Outsourcing to Prevent Financial Discrepancies for Small Firms

While apprehension around outsourcing continues to linger, tasks performed in the U.S. can be done with a team of outsourcing experts at about 60% less cost. No matter the size of the firm, accounting outsourcing has become a popular trend, and for the right reasons.

One of the common challenges that small accounting firms face is significant financial discrepancies. It impacts their profit, credibility and growth. 

Whether it’s an error in bookkeeping, mismanagement of accounts, or the lack of specialized skills, these inconsistencies can become bigger problems in no time. Outsourcing, over the years, has proved to be a one-stop solution for several of these problems. It is known to help maintain accurate financial records, streamline operations and foster growth.  

What are financial discrepancies?

If we are in the field of accounting, we deal with complex and critical financial data. Without expertise, time and bandwidth, this can lead to errors, inconsistencies or omissions in financial statements. They are rooted in one or many of these factors:  

• Human error: Most small accounting processes are prone to mistakes. These include misentries or missed or repeat transactions. 
  

• Lack of expertise: Small firms run on low capacity. This means that they sometimes lack the resources and means needed to hire skilled accountants. They often fail to double-check things—leading to mistakes in critical areas. 
  

• Fraudulent activities: Inadequate internal controls may lead to firms being vulnerable. The overlooking of critical data can lead to fraud beyond recovery. Firms may end up losing a lot more money than they had expected. 
  

• Regulatory non-compliance: Failure to adhere to accounting standards can lead to penalties and financial discrepancies. These discrepancies can land businesses in trouble, especially during audits.  

While these issues may seem complex, which they are, there is always a solution. To prevent these issues from occurring, firms need a strong process, technological adoption and expertise to keep them ahead of the others. Outsourcing can help address many of these issues.  

How to address financial discrepancies with outsourcing

Outsourcing your accounting and financial services is so much more than just saving costs. It is the planning, strategy and precision that matters. It is about building the kind of partnership that helps you move ahead. Here’s how outsourcing can help:  

Access to expertise

When you hire a team of outsourcing professionals, you get a team well-versed in accounting standards, tax regulations, and financial practices. They help in: 

• Ensuring accuracy: They handle bookkeeping, reconciliation, and financial reporting. This helps in reducing the scope of errors.  

• Gaining insights: Skilled accountants analyze financial data. They help firms detect discrepancies and make informed decisions. These insights can also be used to make future decisions. 
  

Access to advanced technology 

When you hire a team of outsourcing professionals, you also get access to the latest accounting tools and technology. These tools help automate repetitive tasks, spot inconsistencies, and flag concerning issues. These tools can also be used to generate accurate financial statements. These benefits include: 

• Process automation: When firms reduce dependencies on manual entries, the chances of making human mistakes are also reduced. It helps prevent errors.  

• Real-time monitoring: Updated financial information can help firms keep track of discrepancies promptly. This also gives firms insights into long-term and short-term changes needed. 

• Data security: This is one of the major concerns that accounting firms have when they are outsourcing their practice to a team of experts. However, outsourcing partners have much more data to manage, hence they have tighter security systems. It helps ensure that the security systems are secure and remain sensitive to the financial data.

Establishing robust internal controls 

For accounting firms, it might be difficult to implement internal control systems that can help mitigate errors and fraud. Outsourcing partners not only suggest this, but they also help design and implement stringent controls. They help in:  

• Segregation of duties: When access to all points is levied with one person, there is a high chance of data manipulation. This also leaves little flexibility in preparing for emergencies. Outsourcing partners distribute responsibilities to prevent unauthorized actions.  

• Regular audits: While having internal audit processes is great, accounting firms should also seek external auditors every now and then. They help identify discrepancies in an unbiased manner while spotting areas for improvement.  

• Policy development: With an increase in the size of business—clients and employees—there is a need for firms to develop policies. These should state financial policies clearly, standardize processes, and lay out exactly what is expected from whom.  

Ensuring regulatory compliance

Tax laws have to be taken into consideration, irrespective of the size of the business. These laws are complex and managing these regulations can be overwhelming for firms without the right resources and bandwidth. You can maintain compliance with outsourcing through:  

• Timely filings: One of the most common ways to avoid penalties is by adhering to deadlines. The task of filing deadlines is immense. Firms can avoid penalties by outsourcing it to an outsourcing expert. 

• Accurate tax calculations: Tax season is one of the busiest times of the year. Amidst the rush and chaos, it is easy to make errors even in simple calculations. When you outsource, you hand this over to a team of experts who can more easily focus on the task at hand.  

• Updated knowledge: Regulations change fast. Outsourcing partners are constantly ahead as they stay updated on regulatory guidelines.  

How do you overcome your apprehension about outsourcing?

Despite its several advantages, there is no doubt in the fact that many small firms have their own share of apprehension about loss of control, hidden costs, quality of resources, data security, etc. But these can be addressed:  

• Choose a reputable provider: Before you finalize a partner, make sure to conduct some form of background check. Partnering with firms that are known for their confidentiality and transparency can help overcome this fear. 
  

• Maintain clear communication: Right from the beginning of the partnership, it is important to establish and maintain clear communication on expectations such as frequency of updates or handling a sudden change and emergency. Clear communication is key to a successful partnership. 
  

• Cost-benefit analysis: Before outsourcing, measure the pros and cons of outsourcing. Weigh the cost benefits you are making before making the decision.  

Get started on your accounting outsourcing today and eliminate financial discrepancies.  

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