[5 STEPS] How to Prepare for Outsourced Accounting

Post Author

Lindsay Ramirez


Date Posted

October 2, 2023

[5 STEPS] How to Prepare for Outsourced Accounting

Outsourced accounting is becoming a go-to solution for business owners, CEOs, and leaders looking to optimize their operations. 

The advantages are clear: it saves time, offers expertise, and frees up resources. 

However, deciding to outsource is just the first step; the real challenge lies in preparing your business for a smooth transition to these specialized accounting services.

To help you navigate this shift, we’ve created a detailed guide that will walk you through each phase of the onboarding process. 

Get seamless financial management with our outsourced accounting expertise.

Let’s jump into our guide to prepare you for outsourced accounting.

The 5-Step Guide to Preparing for Outsourced Accounting

Switching to outsourced accounting can transform your business for the better. 

But to make this transition truly seamless, a well-thought-out game plan is vital. 

From internal audits to setting clear expectations, these steps ensure a smooth onboarding process and a fruitful long-term relationship with your outsourced accounting firm. 

Step 1: Conduct an Internal Audit to Assess Your Current Accounting Needs

The first significant mile marker on this journey is conducting an internal audit. 

Why is this the cornerstone? 

Simply put, it helps you figure out what you’ve got in your financial ‘pantry’ before you go shopping for services. 

So, how do you get started? Follow these easy steps:

1. List Your Current Processes

Roll up those sleeves and jot down every accounting task currently in play in your business. 

Be as thorough as possible, and don’t forget those tasks that may need some dusting off. 

Knowing what you’ve got helps you figure out what you need.

2. Identify Responsibility

Next, attach names to these tasks. Who in your team is responsible for what? 

Pinpointing ownership ensures your future outsourced partner knows exactly whom to coordinate with during the transition.

3. Use a Department Responsibility Team Chart

Organize this information using a Department Responsibility Team Chart. 

Think of it as the blueprint of your accounting world, mapping out processes and identifying who’s at the helm for each.

4. Review and Refine

Take a step back and review your data. 

Does it capture everything? Are there processes that need more attention or perhaps some that are redundant? 

Now’s the time to refine and make adjustments.

By nailing down these steps in your internal audit, you’re not just taking inventory; you’re laying down the first brick in the path towards a successful partnership with an outsourced accounting firm. 

You’ll be in a strong position to articulate exactly what you need, setting the stage for a seamless and effective onboarding process.

Step 2: Identify Gaps and Critical Concerns in Your Accounting Operations

Once you’ve completed your internal audit, the next stage on your roadmap to outsourced accounting is identifying gaps and critical concerns in your accounting operations. 

This is where you take your magnifying glass to the blueprint you’ve created, scrutinizing every detail to detect flaws and bottlenecks. 

But how can you do this effectively? 

Here’s a quick and practical guide to get you through this phase:

1. Prioritize Tasks Based on How Critical They Are

Which tasks are mission-critical and which ones can afford some lag? 

Maybe payroll and tax submissions top the list, while inventory accounting can be momentarily set aside.

2. Assess Risk Levels

At the same time, evaluate the risk associated with each accounting task. 

For example, errors in tax filing can have serious legal implications, making it a high-risk process that might be best managed by experts.

3. Spot the Red Flags

Now, identify the processes that are not running as smoothly as they should be. 

These are your ‘red flags,’ requiring immediate attention and possibly ideal candidates for outsourcing.

4. Document the Gaps

It’s not enough to just mentally note these gaps; they need to be documented. 

Create a separate section in your Department Responsibility Team Chart or a dedicated document that clearly lists these problem areas.

5. Determine Outsourcing Needs

Using your documented gaps and concerns, you can now clearly see where an outsourced accounting firm can step in to provide much-needed support.

By categorizing tasks based on their importance and risk levels, you add another layer of sophistication to your audit. 

This allows you to pinpoint exactly where your accounting operations can benefit from professional outsourcing. 

Documenting these findings is like creating a wish list that your chosen outsourced accounting firm can fulfil, setting the stage for a successful partnership.

