Outsourcing: bookkeeping by an outsourced firm. How to choose your service provider?
News \ 11.04.2018The outsourcing of bookkeeping services is growing rapidly in Russia. If you are thinking about outsourcing this function, you should bear in mind that you will have to hand over to the service provider confidential information and processes on which the success of your business hinges.
What needs to be done so that outsourcing works to the benefit of your company and not against your business? How do you choose a reliable service provider out of the many?
Legal framework of outsourced bookkeeping
The possibility of outsourcing bookkeeping to an external service provider is underpinned by statute. For instance, the Federal Law “On bookkeeping” states that, “Depending on the amount of bookkeeping work, a company’s managers may: set up an accounting department as a structural division headed by a chief accountant; institute the staff position of an accountant; transfer, on a contractual basis, bookkeeping to a centralized accounting function, to a specialized organization or to an expert accountant; or maintain the accounts individually”.
It should be noted, however, that in any case the company’s CEO will be liable for the results of bookkeeping and such liability may not be passed on to a specialized organization.
Why do companies outsource bookkeeping to service providers?
1. It mitigates and delineates administrative and tax risks;
2. There is no need to have a full-time accountant and depend on his/her vacations and sick leave;
3. It cuts costs; and
4. It gives access to expertise.
A provider of bookkeeping services may offer you various models for working with you: drawing up a set of management accounts, or maintaining full-fledged accounting and tax records. The service of drawing up management accounts will suit small- and mid-sized enterprises with a small document flow. Mid-sized and large enterprises may find more advantage in a chief accountant function. The goal is to enhance control over the carrying out of bookkeeping, standardize internal processes, and split the risks between the company and the provider of bookkeeping services. It is more frequent, however, for companies to outsource certain routine blocks of bookkeeping, such as payroll accounting, management of settlements with related parties, and so on.
To take advantage of outsourced bookkeeping you should give serious consideration to the selection of the service provider. The following aspects require particular attention from you:
Reputation is the main asset of any company operating in the service sector. You should first acquaint yourself with the list of clients who cooperate with the service provider in question. Try to obtain references regarding their experience of working together.
Size of the company. The level of the provider of bookkeeping services should be comparable with your company in terms of headcount, geographical footprint, and the like. Experience shows that a small company with five full-time employees cannot supply high-quality bookkeeping services.
Experience. The point to note is how long the provider of bookkeeping services has been functioning on the Russian market: the greater the period, the more reliable and professional your potential partner. Special attention should be paid to the provider’s standards and techniques of client service.
Qualification of personnel is an aspect of crucial importance. Find out how many of the employees of the provider of bookkeeping services have professional certificates and how training to enhance professional skills is arranged within the company. Other aspects relevant for the corporate standards of your company should be assessed, too. These include a knowledge of English and appropriate business attire, among others.
A well-developed infrastructure of the provider of bookkeeping services also attests that the company is a serious player and will serve as a guarantee of quality. Leading outsourcing companies invest heavily in the IT component of their operations. You should be sure that the confidentiality of your information will be preserved and the information is being kept secure.
Cost of services is not the least aspect to be considered. Pricing should be transparent and embodied in the contract. An extremely low price should set alarm bells ringing. A contract of a provider of bookkeeping services should set out in great detail the scope of service, its quality and time limits for accomplishing the tasks that are set.
Another important aspect is the insurance of risks. Leading providers of bookkeeping services should insure their liability to a client.
Ultimately, when you settle on an outsource company that meets all of your requirements, you need to remember that you retain the function of control. Having chosen the provider of bookkeeping services, you need to oversee its operations and work together to improve the process of the supply of services. The outsourcing of bookkeeping does not mean that you can forget about everything, but it does mean that mutually beneficial relationships are ahead of you.