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Money in, money out

Written by Josh Russell on Friday, 03 May 2013. Posted in Financial management, Finance

Is the choice between outsourcing accounts and keeping them in-house really just a case of do-it-yourself or sign it over lock, stock and barrel?

Money in, money out

Whether you’re talking about tech support, customer services or an accounts department, outsourcing can offer significant benefits. A director with limited resources at their disposal may lack the inclination to oversee every process personally and may want access to talent that they cannot afford under a traditional hire. One of the most time-hungry areas of the business, accounts is a natural process to outsource but relinquishing your hold on the purse strings isn’t an easy step to take.

There are specific reasons why outsourcing can be such an attractive option for early stage businesses. “There’s an old phrase in the accounting industry, which is that a good accountant will save you money rather than cost you money,” comments Jonathan Norris, web editor at cloud accounting enterprise Crunch Accounting. Obviously, outsourcing can save funds versus hiring an in-house team and finding the right proprietary software, but what few businesses take into account is that an experienced accountant can offer significant returns on investment in their own right. “The attraction of outsourcing would be having someone who knows where there are extra efficiencies and savings to be had,” he says. “In the end, you can end up actually saving more money than that service is costing you.”

However, it’s not all about cold hard cash. “In terms of why people outsource, as a more general question, people always assume it’s because it’s cheaper,” says Jim Brown, director of on- and off-shore outsourced accountants Bral. “That’s important to a lot of people but it’s not the driver in many cases.”

While minimising spend is important, when an enterprise is starting out there is perhaps one resource which is more valuable: time. “It’s not just the cost of going and trying to hire someone; it’s the loss of focus on the business and it’s the loss of management time on what you could be doing,” says Brown. When considering whether to set up accounts in-house, it’s worth thinking about whether there is a more productive way of spending your time and what the business value is in terms of time saved. “In the early days, it’s about trying to get revenues coming through the door,” he continues. “So how can you focus on that? By spending more time on it.”

Another factor that may attract some enterprises to outsourcing is access to a pool of expertise. It may be tempting to believe the accountant you hire will be one-size-fits-all, but in actuality there’s no guarantee they’ll be able to handle absolutely everything you throw at them. “Accounting’s one of those things that’s completely labyrinthine,” explains Norris. “You get tax accountants, you get financial advisors, you get other strands of accountancy.” Without a huge talent outlay, it will be difficult to make sure one has access to such a wide variety of specialities in-house but an outsourced solution provides access to a talent pool. “If it so happens their accountant isn’t a specialist on a particular subject, they can always be handed over to someone else who is,” he says.

That’s not to say that some people have reasons why they aren’t keen to outsource their accounts. Firstly, cost can be off-putting, especially for those who aren’t convinced they will receive a significant return on investment. “Surprisingly enough, the most common reason we hear for people not coming on-board is that they know someone who’s an accountant and who’ll do their accounts for free,” remarks Norris. However, aiming solely for the cheapest deal isn’t necessarily the best strategy as chances are you will get out what you put in.

Another factor that can put people off is the idea of surrendering control of such a central process. Given that accounts form the lifeblood of most enterprises, signing them over to a third party and not being able to keep a watchful eye over them is enough to make any business owner feel somewhat twitchy. “There are different ways of overcoming that,” says Brown.

One such option is insourcing, where an outsourcer is brought in to work onsite. However, this also comes with its own set of positives and negatives. “What you’re basically doing there is you’re able to build a relationship, which is great, but you’re really becoming reliant on that one person,” Brown comments. Essentially, an enterprise that insources some accounting talent may once again be sacrificing access to a wider talent pool and the stability that comes with having access to additional people to cover sickness.

However, there are now solutions available that are making it easier for enterprises to feel in touch with their data, while retaining access to the broad base of expertise that comes with retaining an accounting firm. Cloud software, such as Crunch, can give clients the best of both worlds. “A lot of the older software or specialist accountants will only update your figures once a week, whereas on all the modern cloud solutions you put a figure in there and it recalculates your tax and your profits,” explains Norris. Clients can manage their own bookkeeping, entering their income and expenditure information and have instant access to all manner of data about their accounts. “I think that’s very powerful, having all of that information available to you, literally in real time.”

But this brings us to the crux of things. Given that software solutions are removing the walls between workplaces and making it easy for people to collaborate regardless of location, is it really appropriate to look at accounts as being a binary case of being either ‘in’ or ‘out’?

“There’s loads of different ways you can approach it,” says Norris. He lists many cases the company has worked with, scaling from a small business that outsources everything to larger businesses with full-time staff handling their books and just using Crunch for accounting. “There are definite shades of grey there,” he continues. “At the bottom end you’ll see people doing their books themselves and, almost uniformly I’d say, as they grow they’ll then take on more people.”

Even if an enterprise gets to the stage where in-house accounting seems like the best option, cloud systems can be used to outsource specialist functions when an enterprise requires it. “You can decide on how much you want to let go of,” Brown comments. Obviously, this is a huge benefit, as suddenly talent gaps in an accounts department can be filled without sacrificing control.

And this sort of solution isn’t just smoothing relationships between enterprises and accounting firms. The recent move to real time information (RTI) by HM Revenue & Customs (HMRC) represented a pretty major headache for a lot of accounting departments as they now need to submit regular figures. But a cloud option allows data to be collected and submitted to HMRC, without any additional effort from the user. “It didn’t require any action at all from our clients to be compliant,” says Norris. “It’s quite nice because we’re developing quite modern stuff and at the same time HMRC are making a big push for online services.”

Clearly then, when it comes to outsourced and in-house accountancy, it really isn’t a case of either/or. Rather, it’s a case of finding the best balance of expertise, return on investment and transparency and creating a structure that supports an enterprise’s needs. 

About the Author

Josh Russell

Josh Russell

As editor, Russell is the man in charge of properly apostrophising our publication and ensuring Oxford commas are mercilessly excised. Our digital doyen, he’s also a Photoshop Pro, a dab hand with InDesign and the man to go to if you need a four-hour soliloquy about the UK's best silicon startups.

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