Whether you want to grow your small business or just make it easier to manage, outsourcing business processes like bookkeeping, accounting, and finance can be a great place to start.
In fact, the outsourcing market for finance and accounting is booming, expecting steady growth of 11–13% over the next 3 years as more businesses look to outsourcing as a scalable solution.
This article covers the pros and cons of hiring outsourced accounting services, including statistics, to help you evaluate this growing option for your business.
What is outsourced accounting?
Outsourced accounting is when a company hires an external accounting firm or professional to handle its accounting tasks instead of managing those tasks in-house. This can include services like bookkeeping, payroll, account reconciliation, budgeting, debt management, and financial analysis.
What does outsourcing your financial tasks look like?
Outsourcing financial services provides the full accounting department experience without the hassle and expense of internal hiring. Small business leaders gain access to knowledgeable, experienced professionals who can take financial tasks off their plates and free up their precious time.
The valuable insight these professionals bring to the table can also help guide your business decisions. They do what they do best, and you get to focus on coming up with great ideas that are backed by financial data to grow your business.
What types of financial and accounting tasks can you outsource?
Accounting and bookkeeping professionals can provide you with a tremendous range of services, including:
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No matter the size of your company, outsourcing your accounting can help you make sure your financial accounts are neat and tidy and that your transactions are recorded correctly.
7 benefits of outsourced accounting
While there are numerous benefits to hiring outsourced accounting services for your small business, here are the most significant advantages that apply to all businesses, no matter the size or industry.
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1. Save your business money
Hiring a full-time staff accountant or bookkeeper can be expensive. When you hire employees to staff an in-house accounting department, you have to consider the inevitable overhead costs. In addition to their base salary, you'll also have to manage the insurance, bonuses, paid time off, vacation time, and other perks that go along with having employees.
Not to mention the time and money spent onboarding and training them.
For many small businesses, it’s nearly impossible to budget for that kind of expense. Outsourcing your accounting services can be more cost-effective because it lets your company tap into quality, well-trained financial professionals for a fraction of the cost.
How many small businesses outsource their accounting?
In 2019, Clutch surveyed 529 owners and managers of small businesses, meaning limited revenue and 1–500 employees across the U.S. The survey discovered that about 37% of small businesses were already outsourcing at least some part of their business.
At the time, accounting was tied with IT services for the most commonly outsourced business process (37%). That means about 14% of small businesses were outsourcing their accounting, but that number might well be higher today. More than half of small businesses, about 52%, indicated they had plans to contract out some part of their business.
2. Get more hours back in your day
An outsourced accounting professional can manage the financial processes that are currently being carried out internally. Their expertise eliminates guesswork from tasks like reconciliation, budgeting, payroll processing, and debt management—so you have greater peace of mind.
As a busy small-business owner, you probably feel like there aren’t enough hours in the day. Outsourcing these tasks to an accountant can free up your schedule, letting you focus on business development and other important initiatives that you never seem to have time for.
What’s more, as your company grows, you can scale up their involvement with your business as needed.
Is outsourcing becoming more or less popular?
The demand for finance and accounting outsourcing is on the rise as CFOs face talent shortages, advancing technology, and persistent macroeconomic uncertainty.
In 2022, UpCity surveyed 600 business owners and employees about their outsourcing strategies, taking a close look at the differences between outsourcing before and after COVID.
According to the responses they received, 82% of small businesses increased their business process outsourcing (BPO) between the pre-COVID and post-COVID eras, and 83% intended to increase their BPO.
3. Improved data access and security
An outsourced accounting team that leverages the latest in cloud-based technology can improve your data access while tightening security at the same time. Giving each system user their own log-in with permissions-based roles can make sure people only have access to what they need, with an automatic audit trail for added protection.
4. Risk mitigation
Especially in highly regulated industries, such as healthcare or construction, outsourcing your financials to trained professionals can help mitigate the risks of non-compliance.
In fact, regulatory compliance and risk mitigation are key drivers behind the growth in outsourcing finance and accounting processes to expert providers.
5. Shed new light on your financials
A fresh set of eyes can give your small business a leg up when it comes to analyzing your financials.
Outsourced finance professionals provide an objective point of view. They’re not immersed in the day-to-day operations of your company and, therefore, hold no bias when it comes to assessing your fiscal health. Their priority is to impart their financial knowledge so that your business can continue to grow and be profitable.
Better yet, an accounting firm partner who specializes in your industry and/or growth stage can deliver invaluable insight into how your company is performing against industry benchmarks, plus cutting-edge advice on new technologies.
Remember, you're one company. They work with numerous clients in your industry, gathering knowledge and data every day.
6. Proactively plan your financial strategy
When you hire an accounting service, streamlined systems can give you full visibility into the core metrics required to make important business decisions quickly and efficiently. Instead of reactively looking back into your books and wondering why you didn’t see a profit in the third quarter, you’ll have a clear understanding of the financial implications of your business decisions.
This allows you to be proactive and gives you a dynamic view of the next steps you can take to scale your business in a profitable way.
