How companies typically use outsourced accounting services, also known as outsourcing accounting.
04 lessons on Outsourcing accounting that business owners need to know
Outsourcing accounting or outsourced accounting services (professionally known as Business process outsourcing,)
Outsourcing accounting is currently a fairly common form of organizing accounting activities for businesses in the startup phase. The business will not organize an “in-house” accounting department but will assign a third party to perform accounting work as desired by the business. Typically, a business will sign a contract with an accounting service company to hand over all work such as tax declaration, bookkeeping, representing the company to resolve issues with tax authorities… or only a part of the work.
Advantages:
1/Reduced costs thanks to “economies of scale.”
Outsourced accounting services can provide accounting services cheaper and faster than if the company does it itself. For example, capital transfer tax declaration. If the company's accountant is not familiar with it, it will take a lot of time to learn how to declare taxes, how to draft contracts, how to advise on transfers effectively, and it will cost the company a lot of money to complete the transfer operation. Meanwhile, outsourced accounting is already familiar with capital transfer tax declaration, so they will prepare declarations very quickly, have ready-made contract transfer templates to advise customers on the most effective way to transfer capital according to the customer's wishes. Therefore, outsourced accounting will save costs for the company when performing the same operation due to familiarity and greater efficiency.
2/Supported by a professional team of accounting services
Due to limited financial resources or financial knowledge, businesses find it difficult to hire accounting experts. In contrast, accounting service companies are recognized by the Ministry of Finance and the General Department of Taxation for their professional competence and regularly check and update their accounting and tax knowledge, which is a mandatory requirement, otherwise, they will be suspended from practice. In addition, service accountants interact with many types of businesses and diverse operations, making it easy to accumulate deep professional knowledge and update it continuously and promptly. This diverse experience and good knowledge will provide a lot of consulting support to the company in the process of accounting operations as well as tax risk management.
3/Free up energy for the boss
Instead of the company owner having headaches recruiting, training, and managing the accounting department, outsourced accounting services now handle almost 99% of the work. The owner only needs to choose a reliable and quality outsourced accounting service company to complete the management task. The owner dedicates all their energy to Marketing, Sales, and operations to quickly drive the company's development.
4/Saving “invisible” costs in the business
Hiring a good accountant is not easy for a boss, especially for those who are completely clueless about financial accounting. This is understandable because one person cannot be a “jack of all trades” and be good at everything; most bosses are primarily good at sales, marketing, and operations. If a company hires a “bad” accountant and that accountant experiments with the company's books, then 3 years later when the accountant is a little more stable, the tax authorities come to finalize, and by then the accountant has fled, the company will have to bear all the consequences. Tax penalties, late payment fees… will emerge, causing the company's profits to plummet.
If a female accountant is hired and works for one year, then the next year she gets pregnant and takes 6 months off, and the company only has one accountant, who will replace her? Meanwhile, outsourced accounting services must ensure continuous work for the company to receive service fees.
A company hiring an accountant with a salary of 10 million VND/month will actually incur an additional 20% for social insurance contributions, per capita management costs such as office rent, computers, 13th-month salary… averaging 15-20 million VND/person/month. Whereas, when hiring outsourced accounting services, these costs are almost entirely avoided.
Professional outsourced accounting service companies always have access to new knowledge about accounting, finance, tax, and even management, so they will greatly assist the company in applying modern knowledge and keeping up with trends. For example, outsourced accounting services will use cloud accounting software, which is extremely convenient for management, as seen during the recent Covid epidemic, everyone could work from home. Companies that do not know how to use cloud accounting software would have their entire operations almost paralyzed.
However, outsourced accounting services also have weaknesses that business owners need to be aware of
1/Over-reliance on external providers
After all, accounting services are not yet a part of the company, so to some extent, they have not fully read and understood the company's business operations to provide advice for decision-making. Furthermore, the business will have to incur significant costs to bring outsourcing back in-house if it wishes to do so.
2/Information security
External accounting services will have access to the company's confidential information, and if not properly trained, this information could be leaked to competitors.
3/Dissatisfaction with the service:
The quality of information provided by external accounting services may not meet the owner's expectations for business decision-making.
Phan Thanh Nam