How cost-effective is it to outsource professional services like bookkeeping in China?
Keeping properly maintained financial records is very essential for any business
– large or small, and especially if you want to ensure long term growth.
Whether you own a startup, or a successful SME, accounting and bookkeeping
must be part of your business strategy and forward planning.
To put it simply, bookkeeping involves keeping records of the financial affairs of a business including all financial transactions, however minor, that take place throughout the day. Records are maintained for VAT reporting and submissions and profits tax reporting and submissions, but are also integral to future business loans, business sale or business owner exit planning. It is no longer an option for businesses to maintain adequate financial reporting.
While the business is still young, maintaining financial records might be a shared task or an ‘add-on’ responsibility for staff – given that they have adequate training and are committed to the ongoing task. These do become more challenging and time-consuming as the business grows. It is recommended that staff are well versed in the most efficient accounting software – and cloud-based applications are a further recommendation.
Companies are then faced with two options. Hire an in-house and suitably qualified team to undertake the different accounting duties, including bookkeeping, auditing and tax accounting or they outsource.
In-house or outsource?
What determines the ideal solution is the size of the company. For large and successful corporations, bringing in a finance team to work on the accounting services is a must. For startups and SMEs, opting for hiring an in-house team could be a costly exercise.
Why is outsourcing accounting services the ideal solution for startups and SMEs in China?
1. Cost-effective on many levels:
The cost borne when hiring in-house is double the cost of outsourcing. Engaging an experienced accountant is time consuming and costly – if you want the right knowledge to help your fledgling business successfully navigate the first few years of growth.
The relationship between the accountant(s) and the business owner should be built on trust. This is such an integral role within any company. Outsourcing places responsibility within the terms and conditions of the client contract directly on the service provider – in terms of maintaining records correctly.
3. Up-to-the-minute in real time, anytime and anywhere:
Thanks to the remarkable technological progress and applications available via the cloud, SMEs and corporations alike, have the same access. A business owner or nominated staff member can access and provide data to their outsourced accounting team in real time, anywhere using highly secure and fast uploading technology. You don’t have to invest in hefty software bills or for that matter, pay for software packages when you may only use one or two items.
4. More flexibility:
Accounting is a very broad term that includes several specific functions. The type and size of a company determines whether all branches of accounting or only specific ones should be managed by an outsourced team. Outsourcing agencies provide businesses the opportunity to specifically define tasks. There is also a room for extending the contract to include other accounting activities while the business is growing, with both profits and overheads increasing. An accountant can guide the business owner based on regularly financial health checks.
5. Temporary and one-time tasks
On occasion, a business owner might only require adhoc assistance. For example, the implications of value-added tax have required companies to seek professional assistance for the import, sale and /or export of their products and / or services.
What to do?
Outsourcing, if you choose to do it, it must have real, tangible benefits for your business, but also for your reputation and standing. In Deloitte’s 2016 Global Outsourcing survey, they noted that cost-cutting remains the biggest reason why firms outsource; but right behind it was focusing on core business. Deloitte presented three key findings which encapsulate the message for those firms looking at outsourcing.
First, invest time in the initial stages of outsourcing, to make sure the relationships will generate value throughout. Second, while the focus may be to save money, it must also include achieving a strategic advantage and maintaining a good reputation with suppliers. Third, invest in establishing strong processes for transition and governance with your suppliers.
Outsourcing has a time and a place, and it may well suit your business needs now. But it’s important, when you embark on any association that may have a significant impact on your business, that you select a partner who understands and respects what you need to achieve. Establish solid rules and expectations before you start, then maintain constant communication throughout, and build in contingency.
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DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.