7. Enjoy greater flexibility
Clear visibility into your financials enhances your company's ability to respond to changes in market demand and consumer behaviors. When you can pivot quickly, you're better able to capitalize on new trends and come out on top.
Are small businesses usually happy with their choice to outsource accounting?
According to the 2022 UpCity survey introduced above, 93% of small businesses reported a positive experience with outsourcing, with greater flexibility as the most commonly named positive outcome (21%).
Drawbacks of outsourced accounting
Despite the allure of outsourcing, it's important to go into it with your eyes wide open. Here are three reported drawbacks of outsourcing—each of which can be minimized if you apply a healthy dose of due diligence in your outsourcing search.
1. The costs can be prohibitive
In considering whether or not to outsource your accounting, be sure to take a close look at the cost structure presented.
Older pricing models were based on expensive hourly rates, which didn’t incentivize efficiency. The more hours the job took, the more money the accounting firm made.
Today, automation is changing the game, bringing prices down and moving the industry toward flat per-month or per-item pricing.
Does cost represent a significant challenge in outsourced accounting?
In UpCity’s 2022 survey, 23% of respondents reported that high costs were the biggest challenge of outsourcing.
In 2021, Gartner also studied accounting outsourcing, reporting a prediction that by 2025, finance and accounting organizations would not renew 60% of their outsourcing contracts because of outdated pricing models.
2. It's only a benefit if it's more efficient
Think carefully about what you could do on your own before you decide to outsource. Could you achieve the same efficiencies by revamping your own systems? Or would an outsourced team provide a genuine benefit beyond what you could achieve internally?
According to UpCity, efficiency is the most important benefit when outsourcing a business process, and most small businesses look for strong problem-solving skills in their outsourced teams
3. Concerns over data security and confidentiality
Pay special attention to the way your data will be stored and handled, especially if you work in a highly regulated industry. The right outsourcing team should leave you feeling just as in control as you would from an in-house team, if not more so.
In March of 2024, HTF Market Intelligence released an outsourcing report titled “Finance and Accounting Business Process Outsourcing Market.” According to that report, key market restraints on outsourcing finance and accounting processes include:
- Concerns over data security and confidentiality, especially with sensitive financial information
- Resistance from internal stakeholders due to fear of job displacement or loss of control over critical financial processes
- Challenges in maintaining quality standards and service levels across geographically dispersed operations
- Potential cultural and language barriers in offshore outsourcing arrangements
- Regulatory complexities and compliance risks associated with cross-border transactions
Nonetheless, HTF still predicts significant growth in the industry.
How to leverage automation in your accounting instead
If you'd prefer to keep your accounting in-house while reaping many of these outsourcing benefits, consider overhauling your accounting processes to leverage new technologies.
Automating your financial operations can help you:
- Save time and money
- Improve data visibility while heightening security
- Shed new light on your financials
- Help you plan your financial strategy
- Help you adapt quickly to changing markets
Sound familiar? Explore the benefits of streamlining your financial efficiency.
Find an accountant to help with your business needs
BILL's free online Find an Accountant tool can help you find the right accounting partner for your needs. Choose exactly what you want in terms of:
- Services offered
- Accounting software expertise
- Location
- Other software and integration expertise
- Industry
The tool will return a list of accounting partners with all the specialties you're looking for.
Outsourced accounting FAQ
Here are some quick and easy answers to the most commonly asked questions about outsourcing your finance and accounting operations.
What percentage of small businesses outsource accounting services?
According to recent data, about 14% of small businesses may outsource their accounting, but that number seems to be growing rapidly.
In fact, CPA.com reports that client advisory services is one of the fastest growing areas for accounting firms, with a median growth rate of 16% and an increase of 25% in net client fees per professional (NCFPP) among top performers.
Is outsourcing accounting a good idea?
It can be. Advantages to outsourced accounting include saving time and money, mitigating risk, and a stronger, more intentional financial strategy. However, old-school pricing models and partners that don't leverage new technology may do more harm than good, so be sure to choose the right outsourced team for your needs.
What is the difference between outsourced and in-house accounting?
The main difference is where the work happens. Outsourced accounting lets an external team handle your accounting tasks, while in-house accounting relies on full-time or part-time employees to do the same work.
In practice, the main difference comes down to whether your small business is set up to manage its own accounting team with a high-tech back office and modern accounting software. If you are, there might not be much difference in your results between an in-house team and an outsourced team. If you're not, you may be better off choosing an outsourced team for stronger financial results.
Is outsourcing accounting cheaper than in-house?
Sometimes—it depends on the pricing model of the outsourced team you choose. When the price is based on the number of full-time employees it would take to do the work, you may not see much cost savings, if any. But outsourced teams that leverage new tech can make a positive difference in your bottom line.
Look for teams that price by the item or time period — or with a hybrid pricing model that includes both subscription and hourly services — for maximum savings and predictable costs. In a March 2022 survey of 127 BILL Spend & Expense users conducted by UserEvidence, customers reported average monthly savings of $10,630.