Traditionally, most companies in the UK have hired in-house accountants for financial tasks (self-assessment tax, VAT, income tax, corporation tax, account books, etc.). A larger part of the accounting work was handled in-house. Thereafter, technology transformed the business landscape, offering varied choices to companies. With technology revolution, accounting outsourcing came into the picture, and the traditional hiring of in-house accountants wasn’t the only choice available for businesses. Outsourced accounting firms have quickly gained the trust of masses through their quality and cost-efficient services. Companies, especially small businesses, have a lot to gain from outsourcing. Outsourcing accounting for small business reduces capex and drives more revenue. Therefore, companies should carefully compare the cost of hiring a new accountant vs. outsourcing the accounting function before deciding on a model that is more profitable to their business.
How expensive is hiring a new accountant?
Hiring a new in-house accountant would mean hiring a full-time bookkeeper who is entrusted with confidential business financials. The hiring cost involves wages and benefits, taxes, overheads, additional time and efforts. The hiring process takes time, but the costs start pouring in very early in the process. To hire a new accountant, your business will have to put up job advertisements, which will incur costs. Once candidates start turning up, the recruitment team will have to spend time interviewing them. After a candidate is appointed, he/she will become an employee of your company and be officially entitled to all benefits as per government laws. You will have to pay salary, provide benefits (health insurance, sick leaves and retirement) and even settle up payroll taxes. You will have to make pay raises once the employee tenures. Other expenses including training, onboarding, utilities, office space, equipment and supplies will also increase. Moreover, if the employee leaves, it will not necessarily be easy to find a replacement. All in all, the overheads of your company will increase, especially if you have a small business.
How much can you save with outsourcing?
Outsourced accounting firms are service providers that have a niche in accounting (self-assessment tax, VAT, payroll). They solely handle the accounting function on behalf of companies and have emerged as a cost-efficient option to manage complex taxes and returns, particularly for small businesses. Outsourcing accounting for small business offers cost advantages, as service packages can be easily customised, and companies have to pay for only what they use. Moreover, there is no hiring involved, no worries of approaching self-assessment tax deadlines, no tax disparities and less headaches. Together, these significantly reduce the operating costs of your business, thereby resulting in more profits.
We have listed five ways in which outsourcing can help your business save more money.
- Hiring and training expenses are eliminated
A large part of company expenses includes hiring and training costs. If more than one accountant is hired, the expenses quickly add up. With outsourcing, there is no need to hire an in-house accountant for accounting tasks, and training costs are saved as well. With outsourced accounting firms, the responsibility of spending the time, resources and money required to train employees lies with the service provider.
- Benefit expenses are removed
Government rules make it mandatory for companies to pay benefits to their employees. For some firms, especially small businesses, it is not possible to cope with these expenses. Outsourcing accounting for small business is beneficial, as it enables access to the services of trained industry experts, but not at the cost of expensive benefits.
- Save employee opportunity costs
How a company uses its resources can potentially affect its competitive position in the market. If skilled resources are utilised for redundant tasks (data entry), you lose talent that can be spent on high-value projects. With outsourced accounting firms, your company’s talent is freed up, and the time saved can be used on core money-making projects.
- IT support costs are reduced
Latest technologies, large computer systems, complex networks and high-value equipment are used in companies to store and process business information and confidential data. When these systems and networks break down, an onsite IT team is required to troubleshoot and fix the issue, but the cost of maintaining an IT team is high. When you outsource, this burden lies with outsourced accounting firms, and your overheads decrease considerably.
- Telecommuting benefits
Some accounting professionals also work on a freelancing basis, and if you are a small business, you can save more costs by outsourcing your accounting to these freelancers, who may work from their own homes but can also file accurate self-assessment tax on your behalf.
Outsourced accounting firms open up a range of cost benefits for small and large businesses alike, and it has now become an important factor that decides the position of a company in the global market. The benefits are innumerable, and many companies in the UK are already outsourcing their accounting.