Understanding the costs and benefits of outsourcing accounting

Companies that choose to outsource their bookkeeping needs to minimize their fixed costs must be vigilant about both choosing the right provider, according to Computerworld. Finance departments regularly farm out their accounting duties to outsourced accounting firms, or OAFs.

OAFs allow companies to free up resource and time and trim their staff and benefits costs. They can help deploy basic accounting tips through automated, streamlined systems. This outsourcing can cut costs , which in turn can make or break a small business that can't afford a separate accountant to perform routine tasks, according to the news outlet.

However, there is a potential downside to outsourcing accounting, according to the news outlet. Companies can potentially lose control over understanding the very basics of their financial systems. Arguably, a business owner still must be fully immersed in his firm's financial statements.

Outsourcing done poorly can result in a loss of business value, as an overloaded OAF will usually deliver financials, not comprehensive advice on how a business is functioning.

As a result, a small business must make sure to have strong communication with the accounting firm, so the financials that are delivered are parsed and made sense of. This knowledge can be channeled into strategy and better financial management.

OAFs are a lucrative industry. According to a report in the Michigan Journal of Business, the business of outsourcing finance and accounting has been one of the fast growing sectors. In 2007, the sector grew by 30 percent.