Introducing a cost control program and eliminating waste is critical in reducing costs and saving money in your accounting and finance department. Depending on your business system, establishing complete financial control can be as simple as requesting a few financial reports, or it can become a complete nightmare for those with underskilled finance and accounting staff.
If you are looking to control costs in your accounting function and improve business performance, it can be virtually impossible without capable professionals on your finance team. When it comes to financial accounting, an erroneous balance sheet leads to bad decision-making but also affects your financial management. So how can you overcome these obstacles and establish better internal financial control?
The Importance of Accurate Reporting
To reach financial goals and determine returns on investment, reporting of accounts receivable and other financial statements must be transparent and accurate. This demand in financial planning has made it especially challenging for business owners relying on an in-house accounting and financing team without the right skill set or access to advanced tools.
In-house teams usually have a hard time keeping up with accounting standards.
Constant changes in regulation require additional training and even a complete digital transformation for business owners with outdated accounting systems. Many accounting systems and accounting software solutions now deliver precise and timely financial reports in a fraction of time it would take an in-house team to complete the same task.
Overlooking the importance of accurate reporting is easy, but when you calculate the standard costs that come with accounting teams and compare them with efficiency and accuracy, having a local accounting team simply can’t be cost-effective.
When compared to other solutions like a back-office staff that would be completely separated from your company through outsourcing, the operational costs of in-house teams don’t make sense for small to middle-market businesses. Without proper internal control, reports can be inaccurate, which gives you a false image of your company’s financial health. This leads to bad decision making and an unreliable financial overview.
What Is Cost Control?
Whenever a company tries to reduce costs, it undergoes a process of eliminating waste and lowering the total cost of its operations by conducting cost control. For example, if you conduct market research and find a vendor that charges less for the same item you are acquiring from another company, you have a chance to cut costs and increase profitability. Many business owners have chosen to outsource accounting to control costs and increase revenue.
Business owners find it makes sense to outsource financial tasks because third-party service providers can offer lower costs for managing the finance function, but also access to superior tech solutions.
- The practice of identifying and reducing expenses in business operations for the sake of increased profits is considered cost control.
- It is virtually impossible to grow and scale your company without top accounting practices, money management, project management, cash flow reporting, process costing, risk management, resource management, and cost control.
- Outsourced accounting saves time and money by reducing the operational costs of your financial department.
Outsourcing vs. In-House Accounting
Comparing the actual costs of your whole operation with your business budget can help lower business expenses and encourage faster scaling.
Outsourcing can, in many ways, be considered as the first step toward better financial management and cost control. When compared side by side, you can’t miss the apparent differences.
Pros of In-house Teams:
- Immediate access to your staff members
- Direct communication
- On-site financial support
Cons of In-House Teams:
- Lack of skilled staff with relevant accounting degree due to the location of your offices
- Increased risks of bad reporting, false accounting definitions, incorrect data entry, and inaccurate balance sheets
- Recurring costs for recruiting, hiring, training and turnover
- Increased operational costs due to technological improvements and staff training
How does outsourcing compare?
- Eliminates the need for any kind of internal control activity
- On-demand financial reports that comply with accepted accounting practices
- Top finance & accounting talent to ensure the right skill set for any situation
- Simplified scaling control and cost reduction
- You will not have an accounting department working on site
- Remote teams require remote communication
- Inability to control activities within the financial department
When you weigh the pros and cons of the different accounting practices, it is easy to notice that outsourcing has a clear advantage because of fixed costs. The lack of an internal control system can be dismissed entirely because the service provider takes full responsibility for accurate and timely reporting.
When it comes to scaling, adding, or removing staff members from your remote team is as easy as it gets. Companies that offer finance-as-a-service have access to a global talent pool that is continuously growing thanks to remote work. Worldwide financial experts can be added or removed from your team, depending on your needs. If the company is in the middle of a scaling process, it is easy to add additional staff members that don’t need to go through a screening process. The service provider already established their level of expertise and charges for their services accordingly.
Running an in-house accounting team isn’t as uncommon as one may think, but without a good internal control system, things can get out of hand quickly and adversely impact business performance. If your staff members aren’t familiar with accounting principles and regulations, your company will have a hard time keeping up with financial reports and ensuring transparency.
Financial policies and procedures are constantly changing, and in-house teams will take a longer period of time to adapt to those changes. Practicing good managerial accounting within your company can shorten adaptation times, but it doesn’t reduce the activity-based costing of your staff members.
Accurate accounting allows you to grow your business through improved business intelligence. Reorganizing your accounting practices can lead to better decision-making and more efficient target costing. Depending on what type of accounting department fits your needs, you can choose between in-house departments, back-office staff, or outsourced solutions. All three models come with important benefits and drawbacks, but outsourcing stands out as the key to reducing accounting costs and saving money.
Having clear insight into your balance sheets and business expenses can make a big difference for your business and help them reach their financial goals. However, effective financial management is hard to achieve without proper and reliable financial data. Partnering with companies like Consero ensures quality in the reporting process but also helps reduce operational costs within the company. If you are unsure how outsourced solutions can help your business scale, request a free demo today and get more information about finance-as-a-service.