Start-up, small and medium sized business can spend more of their time in productivity and creating strategies for growth by using bookkeeping outsourcing services. Choose a reputed firm to outsource financial services as it could have a direct impact on your business and growth. You can get reports, professional evaluation of the finances of your business, run through of strategies for growth and more. You can achieve a few milestones by outsourcing bookkeeping and accounting services. However, choosing poor outsourcing services can bring you pitfalls and loss of reputation to your business.
Misleading information and limited talent
When you outsource bookkeeping and financial services with the aim of focusing on your goals, you must take into account the risk that it comes with. Poor outsourcing can limit the talent you can acquire for the same who can provide you better and accurate information. You have no control to analyze and overview the performance metrics in this arena. You cannot choose or judge the talent of the personnel who is in charge of your company accounts. Though there are many benefits of outsourcing, there are also many pitfalls of these outcomes.
Confidentiality is compromised
Outsourcing can increase your productivity and efficiency but can also drill holes in the confidentiality of the company and its financial matters. Offshore accounting poses these serious threat of confidentiality in countries that do not have the same law as your country in these matters. There is a breach in the matters of confidentiality even if the accounts and bookkeeping is outsourced to domestic companies and they do not provide you knowledge or information of they are outsourcing this work to other firms. This drills a massive hole in the matters of confidentiality as makes the financial information about your company available to firms that you have no direct contact with.
This can be risky in many scenarios. Your competitors might have easy access to your financial data and can devise strategies to come up with a better plans to stay ahead of the game. The information of your companies finances will be open to firms without your knowledge and this can cause a serious breach of trust and could incur you hidden costs and damages.
Problems with communication
It is a good idea to get the customers that satisfaction that your business is operating 24×7. This so happens when you outsource bookkeeping accounting services to a firm in a country of a different time zone. They are officially your partners who are taking care of your business while you are asleep. But there are disadvantages to outsourcing financial and bookkeeping services. Since, you and your partners are working on various timelines, problems in communication is bound to arise. There will be no clear communication and could be disruptions decreasing the efficiency of the overall work.
Devising a newer milestone to reach with the financial reports for analysis can be inconvenient. Planning of newer aims and goals requires evaluation of financial status of the firm. When this data is not in the hands of your own firm and you have to depend on the data of your firm that is outsourced, you are likely to make inaccurate decisions
Less transparency in reports and data
Initially outsourcing and offshoring was used to increase the company profits. Only low key jobs that consumed companies time and resources were outsourced. Since, the outsourcing industry grew, high key jobs which require higher responsibility and meticulousness have also started to get outsourced. This has created lack of employment opportunity since these jobs are done by various firms in other countries and geographic locations. To get minute details about bookkeeping and accounts, it is essential to have an in-house accounting professional do the same. It is not possible to maintain transparency when you outsource bookkeeping and maintain accurate records.
Can make your firm lose credibility and reputation
When the financial records are not accurate, it can land you in serious trouble with the authorities. You will lose the face and credibility of your company if inaccurate financial reports are filed. This can have a long term damaging effect on your company. Once your credibility is hit in the market, it will not be easy to secure your position and reach your business and financial goals.
Compromises your standards of delivery and quality
There are benefits of outsourcing as long as you choose what services and work to outsource. Outsourcing bookkeeping services is not an option if you want to scale your business and grow. You will lose the standard delivery times and quality since financial data is not readily at your disposal. When accounting and bookkeeping services are outsourced to countries that pays low wages, you can expect the integrity, ethics, and standards of working compromised. If those countries lack the technology and infrastructure to handle huge data and dynamic changes and updates, it will shrink your company to size zero. This is one of the biggest disadvantages of outsourcing accounting and financial services.
Breach of data security and privacy
Financial data requires layers of technology and encryption methods protecting the data of the firm. An outsourced firm who lacks the infrastructures and technology to handle data causes loopholes and many vulnerabilities in the security of the financial data of your company and its clients. The financial data of your clients can be manipulated or lost due to lack of implementation of protocols and security measures.
Reduces the want of skilled employees
Outsourcing highly skilled jobs offshore or to other domestic locations can cause a gap the finding skilled people in your own location. If accounting jobs are outsourced over a long period of time, you will have very few accountants left in your own domestic area. Since, there will no more be a job requirement for that work profile, skills and education regarding the same will lose its essence. People in your domestic area will stop developing skill and experience for the jobs that have been outsourced over a long period of time. This can cause a brain drain in the long run.
You lose intellectual capital and competitive advantage
The skills and knowledge that your employees posses is lost through outsourcing. This can also make you lose your competitive advantage as the proprietary information that belongs to your company is handled by another firm. All the information and resources that should be at your disposal are now handled by offshore firms or companies to which they are outsources. You can no more train your employees on specific areas of business or develop managerial tactics if the data is not at your disposal.
You will lose your competitive advantage as you will lose your valuable resources which can be used to quantify the measure of growth of your business in the long run. The secret information of your company is handled by offshore companies and this can make you lose your marketplace.
Allocating more resources
Accounting work outsourcing can only reduce the efficiency of operations and productivity of the business. By outsourcing, you are allocating more of your time and activities to the work that is an essential part of your core competencies. Your reliance on your core team diminishes and you end up relying on outsourced firms and offshore companies. You will not be able to develop the skill set of the employees within your companies if you outsource accounting work.
Cannot spot anomalies
When you choose a poor outsourcing option, there is a good chance of fraud happening and it might not be easier to detect unless and until you check up with the firms regularly. Fake expenses and records if not checked in time can cause long term damages. When you outsource accounting jobs without a lot of research, you will have to toil to find out how book have been manipulated and to spot any anomalies.
Gives you stress
Handling a business and its functions is not a stress free activity. You do not want poorly outsourced services adding up to your stress. Accounting and bookkeeping is one of the backbones of the business. It is ideal to have an inbuilt bookkeeping and accounting service that can add to your competitive advantages and lets you stay productive and focused instead of outsourcing it to save a few bucks.
Penny wise pound foolish
This could be true in the case of offshore outsourcing services. Most of the firms take the decision to outsource jobs to poor countries in the hope of getting more work done for lesser pay. This can cause serious repercussions in the long run. Also, standard and best accounting practices might not be used causing that can derail the chances of growth of your company. Performance metrics are adversely affected when you outsources valuable services that you would rather have in-house. You could miss deadlines and not reach your targeted goals when you outsource bookkeeping services.
Though there are many advantages to outsourcing accounting services such as, expertise guidance, technological advancement, time management, accuracy of data, and more; choosing a poor outsourcing firm can turn these advantages to adversities and failures. Choose an outsourcing service that has an outstanding reputation in the industry, or not at all. The reputation of your business is at the hands of the accounting service that is outsourced, and you can avoid this gamble by choosing an inbuilt team for accounting and bookkeeping.