The Benefits Of Outsource Accounting

Why try to complete all the tasks on your own when you can receive additional help from others? It can be a hassle when everything is done on your own. Fortunately, there is a solution to that problem. In accounting, some companies have outsourced accounting tasks to other countries. In an article in Forbes magazine, Joe Mullich describes how companies “are exploring fresh ideas and seeking new answers” as well as “expanding outsourcing to new areas of finance and accounting, new industries, and new sizes of companies than in the past” (2). This states how companies are more willing to consider other options that they have not explored before. As an accounting major, I was interested in how outsource accounting works and learning more about the process. When companies send outsource accounting tasks overseas, this can create benefits and limits that can be the ultimate decision-maker for whether it may be suitable for them or not.

Before talking about the importance of outsourcing accounting tasks overseas, it is crucial to understand what exactly outsource accounting is. According to J. Anderson and Richard Vita, outsource accounting has been around for a long time in the American business environment and has become popular only recently. The CPA Journal describes outsource accounting as, “leveraging accounting data to provide meaningful insight that allows client businesses to run more efficiently and effectively”. Many countries are contributing to the process of outsourcing: India, China, Philippines, Brazil, and Mexico. Only up until recently, companies have pushed towards allowing third parties to help with contributing to reducing the amount of stress put on by businesses. Beginning in the 1970s, the movement of payroll accounting, accounts payable, and accounts receivable have gone up about 10 percent. As described in, “Should you outsource accounting and finance?”, the main goal businesses want to achieve is “an eventual reallocation of limited internal resources (particularly managerial time and investment dollars) into areas more directly related to profit making” (11). Rebecca Pomering and Larry Kammerer define and explain outsource accounting. J. Anderson and Richard Vita explain the history and the trend of where it is going. By taking the educational and historical approach, it is now clear to see that it is important to know what outsource accounting is and the background history of how it all began.

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J. Anderson, Richard Vita, Yahya Kamyabi, Susela Devi, H. Höglund, and D. Sundvik all take a business and technological approach to talk about how outsource accounting is becoming more and more common among many small and medium-sized businesses. According to the Studies in Business and Economics, small and medium businesses use accounting outsourcing because “accounting is time consuming and difficult” (124). This source from Romania explains how it makes the process of accounting more manageable for businesses to handle by involving external accountants to handle the tasks. Many small and medium-sized businesses lack the resources and skills needed to run on their own which is one of the biggest reasons for companies to outsource. It is difficult for small and medium enterprises to succeed and grow especially without the skills and resources needed. Small and medium-sized enterprises compared to large firms cannot compete with others as effectively. Yahya Kamyabi and Susela Devi states, “SMEs face with resource gap and competitive pressures, they are forced to lessen their costs and create new opportunities” (81). Fortunately, technological advancements have allowed accounting tasks to be useful for CPA firms to be a part of the transaction process. Even though there are sources that took the business and technological approach in discussing how outsource accounting is becoming more acceptable in the business environment, there were others that took the economic approach.

Rebecca Pomering, Larry Kammerer, Joe Mullich, J. Anderson, and Richard Vita all take an economic approach to discuss both the pros and cons of handling tasks to other countries. Outsource accounting can reduce the cost of operating and allow efficiency to provide more towards getting positive results such as providing good service and money. When companies are focusing on helping clients, they can provide good business service which means they are not paying attention to accounting. Most authors agree that there are many things to be gained from outsource accounting, however, only a few sources have presented the limits. On the other hand, companies must think about whether they want to give up having the power to control over the tasks that they are given. According to the Studies in Business and Economics, some of the limits include, “the organization resistance; lack of acceptance within the company, cooperation risk (cooperation can fail); loss of control and know-how and dependency on an external provider; the appearance of suspicions in what concerns the information confidentiality;” (127). All the sources have different approaches to this topic because even though there are many benefits to outsource accounting, there are also downsides that can greatly affect whether businesses and firms decide to or not.

To conclude, many of the authors had similar thoughts on outsource accounting by saying that there are ways for companies to benefit from outsourcing. However, there were only a few that have touched on the problem with deciding to outsource. “Studies in Business and Economics” has proved that there are issues that hinder the company’s decision to outsource. It is important to look at both sides before thinking about implementing something to see if it would be the best decision. With that in mind, there are pros and cons to outsourcing companies overseas which companies must think about before choosing to begin giving tasks overseas. As technology is improving, we should take advantage of those opportunities to grow and enhance companies to become even more efficient than they already are. I am pleased that there are changes that are made in the accounting industry where I plan to be working in.