Step 3: Determine Your Budget for Outsourced Accounting

Now that you’ve mapped out your accounting landscape and zeroed in on the gaps, it’s time to talk numbers. 

Setting a budget isn’t just a fiscal formality; it’s the financial framework that will guide your outsourcing decisions. 

Let’s get into the nitty-gritty of how to set a budget that’s both realistic and flexible:

1. Start with an Estimate

Before you can make any decisions, you need to know how much you’re willing and able to invest in outsourced accounting. 

Take into account your current accounting expenses and how much additional support you’ll require.

2. List Potential Costs

Break down the costs associated with each accounting task you’re considering outsourcing. 

This could include things like payroll management, financial reporting, and tax preparation.

3. Factor in Additional Expenses

Keep in mind that the initial estimate might not cover everything. 

There could be setup costs, software subscriptions, or even contingency funds for unexpected situations. 

It’s good to be prepared.

4. Set Financial Boundaries

As you list these costs, establish both a lower and upper spending limit. 

This gives you a budget range that’s flexible yet well-defined.

5. Revisit and Revise

A budget isn’t set in stone. 

It’s a dynamic tool that should be revisited regularly, especially during the initial stages of your relationship with an outsourced provider. 

Being flexible allows you to adapt to real-world scenarios without breaking the bank.

Crafting a well-planned budget doesn’t just help you in selecting the right outsourcing partner; it sets the financial tone for a long-term relationship. 

It ensures that you’re not just jumping into outsourcing blind but are making an informed, financially sound decision.

Step 4: How to Select the Best Outsourcing Firm for Your Accounting Needs

You’ve done the legwork: audited your accounting processes, spotted the gaps, and even nailed down a budget. 

Now comes the next crucial step—selecting the best outsourcing firm to handle your accounting needs. 

Let’s explore how to go about this task in a way that aligns with your business objectives:

1. Initial Research

Start by shortlisting potential firms based on reviews, industry insights, and your budget. 

Keep it focused and relevant.

2. Deep Dive into Offerings

Compare the services of your shortlisted firms to your list of essential accounting tasks. 

Keep your business needs front and centre.

3. Conduct Interviews

Set up interviews to gauge each firm’s expertise. 

Ask questions that directly relate to your accounting needs and identify gaps.

4. Scoping Calls

Take things a step further with scoping calls. 

These are perfect for discussing details and spotting any overlooked areas that might also benefit from outsourcing.

5. Review and Validate

After all is said and done, review your findings. 

Choose a firm that aligns well with your needs and feels like the right fit for your business.

By diligently conducting interviews and scoping calls, you’re not just picking any provider; you’re selecting a partner

One that not only meets your current accounting needs but can also offer valuable insights into areas you might not have considered. 

Step 5: Clearly Define Your Expectations

You’ve done the research, conducted interviews, and finally selected an outsourcing firm. 

What’s next? Setting clear expectations is your next essential step, and it’s crucial for long-term success. 

Here’s how to go about it:

  1. Goals and Objectives: Clearly articulate what you aim to achieve with outsourcing. Is it cost-saving, efficiency, or access to specialized skills?
  2. Desired Results and Outcomes: Specify what success looks like for you, whether it’s timely financial reports or error-free tax filings.
  3. Timelines for Project Completion: Set deadlines for specific tasks and overall project goals. Make sure they’re realistic but also hold the firm accountable.
  4. Deliverables: Define exactly what you expect the outsourcing firm to provide, from reports to accounting statements.
  5. Communication: Lay out how often and through which channels you’ll communicate. Will it be weekly emails or monthly meetings?
  6. Roles and Responsibilities: Both parties should know who’s doing what. Make sure this is spelt out clearly.
  7. Time Commitments: Establish how much time you and the outsourcing firm will commit to the project or ongoing tasks.
  8. Scope of Work: This is your overarching view of what the outsourcing project encompasses. It ties in all the above points.

Setting expectations is not a one-time event but a continuous process. 

By carefully defining what you aim to achieve and how, and putting it in black and white, you create a framework for a lasting and productive partnership.

The First 90 Days: A Critical Window for Success

The first 90 days after you’ve inked that contract are pivotal. 

