Outsourcing of Accounting Functions
With the advancement of technology the world is moving towards globalization and work place mobility. Corporation in Countries with higher wages set by government tends to outsource the staff as much as possible to reduce costs and hence this leads to arbitrage. In this way corporations can get the job done by equally qualified staff at much lower cost to them. Outsourcing is very common these days and great number of jobs and functions are outsourced to third parties including but not limited to bookkeeping, taxation, telemarketing, disaster recovery etc.
There are many advantages to outsourcing a function to a third party, some of these are listed below with a brief explanation:
1 - Lower Costs
The first advantage is that of cost savings. Outsourcing can lead to cost savings in many ways:
- It saves the company costs of hiring and retaining staff
- It can save the company a lot on wage costs as the outsourced company can provide the service at much lower costs and the company can save a lot on other benefits including employee health care, savings plans etc.
- It can also lead to less room of office space being utilized for the purpose
- Data security and backup
2 - Increased Efficiency
The company providing specific services are expert in that domain through experience, knowledge and core competency and hence achieves not only economies of scale, but they also tend to make less mistakes and provide the services with better efficiency. The outsourced company holds and retains the most qualified and expert staff in the said domain and hence the loss of expertise when an employee leaves the company is avoided as well.
3 - Focus on core competency
The firm can focus on its strategy and core competency when it has outsourced the functions to some other company and achieve better results in its own core services as the outsourced company are maintaining in theirs and together synergistic gains can be achieved.
4 - Multitude of services
The outsourced company can provide multitude of services in any domain, for example for accounting they can cover all aspects of accounting like payroll, bookkeeping, invoicing, reporting etc. and the outsourced company also follows through with all the transactions on company’s behalf leading to every aspect covered and every problem generated solved in the real time.
5 - Security and privacy
The data is transferred and processed through secure servers which can only be accessed by authorized personal and the data is not taken out of the servers or distributed to third parties as per data protection act Moreover, outsourced company maintains its own sophisticated IT infrastructure at its disposal which saves internal investment to company.
6 - Real-time updates
The accounts are updated continuously as the data keeps getting transferred through servers and hence accounts are updated not only on periodic basis but rather daily or even hourly basis. As the accounts are updated on hourly basis the period end closings are carried out at enormous speeds and with meticulous detail.