Editor’s note: This article was updated in June 2025 and explains the major consequences of poor outsourcing that can hamper the business.
Outsourcing accounting is a great option for any business as it gives you expert support, cut down costs and lets you focus on strategy not spreadsheets only if it is done smartly. The key lies in choosing the right partner and setting clear expectations from the beginning.
But when outsourcing is done without research or is rushed it results in serious consequences such as financial errors, trust issues and even legal trouble.
The difference between successful and failed outsourcing often comes down to preparation and due diligence. Understanding the potential risks can help you make better decisions and avoid costly mistakes.
Related blog – How outsourcing can help accounting firms scale without losing quality?
Here are the 12 common consequences of poor outsourcing.
12 Common consequences of poor outsourcing
There are various consequences that can take place due to poor outsourcing, however, below is the list of some most common consequences of poor outsourcing.
Let us explore the pointers one after another.
False information and lack of expertise
With outsourcing bookkeeping and financial services the goal is to focus on strategic priorities while experts manage the numbers.
However, poor outsourcing can completely destroy the foundation. Instead of gaining access to specialised talent, you might end up with unqualified people handling your accounts.
You have no control to analyse 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.
Also read: An ultimate guide for outsourcing to streamline business
Confidentiality is at risk
Outsourcing improves 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.
Even the local outsourcing partners may pass the work to the third parties without letting you know which makes it difficult to track who has access to your sensitive info. This raises question regarding the matters of confidentiality and 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.
Related blog – Why More UK Accountants Are Outsourcing Compliance Services – and How You Can Too
Want to keep your data safe while outsourcing? Outbooks is here for you.
Want to learn more about outsourcing risks and best practices? Check out these helpful videos:
Problems with communication
Outsourcing accounting to firms located in different time zones allows their businesses to run 24/7, but it leads to obstacles in communication, such as getting late answers, unclear updates and misunderstandings, which affects both progress and productivity.
Lack of real-time access to data makes it difficult for your team to plan and take appropriate decisions. Depending on scattered communication can lead to mistakes and opportunities.
Unclear financial insights
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.
Risk to loose 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.
Not defining Outsourcing goals
A common mistake businesses make is starting outsourcing without clear goals. This can cause misunderstandings and disappointment. Here are some goals to consider:
- Reducing costs
- Gaining specialized knowledge or skills
- Freeing up internal resources
Make sure to share these goals with your potential accounting outsourcing partners right from the start.
Compromises your standards of delivery and quality
Outsourcing is beneficial as long as you choose your services and partners wisely. But when key tasks like bookkeeping are handed over to low-cost providers and underqualified providers, quality is bound to be compromised.
Delay in getting reports, use of outdated tools and lack of responsiveness. If the firm does not have the right technology or trained staff the accuracy of data is affected and time taken to complete it can hinder your growth.
Breach of data security and privacy
Technology and encryption methods are the topmost requirements of financial data as is protects the sensitive data of the firm.
If an outsourced firm lacks the technology to manage data it will cause loopholes and many vulnerabilities to make your company’s and clients financial data secure.
The financial data of your clients can be manipulated or lost due to lack of implementation of protocols and security measures.
Loss of 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.
Related blog – UK’s Premier Accounting Outsourcing Firms: Navigating the Future of Finance with Outbooks
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
Outsourcing may seem like a profitable deal to start in countries where work costs are low, but trying to get work done cheaply can cause huge losses in the long run.
If the outsourced form does not adopt standard process and does not work on time, there is a direct harm to your growth and reputation. Poor quality, sleeping on the dead line and not following the rules, your company lags behind.
Therefore, choose wisely. Work only from a reliable outsourcing partner or keep full control of things with your in-house team.
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FAQs
What are the consequences of poor outsourcing?
Poor outsourcing results in data breaching, quality concerns and missed deadlines, poor communication and loss of control over key business functions.
What is the problem with outsourcing?
Lack of transparency, less control over processes and risks with quality and confidentiality if chosen the wrong provider is the main problem in outsourcing.
Is outsourcing unsafe for businesses?
Not at all, but it can be unsafe if it is not done with proper checks, trusted partners or clear contracts.
How to avoid the avoid the negative aspects of outsourcing?
You must choose experienced, reputable providers and be clear with your expectations by maintaining regular communication and monitoring performance closely.
What is the one possible way to manage risk of outsourcing?
By establishing strong Service Level Agreements (SLAs) with measurable KPIs and accountability you can manage risks of outsourcing.
Explain the major strategic risks of outsourcing?
They include loss of intellectual property, dependency on third-party vendors, reduced innovation and potential misalignment with business goals.
Conclusion
Outsourcing, if done correctly can help businesses save time, access to expert support and reduced costs but doing it without understanding then consequences of poor outsourcing can set you back.
Choosing the wrong partner can lead to data leaks, reporting errors and even put your business’s reputation at risk. That is, the work that was done to make business easier can backfire.
That is why it is better to take the decision of outsourcing thoughtfully, with the right process and the right partner. Only then will you be able to reap its real benefits without the fear of any loss.
For more tips on safe outsourcing, check out this video:
Parul is a dedicated writer and expert in the accounting industry, known for her insightful and well researched content. Her writing covers a wide range of topics, including tax regulations, financial reporting standards, and best practices for compliance. She is committed to producing content that not only informs but also empowers readers to make informed decisions.