Strategic Consulting Solutions, Inc.

Outsourcing the Accounting Function

OutsourcingIn today’s competitive business climate, companies are balancing costs versus benefits in every key decision.  Management leaders have realized that keeping all operational functions in house may not be the most efficient practice.  That has given rise to business functions being outsourced at a much higher rate than in the past.  Outsourcing the accounting and payroll function is no exception.  But how effective is it to outsource accounting?  Do companies lose control in the process?  These are a couple of the questions addressed as we look at the benefits companies are reaping by making the decision to outsource their accounting function.

What does Outsourcing the Accounting function mean?   Companies without the resources or infrastructure to manage the accounting and payroll functions internally often look to other companies for that expertise.  Small companies find this beneficial because they are often unprepared to absorb these functions into the operation.  This is also attractive to larger companies that want to save the costs of retaining personnel.  If the right organization is chosen for outsourcing, the functions can sometimes be customized and some portion retained with the company.

Major Benefits of Outsourcing

Cost Savings. This is the big one.  Recruiting and maintaining personnel to perform accounting functions can be costly.  Because of the specialized nature of accounting and payroll, it takes several employees to do certain functions.  Accounting guidelines dictate that some functions have to be separated for internal control purposes which require additional personnel.  When you outsource, you do not have the cost of a full time employee.  You only pay for the hours that are required to perform the job.  Companies often overlook the cost effectiveness of outsourcing because they do not consider the costs of providing benefits to full time employees.  When you consider the elimination of benefits, training , office equipment, down time, taxes, etc. the effectiveness of outsourcing becomes very evident.

Expertise.  Companies that provide outsourcing services make a strong investment in personnel.  They have employees that have expertise in each area of accounting and payroll.  This expertise becomes available to their customers.  You also get access to individuals that have business knowledge of different types of businesses and experience with the processes that are required to be compliant with outside regulators.  Often times, these companies will provide guidance and advice on making improvements to the accounting processes.

Flexibility. Companies that perform outsourced accounting functions tend to be flexible in the setup and schedule for their customers.  This gives an opportunity for a company to exercise control over the processes that are defined up front.  A company can help decide payroll dates, monthly closing dates, approval processes, work flow, etc. as they work with the outsourcing company.  They can craft this process in order to maintain as much control as they have with an internal accounting group.

Focus. Managers will be able to focus more on business opportunities rather than manage the internal accounting processes.  Unfortunately, the financial reporting and analysis side of the business takes a great deal of valuable time away from the management.  As the outsourcing team focuses on maintaining an accurate and compliant set of books, management can concentrate on running the business.

Teamwork. When a company makes the decision to outsource their accounting function, they are actually extending their team to include additional professionals.  The right outsourcing firm can be viewed as an extension of the company’s resources.  As comfort and confidence levels increase, the insight garnered from this extended team can prove to be invaluable.

Guidance. As mentioned earlier, outsourcing teams are experts in their fields.  Companies can take advantage of that resource and often ask for guidance in several aspects of accounting and finance.  Outsourcing teams with the right expertise are also well versed with audits, outside agencies such as DCAA, government accounting and compliance regulations such as FAR, GAAP, etc.  They can prove extremely beneficial in these areas.

In summary, the practice of outsourcing comes with many benefits.  When companies make the decision to outsource, not only do they reap the benefit of a cost savings but they add another level of expertise, guidance and focus to their management.  In order to reap all the benefits mentioned, it is an important step to determine the right company to choose for your outsourcing.

Strategic Consulting Solutions (SCS) works with several companies that are reaping the benefits of outsourcing their accounting function.  Summarized below are a few case studies that highlight those benefits.

Visionary Solutions, LLC – Knoxville, TN

Visionary Solutions (Visionary) was informed by DCAA of an upcoming audit on proposal pricing.  At the time, the company did not have the personnel that was experienced in compliance of government contract accounting.  Of main concern was the absence of an indirect rate structure that was acceptable by DCAA.  With an audit looming, Visonary Solutions needed guidance in developing an indirect rate structure and a review of their accounting system.  SCS assisted in developing a company budget that supported the company’s indirect rate structure.  Assistance was also provided in restructuring their accounting software to be more compliant.  Since Visionary did not have the expertise in government contracting, SCS personnel supplemented the accounting department to perform certain functions like payroll, billing and general ledger support.  Positive results from the audit have prompted Visionary to utilize SCS personnel to ensure compliance from both a DCAA and GAAP standpoint.

Bennett Aerospace – Cary, NC

Bennett Aerospace (Bennett) contacted SCS for some help with compliance issues.  Their accounting function was performed by an in-house bookkeeper that did not have government contracting experience.  Bennett had concerns that their accounting system (QuickBooks) was not in compliance with government requirements and SCS performed a review. SCS corrected deficiencies that were found in the accounting system that included General Ledger/Job Cost Ledgers not reconciling and the inability to accurately invoice Cost Plus type contracts.  SCS also corrected some indirect expense calculations. SCS further enhanced Bennett’s accounting function by making needed adjustments in the database, modified processes and helped develop accounting processes and procedures.  After further discussion, Bennett asked that SCS do the accounting function on an outsourced basis to ensure government compliance going forward.  Since that time, Bennett has migrated to Deltek GCS Premier and has passed a DCAA audit.  Doug Bennett, President, has said his company receives a great deal of value because “for the price of one in-house book keeper, we have access to an entire team of accountants with a wide range of backgrounds across numerous, integrated disciplines relative to government contractor accounting.”

PAL Services, Inc. – St. Louis, MO

As PAL Services, Inc. (PAL) was awarded their first government contract in 2004, they reached out to Deltek to possibly purchase a software license.  PAL was referred to SCS, as a Deltek Partner, to help with their software options.  PAL was basically a start-up company at the time with no back office personnel.  SCS provided software options that included outsourced accounting.  The option was a viable one for PAL from an economic standpoint since the outsourcing costs were much less than purchasing software and training personnel on a new system in addition to learning the nuances of government accounting.  SCS provided a Deltek GCS solution with full outsourced accounting.  PAL’s owner, Travis Hayes, has reiterated that this model allows him to focus on the business and not worry about the accounting function being performed correctly.  Mr. Hayes has stated that the economics of this model has been very positive since he only pays for the personnel he needs without the additional cost of turnover and training.

Leave a Reply