Are you a business that is struggling to keep up with your finances? You are certainly not the only one!
According to SEMRush, 66 percent of small businesses tend to experience financial challenges. Additionally, 43 percent of such businesses find paying their operating expense to be the biggest obstacle.
Considering that most businesses go under due to cash flow, managing finances becomes even more prominent.
Unless you have enough resources to allocate to develop a proper finance department, it is better to outsource tax returns and finances. Doing so is quite popular. For starters, Fortunly reports that the financial service outsourcing market is worth 130 billion USD.
Here are four reasons why outsourcing finances and tax returns are the smart things to do.
1. It Gives You Time To Focus On Your Core Business
Even though accounting and tax returns are an imperative part of a business, they do not bring in revenue. A mere error in your bookkeeping can have a disastrous impact on your ability to have a positive cash flow. Additionally, all financial tasks tend to be very time-consuming and require perfection.
Managing such important and hectic tasks can take time away from the core business activities unless you have a well-organized finance department. Focusing on the core value proposition is essential for bringing in new customers, which will help you achieve break-even and beyond in your firm.
You can free up your resources and assign them to divisions directly linked with revenue generation by outsourcing tedious tasks like tax preparation, payroll, bookkeeping, etc.
You will find various accounting and income tax services in your area. We suggest you stick to ones within your state. For instance, there are income taservices in Ottawa that would be ideal for businesses operating in Ottawa since such companies would have knowledge about the state regulations.
2. It Is Cost-Effective
Deloitte conducted a study to gauge the reasons due to which businesses outsource functions. Fifty-nine percent of the respondents did so to reduce cost.
Contrary to the apparent belief, outsourcing any business function, including accounting and tax returns, can help reduce costs. How is this so? After all, remote companies tend to charge a high amount for their services, right?
Well, there are various hidden costs associated with hiring an employee. This includes:
- Paying for benefits like paid leaves, bonuses, gratuity, insurance, etc.
- Purchasing and maintaining in-house equipment for employees to use.
- Investing in training and development of employees.
Did you know that the cost of hiring every new employee can be as high as 150 percent of their gross annual salary? Not to mention that retaining and training them is costly too. Compared to this, when outsourcing accounting operations, you only pay for the services attained.
You can also vary the type of services you outsource, as per your requirements. For starters, an income tax professional’s service can be sought when it is time to file your tax returns. But, if you were to hire someone for it in-house, you would have to pay him throughout the year.
You can reinvest the money you save from this front into making your business more profitable.
3. It Lowers Your Tax Burden
Tax in itself is a world on its own. Just because you have a firm grasp of the basics of accounting and finance doesn’t mean that you can easily manage your tax returns.
Specialized services tend to have accountants that have deep and insightful knowledge about the field. They tend to know about all the different tax codes relevant to a given type of business. Here, it is imperative to note that different sectors and businesses have different tax requirements.
Additionally, such specialists stay updated about new and prevailing tax laws. They can help businesses in identifying how to best benefit from altering national and state tax laws.
Since such firms rely on their performance and the benefit provided to businesses to keep clients coming back, they try to provide their clients with as many tax benefits and hacks as possible.
This can mean that you can make more money, which can reward your efforts or be reinvested back into the business.
Not to mention that their resources aren’t managing multiple other tasks, unlike your finance department. This gives them enough time and energy to focus on the task.
4. Scalability Is No Longer An Issue
Scalability is challenging enough on its own. But, with an in-house team, it becomes considerably harder.
Research conducted by Fast Company revealed that, on average, it takes over 26 days to hire a new resource. This figure does not take into consideration the notice period of a new hire. If you take that into account, the time increases up to 57 days!
For a company growing quickly, it does not have the luxury of assigning months to attract the right human resources.
However, when you are outsourcing accountants, you can easily increase resource allocated. This is because such companies have a pool of employees that they divide between different clients and projects.
The same is also true for instances when your business is contracting. Here, you can reduce the number of resources required without having to bear the cost of redundancy.
Running a business has become harder than ever in the modern competitive landscape where too many fishes are already in the sea.
For a startup or struggling firm, taking care of any back-office tasks can seem unimportant. However, they are the backbone of the business. Your accounting and tax department help ensure that your business is aligned with state tax laws and has enough cash to stay afloat.
Still, the tasks might not be your priority when other more product-centric decisions are made. This is why it is better to select expert accountants and outsource the task to them. This way, each aspect of your business can receive its due attention.