Does It Make Sense For a Startup To Outsource Accounting?

By February 3, 2015 July 14th, 2017 Accounting, Small Business, Startups

Starting a new business is risky, complex and overwhelming, even if you have multiple owners and resources. To succeed and grow, I suggest that owners must manage their primary and support activities effectively.

Let’s take a look at these activities in more detail.

Primary activities are direct processes that create value.

As the owner of your business, you know what creates, or generates value in your company, and thus, you should be involved entirely in these primary activities.

Support activities are indirect processes that create value.

Accounting, finance, human resources and IT are support activities, and are often difficult for small business and startups to manage. If your company has no experience, time, or resources for these and other support activities, outsourcing makes sense, and can greatly benefit your business.

Still not convinced that outsourcing makes sense? Maybe the following benefits of outsourcing will help.

Outsourcing Provides Expert Advice & Analysis 

Because many owners are involved in primary activities, there is not enough time or skill for support activities. Accountants and other outsourced providers have the needed skills, and provide it more effectively than if done internally. Financial reports, payroll services, accounts receivable and accounts payable functions, as well as tax services are many tasks that may be daunting for you, but are a piece of cake when outsourced.

Outsourcing Can Be Cost Effective

When a business starts and begins to grow, many support activities are not affordable. Hiring a company accountant or IT manager for example, can be quite expensive. However, this is often not the case for outsourced services, as there are usually many options out there providing affordable monthly services, at a fraction of the cost of hiring a full time employee.

Do Not Fear Loss Of Control

There is a shift of responsibility when you choose to outsource accounting and other services, but this does not mean that control is lost. It is easy to assume that that you may not be in control, but as reported from the Association of Chartered Certified Accountants (ACCA), control can increase with outsourcing.

For me, Jag Dalal, a managing director at the International Association of Outsourcing Professionals (IAOP) says it best:

“Many companies don’t realize going in that they manage an outsourced provider more stringently than their in-house resources were managed.”

This does not guarantee zero loss of control but that only responsibility has changed, as long as it is maintained.

Many small businesses that outsource their support activities move up in the value chain. Why? Because they are focusing their time creating value, not supporting it. Don’t let your business be overwhelming or prevent yourself from reaching your potential. Outsourcing is a great solution and it just makes sense.

I hope this post helps you to understand why outsourcing accounting, as well as other activities, can be of great benefit to your startup.

If you have any questions or comments, please leave them in the comments below.


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