Outsourcing is the practice of having certain job functions done outside a company instead of having an in-house department or employee handle them; functions can be outsourced to order organizations that can do it better, time and cost savings.
Outsourcing has become a major trend in human resources over the past decade. It’s the practice of sending certain job functions outside a company instead of handling them in house. More and more companies, large and small, are turning to outsourcing as a way to grow, in Nigeria the following professional jobs can be outsourced namely, book keeping, accounting, filing of returns to CAC-corporate affairs commission, tax and payroll management system
The reasons are ;
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1. Increasing your sales/turnover as result of total concentration on core service
By outsourcing your bookkeeping, accounting, and tax you are going to get timely financial reporting. Having your bookkeeping system handled by experts in the field will allow you to focus your time and energy into utilizing the financial reports to create forecasts and a general financial plan. Your time can be spent focusing on increasing your sales and growing your business rather than on keeping track of your books.
2. Opportunity to cross checks your balancing figures.
Putting checks and balances into a accounting system will give the owner piece of mind. For instance, having your bookkeeper handle all aspects of Accounts Payable and having the owner handle the final step of the process which is verifying the details of the checks and signing them. The are many aspects of Accounts Payable such as amount verification, terms, dates, etc. can be tedious and the time dedicated to this is critical.
3. Freeing up time for the owners/professional managers
Owners and professional managers can concentrate on the professional and strategic decision making rather than wasting their time on bookkeeping/accounting and tax job. By outsourcing bookkeeping they can get back to growing, selling, marketing, product development, or any other areas they are depriving of the attention it needs.
4. Independent 3rd party advice
By having an independent 3rd party involved with your business you get a true opinion from someone that isn’t emotionally or financially invested. That 3rd party will always give advice on what benefits the company not necessarily themselves. This allows you to use your bookkeeping system to make key business decisions that is based on best practice.
5. Timely Financial Reporting
Bookkeeping is the first task that usually gets pushed to the back burner when your hours start to pile up. Next thing you know its tax season and you haven’t touched your books since year end. By using outsourced bookkeeping services you will have your financial reporting available virtually anytime.
And you can then make an informed decision. Take for example, pay as you earn, PAYE tax and VAT is remitted every month and if your records are not updated accurately, you will be overpaying or underpaying government, that is if you even ever remember to remit in the first instance.
6. Minimize Tax Liability
Your inaccurate books figures can lead to some unpleasant results. If your statement of income report is over stated then you might end up overpaying taxes and wasting hard earned money or if it’s understated you might underpay in taxes and set your business up for tax audit you will eventually pay the short fall, interest and penalty. Why don’t you just outsource the bookkeeping, accounting and tax job to experts to get the best results?
7. Cash Flow management
Maintaining your bookkeeping system and proper tax planning on a regular basis will assist in cash flow management. Cash flow management is the hearth of every successful business all over the world. But the starting point is proper book keeping and accounting methodology.
8. Accounts Receivable
A major component of cash flow management is the handling of Accounts Receivable. Poor Accounts Receivable procedures and policies can lead to major cash flow shortages. While you statement of income may have great revenue figures, your statement of financial position may reveal that all the cash is tied up in Accounts.
9. Receivable and your bank balance may be suffering as a result of poor invoicing and customers account statements to show what is outstanding to pay your organization. High Accounts Receivable balances can lead to cash flow shortages, which may put your company in danger of going out of business and you may not figure out the problem.
10. Employee Costs Savings
Outsourcing your bookkeeping, accounting , tax and annual returns to CAC services will also have a positive impact on your financial reports. Not only are the costs of outsourced bookkeeping services a fraction of hiring a full time (or even part time) employee but you don’t have to worry about paying additional employer payroll taxes. Outsourcing your bookkeeping will also save on employee benefits such as healthcare, retirement, paid vacation, additional chairs, tables, laptops, internet usage and office space.
11. Avoidance of administrative headaches
When you hire any employee of any field, you still need to guide and give out the job responsibilities to be carried out, because that is the basis of performance measurements. In a situation where you can not define the rolls or responsibilities there would be problem of performance measurement. Then it is better to outsource such duties to the professionals who will always rollout the duties to be carried out and follow them up professionally.
12. Avoidance of cost of labour turnover
Outsourcing your accounting job would make you not to worry about labor turnover of your employees since the non-core jobs have been outsourced to the professionals who will eventually manage and retain the professionals in his office to work with him
13. Reduced Fraud.
According to Association of Certified Fraud Examiner’s study released in 2012, most common victims of fraud are privately owned small businesses with less than 100 employees with an astounding median fraud amount running into thousands of dollars. This is due the fact that most small companies don’t have access to a controller or CFO who could look at the Key Performance Indicators (KPI) and metrics which show abnormal activity in the transactional and billing data. Accounting controls and external audits are responsible for 26% of the cases in the study for detecting or preventing fraud. With Outsourced accounting small businesses can afford a CFO/controller who can look for fraud signs and implement proper fraud protection controls.
14. Accountants know accounting. By outsourcing your accounting operations to a professional accounting firm, you’re effectively hiring a team of experts. Professional accountants know the tax codes and laws backwards and forwards—it’s their job. They work around the clock for your business by keeping up with the latest tax information, affording you full-time coverage for only part-time pay. Staffing options are considered and executed per task, so you’ll only have the most experienced and qualified individuals on your side, right where you need them.
15. Scalable options. When you outsource your accounting operations, it becomes simple to expand and grow your business or find places to cut down on spending. Accounting firms can provide you with lists of options, giving you valuable feedback and suggestions that will raise your profits at the end of the day. Whatever your long-term goals are with your business, earning more money—and keeping more of it—will help you achieve them. Essentially, outsourcing gives you tons of flexibility and options.
Written by Managing Director , Inner Konsult Ltd.
Accountancy, Tax and CAC services