The Increasing Value of Outsourced Bookkeeping & Accounting

by Lynnea Bylund on June 28, 2012 · 4 comments

“The small-business market, unlike the mid- and enterprise markets, utilize the general services of public accountants in much greater volume and typically for more fundamental business services – such as business bookkeeping and daily process support,” writes Joanie Mann at her accounting technology blog.   

Bigger companies  typically use their own financial departments and/or in-house staff, and depend on outside CPAs for higher-level accounting.  Small companies, alternatively, should outsource much more of the core bookkeeping and checkbook management functions to their outside accountant or bookkeeper. This creates a consistent flow of updated bookkeeping work which can be burdensome and not terribly profitable for many CPA firms. But this level of work is of significant value to the small business owner, and thus the value of outsourcing to the accounting professional should be clear.

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Around the 1980?s or so, CPA firms started to step away from bookkeeping activities, reserving their time for compliance, audits, and other engagements referred to as the “higher level work”.  As business accounting became more complex (largely due to advances in information management technologies as well as accounting and tax regulations, which generated a LOT more detailed information to “account” for), many professional firms saw a need to focus on their core offerings, and not on the lower level bookkeeping and record keeping activities. 

As a result, the emerging cottage industry of bookkeeping service providers grew in power and numbers, and came to represent a critical intermediary between the CPA and the small business owner.  Truly, bookkeepers and software consultants are often the folks who help to automate the processes, capture the information, and organize the data so that it is useful to the accountant.

The issue that revealed itself was that small businesses started to pay more attention to the technology and business solution advice and direction of their bookkeepers and consultants than the advice of the CPA.  In a lot of cases, the CPA kept an arm’s length from the business, concerning themselves with their tasks, and not paying significant attention to how the data is collected or controlled.  As long as they got the data, that was OK.  As the reality started to set in, that bookkeeping and information management consulting also delivered the “higher level” accounting work, CPAs once again sought a means to gain more direct participation in the client business… but through a somewhat less direct manner than previous.  Now, partnering was revealing itself as the means to more fully engage the business, and the bookkeeper or consultant, in the overall accounting value chain, resulting with the delivery of work as well as value back to the accounting professional.

The enabler of this value chain, where the accounting professional, the bookkeeper, and the business owner can all work in concert without limitations in systems or based on location, is the cloud.  Providing standardization in terms of data platforms and integration, offering mobility and device independence, and combining resource management and access into a comprehensive approach to solving business problems is enabled through cloud technologies and connected solutions and services.

For many, this concept of fully technology-enabled business seems frightening, like a loss of control or individual accountability.  But it’s important to recognize that, as things become more complex, the opportunity for specialists is always created.  In the ever changing world of technology, it’s a dangerous approach to believe that you can be all things to all people, just as in accounting or tax.  You can’t be a specialist in every area, so you specialize in your niche, do it better than anyone else, and outsource/partner to get the rest done.  This is a philosophy of the cloud, and it’s working.

The true value of outsourcing, whether it is a small business outsourcing their bookkeeping and accounting to a public accountant, an accounting professional outsourcing bookkeeping work to a bookkeeping provider/partner, or those businesses outsourcing information technology management to cloud solution providers, the end-result can include improved focus on the core business, greater agility in embracing and adjusting to new strategies, improved quality of information through attention to process and control, and a much higher level of value delivered to all participants in the value chain.

{ 4 comments }

1 Brij Taneja September 19, 2012 at 12:02 am

Providing superior bookkeeping services with a focus on management accounting.

2 Bredon Adam December 14, 2012 at 5:54 am

For a small business owner it is not feasible to have an separate accounting department as it requires a good amount of money to be spent.
So now most if the business owners are outsourcing their accounting and payroll services for better results and other advantages. there are many firms which are offering their services in this sector. so select the best suitable one for you according to your business profile.

3 Laura A. Dahl, Esq January 6, 2013 at 10:23 pm

Small business owners mostly prefer to outsource their work because they do not have a lot of work (or time) so it seems more feasible to outsource the bookkeeping and accounting.

4 Mary Jain Madhu April 3, 2013 at 4:08 am

I completely agree with you, that the outsourcing of accounting and bookkeeping roles to third party accounting professionals can not only help manage costs but at the same time can help the business decision maker(s) take proactive decisions on their accounting and business requirements.

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