In a recent blog, we tackled the issue of exactly how much your company should be spending on accounting. We shared with you a realistic benchmark that can be applied to a business of any size. For small to medium companies, the key takeaway was that it often makes financial sense to outsource your accounting. But what is involved in outsourced accounting? And how is it different to simply employing the services of a bookkeeper?
Meet the internal accountancy function!
To understand the real value of outsourced accounting, we first need to look at what constitutes the internal accounting function of a company. Typically, companies with over €5 million in turnover have their own accounts department with an internal accountant. So, who makes up the team? Let’s have a quick look…
The Financial Controller manages the team and the processes while also doing monthly management accounts and journals, checking reconciliations, making sure systems are working properly, reporting on KPIs, handling one-off tasks for management, looking at analytics, etc.
The Financial Director, at a higher level, looks at the strategy of the company and how it’s growing, talks to shareholders, and identifies ways to make the company more profitable, etc.
Accounts payable and accounts receivable
Accounts payable and accounts receivable closely monitors the comings in and goings out of the company, keeping a complementary balance between the timing of the two.
Payroll is in charge of ensuring all employees are paid correctly for the number of hours worked, taking into account sick days, bonuses, holidays, taxes, etc. As you can see, there can easily be three or four people in an internal accountancy function. But even with this fully fitted out accountancy team, the company will require the services of an external accountant. What do they do?
The external accountant takes care of compliance. They file tax returns with Revenue and external reporting with Companies Registration Office (CRO), etc. The may also handle auditing. To do their work, the external accountant will need to liaise with the company’s internal accountant.
Is bookkeeping enough for your company?
Most small to medium-sized companies will not have the budget to have their own internal accountancy function, especially if they are growth orientated. As a result, many would believe their only option is to hire a bookkeeper. While bookkeeping services are great for helping companies with a particular function – such as accounts receivable or accounts payable – they are only providing part of a service.
Management accounting for your bookkeeper
In this scenario, the bookkeeper is reporting to the company and it is still the company’s responsibility to act as the internal accountancy function by checking the bookkeeper’s work, making sure the process is running correctly and even troubleshooting when necessary. This is not a very efficient or reliable setup, and it would be better in the hands of an outsourced accountant who can make sure that the bookkeeping is working well. If you have bookkeepers working by themselves, they’re going to be posting and reconciling things as best as they can. But nobody is checking their work to know it is all hanging together. The outsourced accountant can be the manager of that role. They have the knowledge and expertise to be able to say, “OK, this is done right, this isn’t done right. There’s a gap here. We need to fix that. There’s an extra journal required.” Without this management accounting in place, how can you be sure your bookkeeping is accurate and up to date? These are not small things. It is, after all, why bigger companies that can afford it have their own internal accounts department. They recognise that for their business to be successful they need they a complete and managed accountancy function, so they can have access to reliable information and reporting when they need it. SMEs can achieve this with an outsourced accountant. If you’re looking for a more complete accounting service that can work autonomously, take responsibility for your accounting needs (whether internal or external) and provide valuable financial insights, outsourcing your accountancy function could be better suited to your company.
Outsourced accounting takes care of both internal and external accounting functions
At Beyond, we offer an outsourced accounting service that takes care of both your internal and external accounting needs. What does this mean? Well, instead of a bookkeeper who, for example, only looks at your accounts payable and still requires your company to check their work, Beyond could take accounts payable completely off your hands. In practice, this service would be provided by a Beyond accountant being allocated to you for one hour a week alongside a bookkeeper who works for 3 hours a week. Now you have a complete accounting service, with the best processes in place, reconciliations automatically checked and someone directly accountable for that function. In this example, your company has outsourced one of your accounting functions to Beyond for €1,000 a month, which compares favourably with having an in-house person doing that for €30,000 a year. Of course, the service does not have to be limited to accounts payable, you could just as easily avail of our other services, whether they be accounts receivable, financial director, credit controller or a combination of a few services. Take a look at our Outsourced Accounting service to see how we can help your company grow by providing a full accounts department at a fraction of the cost.