The demand for accounting and bookkeeping services in the UK is on the rise. Accounting firms in the UK find themselves in a precarious position of not being able to fulfill their current lot of projects. The reasons could be numerous; however, indications point towards a lower workforce of accountants. Studies show a drop in the number of individuals taking up accounting and bookkeeping roles in the past few years.
Furthermore, more accountants have left their roles in the past two years than at any time in history. Under the present circumstances, scaling operations seem highly improbable.
The effective solution to the acute shortage is outsourced bookkeeping. It provides accounting practices with much-needed access to skilled professionals who understand specific nuances of UK accounting and ensure compliance with HMRC guidelines.
This blog provides an in-depth overview of outsourced bookkeeping and how firms can scale quickly with the help of a cosourcing partner.
What is Bookkeeping Outsourcing?
Bookkeeping outsourcing is the process of hiring third-party professionals to manage everyday financial records. It provides various services like ledger maintenance, data entry, payroll processing, bank reconciliation, and sometimes preparation of financial statements.
Bookkeeping outsourcing allows accounting practices to focus on advisory or tax services. It also allows the practices to enhance scalability and reduce overhead costs.
Why Does Bookkeeping Outsourcing Matter?
Bookkeeping is an important function; however, it can be time-consuming, prone to error, and requires field-specific knowledge. Bookkeeping outsourcing provides practices with the expertise to run their operations effectively. It allows accounting practice to remove the burden of hiring and training in-house employees.
By outsourcing, accounting practices can ensure efficient management of records. It helps the owner focus more on the growth of practice. Additionally, the complications of tax laws and financial regulations make it difficult to stay compliant. Outsourcing allows accounting practices to work with experienced and skilled professionals who have knowledge regarding tax laws and regulations. They know the best practices that can reduce the risk of costly mistakes.
Benefits of Bookkeeping Outsourcing
Bookkeeping outsourcing provides various benefits to accounting practices. Below are some of the advantages:
Reduces the Risk of Fraud
Outsourcing bookkeeping functions can decrease the risk of fraud. By outsourcing bookkeeping services, the accounting practice creates an added security layer. The accounting practice can check the portfolio of the outsourcing firm. This is because reputable outsourcing firms have strict internal controls. They have procedures to put a check on fraud. This guarantees the accuracy of the financial records within the accounting practice.
Provides Access to Skilled Accounting Professionals
A lot of UK accounting practices have decided to outsource bookkeeping due to the lack of time and trained staff. Bookkeeping outsourcing gives accounting practices access to skilled and experienced accounting professionals. These professionals help the practices to be on top of the latest tax and payroll regulations. This makes sure that the accounting practice remains compliant and helps avoid costly penalties.
Increased Accuracy and Efficiency
Bookkeeping outsourcing increases the accuracy and efficiency of the financial records. Professional bookkeepers use advanced cloud-based software and AI-assisted tools to ensure accurate and high-quality financial records. These professionals help the accounting practice by handling time-consuming and repetitive tasks. This allows the in-house teams to focus on high-value client advisory. It helps the accounting practice in handling complex tasks more accurately and efficiently.
Easy Tax Compliance and Filing
Tax compliance and filing are challenging. It is due to factors like the complex, multi-layered tax system, massive adoption of MTD, and rapid legislative changes. The accounting practices face a lot of pressure owing to deadlines and high volumes.
Outsourcing accounting practices stay updated with the ever-changing tax regulations. From quarterly filings to year-end-tax preparation, outsourcing helps ensure that the accounting practice remains compliant. It ensures that your practice avoids penalties for incorrect filings or missing deadlines.
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This can be an intricate task for accounting practices. It is due to continuous legislative changes in tax and employment law, strict HMRC compliance needs like RTI, and more. It needs high accuracy to avoid penalties while dealing with time-consuming non-standardized calculations.
Outsourcing makes sure that all deductions are made correctly, the employees are paid on time, and the taxes are filed correctly. It makes sure that everything is handled correctly and efficiently. They are aware of the payroll regulations and help in decreasing the risk of penalties and audits. They utilize advanced technology which makes data more accurate. This ensures that sensitive employee information is handled securely and thus improves the entire payroll process.
Enhancing Automation
With the introduction of Making Tax Digital (MTD) by HMRC, it is important for the UK accounting practices to manage tax digitally using authorized software. However, this can be challenging owing to various factors. Some of the factors are- the need to upgrade legacy systems and handle the high volume of quarterly submissions. The main challenges include integrating new, compatible software that ensures digital links and rising costs.
Outsourcing practices use AI-driven automation. The outsourcing practices use cloud-based software which ensures digital record-keeping and real-time data accuracy. Outsourcing partners make bank reconciliations, data-entry, and invoice processing automated. This allows accounting practices to meet strict HMRC deadlines without manual burden.
Optimizing Cost-Efficiency
In-house staffing and training are expensive. It reduces the liquidity of accounting practice. To tackle this problem, practice can hire an outsourcing partner. The outsourcing practice eliminates the expenses related to hiring, training, specialized software, and office space. These outsourcing practices help convert fixed costs to predictable costs.
How Do Accounting Practices Scale with Bookkeeping Outsourcing?
A key value of outsourcing bookkeeping is its ability to scale up or down quickly. Given below are some factors through which outsourcing allows scaling of key services.