Think of it as the honeymoon phase of your outsourcing relationship; it sets the tone for everything that follows. 

During this critical window, you’re not just observing whether tasks are completed on time; you’re also assessing the partnership’s overall health. 

So, how can you make the most of this crucial period? 

Let’s dive in:

  1. Set Up Regular Check-ins: Schedule weekly or bi-weekly meetings to discuss ongoing tasks, roadblocks, and progress. These frequent touchpoints can reveal a lot about how well the relationship is shaping up.
  2. Use Performance Indicators: Establish key performance indicators (KPIs) to measure the success of the outsourcing firm against your set goals. This allows for objective assessments.
  3. Be Open to Feedback: Both parties should have a clear channel for sharing feedback. It’s a two-way street—just as you’re evaluating the firm, they’re also getting to know your business.
  4. Audit the Deliverables: Consistently review the work submitted. Is it up to the quality you expected? Is it delivered within the agreed timelines?
  5. Adapt and Iterate: If things aren’t going as expected, it’s easier to make course corrections early on. Be agile and open to making adjustments to the original plan.
  6. Consult Your Team: Gather insights from your internal team members who are directly involved with the outsourcing firm. Their first-hand experience is invaluable.
  7. Document:: Keep detailed records of meetings, changes in scopes, and performance metrics. This will be useful for future evaluations and any necessary contract revisions.

By actively monitoring these aspects during the first 90 days, you’re giving the relationship the attention it needs to flourish. 

Don’t let this window pass by passively; use it as an opportunity to fine-tune and set the stage for long-term success.

Best Practices for Long-Term Success

Securing a successful long-term relationship with your outsourcing firm goes beyond just the initial setup or the first 90 days. 

It’s about fostering a partnership that’s built to last, adapt, and evolve. 

Here are some best practices for keeping this relationship healthy and beneficial for the long haul:

  1. Continuous Communication: Keep the lines of communication open. Whether it’s through regular meetings or monthly catch-up calls, make sure you’re both on the same page.  Also, be on the same page with what communication channels will be used, i.e. email, slack, Teams, Zoom, physical meetings, etc.
  2. Periodic Evaluations: Schedule quarterly or bi-annual reviews to evaluate the partnership’s effectiveness. Use the KPIs you set as benchmarks to assess performance.
  3. Set and Reset Goals: Businesses change, and so should your goals. Revisit them periodically and adjust as necessary to meet your evolving needs.
  4. Celebrate Milestones: Recognize and celebrate the small wins along with the big ones. It’s a simple yet effective way to keep morale high and motivate both teams.
  5. Stay Flexible: The world of business is ever-changing. Adaptability is key, so be open to altering scopes, processes, or even goals as the landscape shifts.
  6. Feedback Loops: Consistently provide and ask for feedback. This helps both parties understand what’s working and what needs improvement.
  7. Financial Audits: Review invoices and financial reports regularly. Make sure you’re getting the value you expected from the outsourcing relationship.
  8. Strategic Planning: Once a year, sit down and strategically plan for the year ahead. Align your objectives, budgets, and resources for maximum efficiency.
  9. Contract Revisions: Never hesitate to update the contract based on periodic evaluations and changing business needs. Keeping it current safeguards both parties.
  10. Keep Learning: Stay up-to-date with new industry trends and technological advancements. Share these insights with your outsourcing partner to foster innovation.

By incorporating these habits and routines into your relationship with your outsourcing provider, you’re not just maintaining; you’re nurturing a partnership designed to withstand the tests of time and change.

Conclusion – Preparing for Outsourced Accounting

Preparing your business for outsourced accounting is a strategic move that can unlock efficiency, expertise, and growth. 

We’ve walked you through five essential steps, from conducting internal audits to setting clear expectations, all designed to ensure a smooth transition and a fruitful partnership. 

Now, it’s your turn. Don’t wait; take that first step today. 

Reach out to potential outsourcing partners, start your internal audit, and craft that budget. 

With the right preparation, you’ll be well on your way to a future where your business thrives with the support of expert accounting services. 

Take the first step towards financial stability and success with our expert outsourced accounting services.

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