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Here’s Why You Should Outsource Financial Services

Outsource financial services

In the world of business and finance, staying ahead of the game can make the difference between success and failure.

You need an experienced financial team, familiar with the latest tax law and strategies to keep your business profitable. Accounting departments in large companies handle large amounts of financial data and sophisticated financial practices – this requires training, expertise, and expenditure on team members.

Many companies now outsource financial services, potentially even getting a Fractional CFO among their services. Here’s how that works and why it’s worth considering:

Is it time to hire a fractional CFO? Get our quick guide here

What does it mean to outsource financial services?

There is a trend among companies for outsourcing services of all kinds, including financial services. This simply means that you transfer responsibility for your financial services to a third-party.

Generally speaking, what you outsource will depend on comfort level and the resources available in-house. To outsource financial services, look for a CPA or accounting firm with a strong reputation and good qualifications. Some companies only outsource their bookkeeping services, while others outsource a range of accounting needs.

Many businesses of all sizes are now outsourcing financial services to a “fractional CFO.” This simply means that instead of having a full-time CFO employed in-house, you get the benefits of a CFO who works for a third-party company. “Fractional” means that they work for your company less than full-time. They handle the duties of a CFO (Chief Financial Officer) as and when needed.

Outsource financial services

Key benefits of outsourcing financial services

Outsourcing financial services can be an excellent way to grow your business and manage finances carefully, while giving you flexibility over how you structure your business. Here are some key benefits of outsourcing:

Outsourcing services saves money

Most companies look for ways to cut back on costs. This is a major reason for outsourcing services of any type – it’s a good opportunity to reduce overhead.

Your company might not have the capacity for a full-time CFO, or you might not be able to justify the expense of having an accounting department. Regardless of size and budget, you still need accounting services and other types of financial services that an accounting department can provide.

Outsourcing financial services gives you more flexibility over costs than employing full-time staff. You pay for the services you use as and when needed, rather than paying salaries or wages to internal team members.

When you outsource financial services to a qualified professional, you can also save money by ensuring that financial management is handled correctly. Poor financial management is one of the core reasons why seven out of ten businesses fail within their first ten years. Many companies try to handle financial services themselves, even if they have little knowledge on the subject. This might save you short-term money, but in the long-run, it can spell disaster.

Reduce complexity in your financial management

In-house financial management is a complex exercise that not all businesses are equipped to manage. It means handling any or all financial tasks such as; accounts receivable, accounts payable, employee benefits and payroll, financial reporting, managing cash flow and more.

Many business owners aren’t financial services experts, in fact, tackling those essential financial tasks can result in wasted time. If you’re having to double-check meaning, translate terms, and research how to do tasks properly, there are probably better things you can be doing with your time.

It often makes sense in terms of business strategy to reduce internal complexity wherever possible. You might need to acknowledge that the people in your team aren’t the best choices to handle the finances – it may simply be more efficient to outsource financial services.

Access qualified professional services

A major benefit when you outsource financial services is that you get someone who is qualified to do the job. A CPA or fractional CFO can quickly and confidently take care of tasks such as financial analysis, financial planning, and accounting services.

One of the attributes of highly qualified outsourced financial services is that they live and breathe the financial industry. They’re experts because they practice aspects of financial planning and analysis every day and because they keep up with the many changes affecting the industry. For example, changes are made to the tax code frequently – your business probably doesn’t have time to keep up but your CPA does as part of their everyday work.

For some companies, hiring the right expertise internally is a major challenge. There are often shortages of skilled labor or general difficulties finding qualified talent. This is another reason to outsource financial services – access to talent without having to find and hire people.

As an example, CFOs can be hard to find and hire (they also command very high salaries). A fractional CFO can bring a fresh set of expert eyes to the financial management of your company, without going through the time and expense of hiring. It solves the dilemma when you need the capacity of a CFO but aren’t in the position to hire one full-time, too.

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Outsource financial services

Outsourced financial management can improve internal controls

When you outsource financial management, you get professional services that can effectively improve your internal controls. This is especially the case if you haven’t had qualified people to do financial tasks, or if you’ve had any issues with those you’ve hired.

Your internal processes and procedures are essential for good financial management and reducing overall risk. If you have in-house processes that are ineffective, you can be exposed to considerable financial risk, from costly mistakes to employee fraud. When you outsource to a qualified professional, they can improve your processes and reduce risk. They can often provide training to staff where necessary, so that everyone has a good understanding of what they need to do.

By outsourcing, you also get access to best-practice systems for financial management. Your CPA or CFO will use the best tools for accounting services and financial reporting and can advise you on what to use. They can also help with setting vital policies, such as expenses.

Many companies notice that by outsourcing, their productivity is also significantly improved internally. Employees can be assigned to tasks that they are better suited to, while business owners can focus more on activities that grow the business.

Ready for a fractional CFO? Download our mini guide here

What financial services can you outsource?

What you choose to outsource will depend on your own capabilities and comfort with outsourcing financial services. The short answer is that you can outsource your entire finance department, the longer answer is that you may want to pick and choose. Some companies keep basic tasks in-house, for example, while outsourcing more complex financial analysis.

Here are some of the financial services that are commonly outsourced:

  • Strategic and financial planning
  • Cash management and budgeting
  • Tax planning and compliance
  • Financial analysis and reporting
  • Financial forecasting
  • Employee payroll and benefits
  • Accounting services and accounts payable
  • Risk management analysis.

The bottom line is that outsourcing financial services can help to optimize your operations, save money, and ensure that you’re following financial management best practices.

Streamlining the financial portion of your business can make the best use of your time to achieve sustainable growth. Find the right expert help and you can improve the overall financial position of your business.

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