Outsourcing your accounting and bookkeeping

Payroll, accounting, HR and IT are among the most common ‘back office’ functions that your business might want to outsource.

The reasons vary: smaller companies may be short on staff or may want to free up the management team, whereas larger SMEs may want access to greater levels of professional expertise without the cost of bringing them in-house.

If you’re considering outsourcing your accounting or bookkeeping services, here’s a quick guide to the benefits and pitfalls to consider.

What does it mean to outsource accounting and bookkeeping?

Let’s start with the basics: to ‘outsource’ a role means to have it performed by an external supplier rather than one of your staff (or, indeed, yourself). So when you outsource accounting and/or bookkeeping, you pay an external accountant or accounting firm to manage your accounts for you, rather than employ an accountant on your own payroll or do the accounts yourself.

Some businesses go a step further and opt for offshoring – using an accountant or firm based overseas. This can save on cost, but the trade-off against the benefits of a more local service may ultimately not be worth it.

What are the advantages of outsourcing accounting?

There is a lot you can gain from outsourcing your accounting function.

1. Saving time

This is usually the biggest appeal of outsourcing. If you’re a small team handling the bookkeeping yourself, handing the job off to another firm frees you up to invest more time in growing the business. And if you’re a larger company, it can save you the time needed to hire, train, develop and manage an internal team of accountants.

2. Saving costs

It’s often cheaper to outsource all, or part of, your accounting function than to have a full in-house department. That’s because you save on employee-related expenses, such as National Insurance and pension contributions, benefits and training. You also save on overheads, since you won’t have to worry about providing accounting software, hardware and office supplies. And if you choose to use an overseas supplier, labour costs and the exchange rate could work in your favour.

3. Having access to experts

Accounting companies are, naturally, all about accounting. Why point this out? Because as specialists they can generally provide a far more expert and efficient service than someone for whom accounting isn’t their main role. They bring a wealth of knowledge and practical experience that adds significant value, whether it’s simply in the time it takes to complete the accounts, or the added insights they can provide.

Outsourcing also greatly reduces the risk of making a costly financial mistake, or choosing a bad hire. And it can give you access to top talent that might otherwise be out of reach.

4. Improving operational efficiency

There are lots of ways outsourcing accounting can make your business more efficient and productive. If you outsource to a larger accounting team, you gain business continuity benefits, since you never have to worry about holiday or sick leave impacting work.

Additionally, most accounting companies are also up to date with the latest standards and technologies. While they’re happy to follow your process and work as an extension of your team, they can also implement new technology-driven processes to improve your service levels, reduce costs, and boost your competitiveness – setting you up for growth you may otherwise have missed.

Good accountants may even offer value-added services, such as assisting with strategic planning in addition to meeting your standard compliance requirements.

What are the disadvantages of outsourcing accounting?

Although there’s a lot to gain from outsourcing, so much of its success depends on the service provider you choose. You’re trusting them with a critical business function, so it’s important to do your due diligence when looking for a partner.

If you select a sub-par supplier, you may experience challenges with:

1. Service quality – your provider may fall below your expectations, working at a slower pace than you need, failing to communicate properly, making errors or missing deadlines. If you’re using an offshore provider, in can be harder to vet quality levels when shopping around, since all you can really rely on is online information and reviews. You also can’t go knocking on doors if there’s ever an issue.
2. Confidentiality and security – accountants deal with sensitive business information, so it’s important to use a supplier you can 100% trust to handle it with the appropriate care.
3. Management – a good supplier can be trusted to work as an extension of your team, with minimal management or hand-holding. But a bad supplier can be the opposite and cause friction or inefficiencies.
4. Flexibility – Suppliers often let you scale service levels up and down as you need to fit your budget. Some suppliers, however, may follow a contract rigidly, and be less willing to accommodate any kind of change. It’s important to understand your needs and consider how much flexibility you will need before you sign.

How much does it cost to outsource accounting?

Outsourcing rates vary, but the factors influencing them include:

• The type and size of your business (number of employees etc.)
• Your annual turnover
• Your accounting needs (which services you need help with)
• Your business’s stage of development
• Where your business is situated
• The size and quality of the supplier

The larger your company is (employees and turnover), and the more specialist accounting services you require, the more you’ll pay.

Some suppliers charge by the hour, where you’ll work on a pay-as-you-go model. An accountant performing basic accounting services will usually work for between £25 and £35 per hour. More specialist services, such as tax planning and business planning advice, are usually more expensive, in the region of £125 to £150 per hour.

Others charge a mixed monthly fee based on an agreed scope. For smaller businesses, this monthly fee can be as low as £60 or as high as £250. You could even mix and match, paying for some fixed services via monthly fee, and more bespoke services by the hour.

For a helpful breakdown of typical fees per service, visit our other guide on: How much do accountants charge?

Which types of business typically outsource their accounting?

Businesses of all sizes outsource their accounting and bookkeeping for different reasons as we outlined above. It’s a popular option among smaller businesses, who have a lot to gain from cost and time efficiencies and accounting know-how. A KPMG survey found that nearly 40% of small to medium companies planned to increase their use of outsourced accountants.

Should you outsource all accounting functions?

It’s up to you – and your budget and skill levels – whether you’d like to outsource all or some of your accounting function. Perhaps you’re a sole trader with no knowledge of accounting and need a trusted partner to manage everything. Or perhaps you already have a competent finance department that just needs more hands, or more specialist skills.

Depending on your needs, you can look to outsource to a large accounting firm with a handful of dedicated accountants at your fingertips. Or you could use a single accountant to help with your annual VAT returns. And if you need to keep fees to a minimum, you can always help by maintaining good record keeping on your end, sending all information to your accountant in good time.

How to outsource your accounting and bookkeeping functions

If the idea of outsourcing your accounting sounds good to you, here’s how to get started:

1. Decide what and how much of your accounting you’d like to outsource, whether it’s the full function or a specialist one. Weigh up all the pros and cons.
2. Research accounting companies or accountants suited to your company type, size and needs. You can use a site like Unbiased to find your perfect match.
3. Gather information and quotes from all the suppliers you like. Always read online reviews to get a sense of their reputation, and don’t be shy to ask about their qualifications. Remember, however, that accountants aren’t legally required to hold any qualifications. But if they do, ensure they’re qualified through a recognised UK body, like ICAEW, ICAS, CIMA or ACCA. And if you’re using an offshore supplier, find out if they’re chartered, as this is an internationally recognised level of professional standing.
4. If possible, meet prospects in person – whoever you go with is likely to become a long-term partner, so you’ll want a good connection. Ask the right questions early to get the decision-making information you need.
5. Once you’ve selected your supplier, take careful time to compile or review the contract. Ensure the terms and fees work for you, and that you’re aware of all related charges.
6. With your supplier on board, it’s time to start providing them with all the information they need. Documents they’ll need include bank statements, bills, invoices, receipts, credit notes, purchase orders and previous years’ accounts. If you’re new to this, they’ll guide you and give you a checklist.
7. Your supplier will now work on managing and preparing your accounts. They’ll submit all the relevant documents to HMRC and can also deal directly with clients for you. Keep an open communication channel to ensure you both get everything you need.

Where can I find a good accounting company to outsource to?

Unbiased can connect you to the right accountant for your business. Our smart Connect tool matches you to the nearest suitable accountant based on your needs, while our search and browse feature lets you see a list of accountants filtered by location or expertise.