Flexible Capacity for Growth
On-demand scaling- Outsourcing allows accounting practices to instantly add professionals during peak times of the year. The accounting practices can scale back during slow periods. It eliminates the burden of hiring in-staff.
Overcoming Talent Shortage- There is a lack of trained accounting professionals and therefore hiring them becomes difficult. Outsourcing provides quick access to a global pool of skilled accounting professionals. These professionals are trained in GAAP/IFRS, which enables accounting practices to handle more clients.
Operational Efficiency and Technology
Advanced Technology Access- Outsourcing practices use AI-driven automation and cloud-based software. This prevents accounting practices from investing in these tools themselves.
24/7 Processing- There is a difference in time zones of different countries. This allows for overnight processing, which means books will be updated by the next business day.
Cost Structure Transformation
Reduced Burden of Training- Outsourcing companies give access to pre-trained professionals. This reduces the time and money spent on accounting practices for internal training.
Lower Overheads- Outsourcing eliminates fixed salary, office infrastructure and benefits costs. It allows the accounting practice to give lower costs, per project, or per full-time-equivalent rate.
Bookkeeping Outsourcing Services that can help Accounting Practices in Scaling
Daily or Monthly Bookkeeping- This is a time-consuming task. Accounting practice can hire an outsourcing partner to record income/expenses. The outsourcing partner can also categorize the transactions.
VAT Returns and Compliance- VAT returns and compliance can be a tedious task. It is due to various reasons, like complex regulations, strict MTD filing requirements, and high penalties in case of errors. It increases workload and is prone to manual errors. To solve these problems, accounting practices can hire outsourcing partners. Outsourcing partners handle the HMRC-compliant VAT submissions and ensure compliance with UK regulations.
Bank Reconciliation- It can be a difficult task due to high transaction volumes and complex multi-channel payment streams that lead to timing delays. Moreover, manual errors, outdated records, and unrecorded bank fees increase the difficulty. To deal with this issue, outsourcing partners can be hired. These partners can do the monthly matching of credit cards and bank statements.
Accounts Payable and Receivable- It can be a challenging task. This is due to the consistent manual work which is prone to error. Along with this, paper-based workflows are still prevalent, and there is a high volume of B2B transactions. The need to comply with strict HMRC regulations makes it even more challenging. To cope with this, an outsourcing partner can be hired. These partners can manage the invoices and supplier payments to optimize cash flow.
Management Accounts- Preparing monthly/quarterly reports can be a time-consuming task. It is owing to heavy dependency on manual data entry and cyclical workloads during tax seasons. There is a shortage of trained staff while the expectations are of high accuracy. This often results in staff burnouts and reduced efficiency. An outsourcing partner can prepare monthly/quarterly reports like profit & loss statements and balance sheets.
Payroll Services- Payroll is a challenging task owing to the high-stakes, time-consuming nature of managing complex and ever-changing regulations like RTI and pension auto-enrolment. There are strict deadlines, manual errors, and penalties for non-compliance with HMRC. An outsourcing partner can manage RTI filings, PAYE, and auto-enrolment. In this way, the outsourcing partner can protect the accounting practice from paying severe penalties.
Strategies for Scaling with Outsourced Services
There are some strategies which the accounting practice can follow to scale with the outsourcing services.
Recognise Key Areas for Outsourcing-
Self-assessment is an important aspect of outsourcing accounting practice. It is done to recognise the areas that can be outsourced. The accounting practice can focus on those tasks that are routine, time-consuming, and do not need direct client interaction. Outsourcing such tasks can vacate the time for in-house teams to focus on client relationships. Some of the common outsourced tasks include- bookkeeping, financial reporting, payroll processing and tax compliance.
Choose the Right Outsourcing Partner-
Selecting a dependable outsourcing partner is important to scale. The following points can be considered when selecting an outsourcing partner
Experience and Expertise- Look for outsourcing providers having a proven track record and expertise in accounting services.
Technology and Security- Make sure that the outsourcing provider utilizes advanced technology. Along with this, the outsourcing provider must have strict data security measures.
Cost Structure- It is important to understand the cost structure of the outsourcing partner. Make sure that it aligns with the budget and expected savings of the accounting practice.
For example, AcoBloom International offers outsourcing services with a focus on data security, quality, and client satisfaction.
Monitor and Evaluate Performance-
It is necessary to continuously monitor and evaluate the performance of the outsourcing provider. This is to maintain high-quality standards and achieve desired results. The accounting practices can implement the following strategies
Performance Metrics- Establish Key Performance Indicators (KPIs). It ensures that the practice can measure the efficiency and quality of outsourced services. Some common KPIs are- client satisfaction scores, error rates, and turnaround times.
Regular Reviews- Organize periodic reviews with the outsourcing provider. Reviews must be organized to discuss the performance, address any kind of issues, and recognize areas for improvement.
Feedback- It is important to get feedback from the in-house team and clients. This should be done to gather suggestions and make necessary adjustments.
Conclusion
Bookkeeping is a time-consuming and routine task which does not require direct client interaction. It drains a lot of resources from accounting practices, like training costs for in-house employees and fixed salaries. Along with it, there are complex and ever-changing tax regulations by HMRC.
To overcome these problems, an accounting practice can hire an outsourcing provider. These providers aid accounting firms by reducing fixed costs, in complying with the tax regulations. In this way, outsourcing providers help the accounting practice in saving time and resources. It allows accounting practice to focus on advisory and client relationships.
