Accounting outsourcing in Poland: benefits of transferring the accounting function to an outside supplier
Accounting outsourcing is the contracting out of the accounting function to a third party. Lots of companies are familiar with outsourcing functions such as legal and tax advice or IT consulting. Nevertheless, the transferring of the bookkeeping to outside suppliers is still a relatively novel practice in Poland. Accounting outsourcing still causes fear. Let us, therefore, point out why it is good to outsource the accounting function as there are at least 7 benefits of such a business model.
The seven benefits of accounting outsourcing are:
1. Cost reduction
According to Rödl & Partner's calculations, accounting outsourcing allows for saving 20–50% of the total cost of in-house accounting. Why the difference? To understand this, we need to itemise the total costs of accounting (whether external or in-house):
- Technical costs - These include purchases of hardware, software (operating systems, applications, security software etc.); finance & HR program; process coordination (analyses of proposals for products and services, analyses of contracts, transport and assembly of hardware, software installation etc.); end user training; licence subscriptions; hardware and software maintenance, and system administration.
- Personnel costs - These include not only salary, bonuses, health and social insurance contributions, but also costs of handling these components, costs of compensated absence of an accountant (holiday or sick leave), costs of recruiting an accountant, training, and costs related to risk of material errors made by the accountant.
- Logistics costs - These include not only office supplies, equipment, and office space, but above all space for document storage (may be virtual), and the document workflow system.
With accounting outsourcing, the enterprise pays one monthly flat rate. It does not have to bother about the individual elements – no need to worry about them. An additional advantage is the fact that accounting outsourcing helps streamline budgeting and cost controlling procedures. More importantly, the costs are tax-deductible.
How, then, an accounting service provider is able to offer rates that allow for saving 20–50% compared to the total cost of in-house accounting? The main reason is that most of the overheads are split among several clients. Furthermore, an accounting firm specialises in this business and is constantly optimising its operations thus reducing its costs.
2. Experience and professionalism
A provider of accounting outsourcing knows how to find the best employees on the market. The HR department of such a firm specialises in searching and interviewing people highly skilled in accounting. Moreover, in working with numerous clients, the company and its employees gain rich experience and are constantly building up the unique know-how through different systems. With this, it improves its effectiveness and efficiency and is able to better handle crisis situations.
3. Risk management
Outsourcing of the accounting function is a method to protect the company against the risk of accounting errors. The accounting service provider assumes the risk for performing contracted duties and bears financial liability for non-compliance or untimely performance. The accounting firm which offers accounting outsourcing services hires professionals who gain invaluable experience thanks to the specific nature of their work. They also work with certain systems and follow procedures to improve security. All the above factors substantially reduce the risk of error.
4. Passing on liability
Accounting outsourcing not only mitigates risks faced by an organisation. With outsourcing, liability is passed on to a third-party service provider and the management staff is released from criminal and civil liability for any accounting errors. Managers are thus able to focus on making better decisions in aspects that are key to their enterprise.
5. Focus on core business
Outsourcing of part of services or business processes (including accounting) allows the management to focus its efforts and resources on the core business for which their company was established and in which it specialises. With an outsourcing solution, it is the outsourcing service provider that is responsible for the performance of time-consuming and complicated tasks such as on-going accounting, preparing tax returns, payroll accounts, monitoring legislative changes, supervising document workflow etc. The firm that offers accounting outsourcing is obliged to provide the client with analyses and reports presenting clear financial information, and in making well-founded recommendations based on extensive know-how, the service provider should support the management in the decision-making process.
6. Saving time for management board
The management board no longer has to bother about checking the quality and effectiveness of the accountants' work. Neither does it have to deal with solving problems or think about development of that department. All tasks connected with managing the accounting department are transferred to the outside supplier.
7. Interdisciplinary approach
Only big accounting service providers can offer this benefit. Because they advise on diverse business aspects, they view problems from different angles and offer comprehensive solutions. With this approach they often generate savings for their clients not only by assuming outsourced accounting duties, but also by giving them access to experts (e.g. in law or taxation) whose knowledge and experience is offered to the clients.