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September 3, 2012

Outsourced Accounting Services: Is It Right for Your Organization? (article)

Oftentimes the accounting department of an organization is viewed as a necessary evil. After all, it does not generate revenue like the sales department. Nor does it produce the products or services being sold. It can be easy to downplay the importance of the accounting department, but all business leaders can agree that poor financial information leads to poor decisions and poor decisions can lead to financial calamity.

This often leads to the question: How large should the accounting department be? Smaller organizations may make the mistake of assembling an accounting department that’s too large. While this can lead to greater assurance of accurate financial information, it may be draining needed funds from other departments unnecessarily. Other leaders of small organizations may decide to take care of the accounting functions themselves. While this can certainly save money, those leaders often find themselves tied to their computers, performing time-consuming tasks which keep them from what should be their primary function – running the organization.

Because of this dilemma, more organizations are choosing to outsource their accounting functions to an outside CPA firm and they are seeing the benefits. Rather than paying a fixed salary and benefits to a full-time employee who may not be needed 40 hours per week, the organization can pay an outside accountant or bookkeeper only when needed. In addition, during lean times, it can be much easier to cut back on the accounting services of a CPA firm than to lay off an employee. Still other organizations, who have suffered through a revolving door of poor-performing accountants or bookkeepers, will turn to an outside CPA firm because that firm has already vetted the bookkeepers and accountants on their staff.

For organizations with leaders who already possess strong financial and accounting skills, it often makes sense to engage an outside bookkeeper to perform the more repetitive, time-consuming activities such as bill payment, bank reconciliations and monthly journal entries. This provides the organization’s leaders the additional time needed to perform upper-level tasks.

For organizations that do not have individuals with an advanced level of knowledge in accounting or finance and also do not have the workload to justify a full-time CFO, it can make sense to outsource the higher level functions to an outside CPA. This individual can be engaged to review the accounting data for correctness and completeness. In addition, the outside CPA can then analyze and interpret the accounting data for upper level management, leading to better overall decision-making.

Still other services are available for any organization lacking the resources to perform them. Regardless of what services an organization chooses, outsourcing an organization’s accounting duties can often be the answer to determining the “right size” of the accounting department.

Copyright © 2012, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. To ensure compliance with requirements imposed by the IRS, we inform you that-unless specifically indicated otherwise-any tax advice in this communication is not written with the intent that it be used, and in fact it cannot be used, to avoid penalties under the Internal Revenue Code, or to promote, market, or recommend to another person any tax related matter. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).

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