Outsourcing Considerations

Thinking about outsourcing your accounting function?  It’s not a decision to take lightly.

Over the last few years we’ve worked with several clients who outsourced various accounting functions, such as joint interest billing, revenue processing, or accounts payable.  Others have gone a step further and outsourced their entire accounting department, including the controller function.

Some of these arrangements work really well, but some others we’ve seen created huge problems.

If you’re considering outsourcing or trying to evaluate your current arrangement, here are some things you might consider from our experience.

Remember you’re not their only client. You hired the outsourcer in part because they serve lots of companies in your industry.  That means they also serve other companies with the same reporting deadlines that you have. Before you engage an outsourcer, establish a monthly accounting calendar that details all of the reporting deadlines, and make sure they agree to meet those deadlines.  Most importantly, don’t miss your deadlines.  You will have to provide information to the outsourcer throughout the year, and every delay on your end could result in delays by the outsourcer.

Make sure you control the general ledger.  Some companies outsource the responsibility for recording transactions so that every entry is recorded by their outsourcer in an accounting system maintained by the outsourcer.  In those situations, you lose a significant amount of control over the efficiency of the accounting process and your ability to generate financial reports on a timely basis.  And what if they get some entries wrong and they have to be corrected?  Now, you’ve delayed the process even more.  Finally, what happens if you decide the arrangement isn’t working and you want to change service providers or take the accounting in-house?  If you don’t own the software and control the general ledger, you’ve got problems.

Hire a knowledgable and experienced controller. You need someone who lives in and experiences your business everyday to effectively oversee your accounting and financial reporting processes.  You need someone in-house who understands the accounting and tax implications of the operational decisions you make every day and can offer proactive advice.  An outsourcer who thinks about your company on a part-time basis when it’s time to close the books just can’t offer that service.

The decision to outsource has huge impications for your company.  If you’ll invest the time early on to set expectations, you can structure an arrangement that works very effectively.  If we can help, just let us know.