How Outsourced Accounting Became Mainstream

By Accounting Resources October 18, 2022

How times have changed!

Thirty-five years ago, nearly every company had an internal payroll accounting department – staffed with employees whose only role was to process payroll. Then, one day, someone proposed the idea of outsourcing payroll, allowing a dedicated specialist to manage the task and gaining economies of scale. This idea was met with some resistance and skepticism as some folks were unwilling to hand over that much responsibility and control to an external resource.

Fast forward to today and we find that the vast majority of companies now use a payroll service.

The accounting services industry is undergoing a similar transformation. If we compare the payroll function to the accounting services function, we find a host of similarities.

  • Just as a paycheck in Connecticut is roughly the same as a paycheck in California, the same holds true for debits and credits
  • Outsourcing of each of these functions provides significant cost savings to the organization
  • Having an external expert on hand is beneficial when questions or complications arise
  • Outsourcing eliminates a single point of failure because there is always someone else to do the work if an individual falls ill or leaves the organization abruptly

Our team believes that, a few decades from now, the internal accounting departments of many small businesses and nonprofit organizations will look much different than they do today. As outsourcing becomes more understood and accepted, there will be a steady migration to outsourcing to take advantage of all the benefits listed above.

In recent years, we have also noted a difference in how prospects approach their initial discussion with us. In the past, we would spend a good portion of our time educating business owners and nonprofit executive directors on just what outsourced accounting is and how it could benefit their organization. Today, we spend more time talking about the services we offer and how the transition would occur. This has been a major shift in the process.

Interestingly, the recent pandemic has only fueled the desire and readiness to outsource. Many employers unwittingly outsourced their entire accounting department when they sent their employees home to work. Teams were compelled to adopt new technologies and restructure their accounting processes. Very quickly, everyone discovered that bills got paid, deposits found their way to the bank, and monthly financials were generated. It seems “necessity” truly is the mother of invention.

Now, faced with a tight labor market, the great resignation, and increasing hiring costs, many companies are turning to outsourcing as a way to manage their accounting needs. And, given the benefits our clients are realizing, we don’t see the process slowing anytime soon.

There is no doubt that taking the time to generate accurate, reliable financial statements each month is challenging and time consuming.

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Some of our clients have found that they spend as much as 75% less time focused on accounting when they outsource to ARI.

If you would like to explore if ARI is the right partner to manage your accounting function, contact us today.

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