Outsourcing. Here is a business buzzword for the new millennium that brings hope to the beleaguered small businessman and strikes fear into national economists. At the small business level, it means turning to outside specialists. At the national level, it means tens of thousands of jobs moving offshore to other countries.
For years small businesses have turned to outside sources for tax preparation. With the advent of today’s information technology, using outside sources for daily and weekly accounting functions is beginning to make as much sense as the yearly tax returns. There are hundreds if not thousands of local accounting firms that provide off site accounting services for small businesses. There are also national firms that provide the same service to local businesses on a franchise basis.
Seemingly the most popular small business accounting service is payroll preparation and book keeping. Many small businesses will have an accounting service prepare their biweekly payroll checks and handle the deductions and the payments to the government that are required over the course of the year. This task is easily separated from the daily accounting functions of a business that has purchasing, sales and invoicing occurring every business day. It also provides the accounting service with a head start on preparing the business’s annual taxes.
With the appropriate software, accounting services can also handle a firm’s invoicing and accounts payable in relatively seamless fashion. Done properly it requires some networking and it requires standardized forms so that the business staff in the front office understand what the accounting service is doing. Similarly, the accounting service has to understand what accounts payable are coming to them and how they should be categorized as a business expense. This part of an electronic outsourcing system requires some data input as bills roll into the business office and must be standardized as payables for the accounting service.
Some accounting services provide a complete accounting service that includes collecting daily information from the business on a standardized form and developing a sophisticated database on every aspect of the client’s finances. The accounting service will provide work document forms that standardize the process. They will also handle deposits, banking records and pay the bills. The small businessman is provided a duplicate copy of the check in order to track the activities of his accounting service.
Some of these “full service” accounting services will manipulate the financial data they have collected for the business and provide customized reports. They also supply weekly reports of financial activities. One of the values of a service like this is for businesses sufficiently large that they loose track of overdue accounts. A weekly report on the financial activity in the business will provide a weekly reminder of the phone call that needs to be made to the delinquent customer.
Accounting services can also reduce employee requirements within the business structure. The key is finding the right balance of on site staff with off site services so that financial activities flow smoothly and the ability to analyze and project is one of the end results of the accounting procedure that has been developed.