine.
Outsourcing provides immediate access to trained support that can unburden your in-house teams, the opportunity to grow and scale without adding more in-house employees, and the added industry experience your team needs.
If you’ve noticed any of the issues outlined above, it’s a strong indication third-party support may be in your company’s best interest. Outsourced accounting is your solution for specialized support when your team lacks expertise, you don’t have the resources to hire, the business is fluctuating, and you’re unsure of future demand.
Conclusion: Seek help from the experts at Chortek
Managing accounting in-house presents significant challenges, especially in unique fields requiring specialized expertise. The dual demand for industry-specific and general financial skills can strain limited in-house resources or when skilled staff suddenly quits.
Outsourcing accounting offers immediate access to specialized expertise, scalability for growth, and relief for overburdened teams. By recognizing warning signs like messy financial records, unpreparedness for audits, and financial losses despite strong sales, businesses can leverage outsourced accounting support to enhance financial management, ensure regulatory compliance, and drive sustainable growth.
Evaluating outsourced accounting is crucial for businesses with limited in-house resources seeking to optimize financial operations and achieve long-term success.
If you’ve noticed any of these red flags in your business, it’s time to make a change. Contact us to improve your business’s accounting with support from Chortek’s outsourced accounting experts.
