Benefits of outsourcing accounting
We have outlined some of the main reasons for international companies to consider outsourcing these services regardless of the size of their business.
Outsourcing accounting functions allows saving time which can be used to address and resolve issues related to the company’s core business.
Managing an accounting department requires a lot of time especially in Russia where the amount of mandatory reporting is twice as much as in Europe
This time may be used much more efficiently to resolve important business issues and devise company development strategies.
Most efficiently run companies become successful because they focus on their core business, and this allows them to be ahead of the competition, sustain their growth and increase their earning capacity.
Outsourcing accounting, payroll and HR recordkeeping allows cutting costs by reducing operating expenses because it is cheaper to get such services from a specialized outsourcing company than running an in-house accounting department.
Moreover, specialized accounting firms engaged for outsourcing usually widely use automated work processes so fewer staff is required, and this results in an even greater cost reduction.
We have written another article about why it is cheaper to outsource accounting rather than run an in-house accounting department. This article also features a client case.
Outsourcing support services allows the management of companies to focus on business expansion without being distracted by tasks such as recruiting, hiring and training financial specialists. The amount of work performed by the contracted outsourcer may be increased if necessary. We, for example, can always involve more people to serve our clients.
During periods of low activity, clients can decrease the amount of work required thereby saving on service fees for our company. In case of in-house accounting department, it is much more difficult to reduce the number of employed staff in such case as the Russian Labor Code imposes many obligations on employers wishing to reduce their staff.
Application of best practices
The staff of specialized accounting firms consists of experienced professionals who apply the most advanced and effective methods to solve the problems of their clients.
Throughout their work, they gain extensive knowledge of the particularities of accounting in various industries and of the effectiveness of certain business methods.
Russian laws change constantly, and this greatly affects company processes. The employees of specialized firms constantly monitor these changes and know what measures should be taken relative to such changes.
Outsourcing companies carefully select their specialists who should be up to speed on Russian laws, with appropriate qualifications and extensive professional experience. For example, we have developed a system to test and select our accountants, financial and tax specialists.
Accounting firms can hire employees for projects that are of interest to them, and because these employees work in industries that interest them, they are more motivated.
Specialized companies have more opportunities to automate processes, standardize procedures, increase accounting work performance and reduce the number of errors. Clients using the services of outsourcing companies are therefore better protected from tax and legal risks.
Reduction in fraud risks
Many international companies have suffered losses due to fraud or asset misuse by their Russian divisions’ CEO or chief accountant.
Outsourcing accounting and separating responsibilities allow protecting the interests of shareholders and avoid misstatement of accounting data as well as misuse of corporate finance. Outsourcing also helps increasing transparency and confers the management of international corporations with some independence from the actions of local employees.
Outsourcing companies employ experienced IT specialists who provide technical support and a high level of security. These specialists are responsible for maintaining local and remote servers, ensuring connection stability, daily data backup, recovery plan development and user technical support.
The personal data of Russian nationals must be stored and processed in Russia with local providers so local technical solutions are required. Outsourcing providers engage their own specialists to develop such solutions or involve reliable third-party providers to do the same.
In-house accountants go on vacation, fall ill, can be dismissed unexpectedly or are open to other situations where the performance of accounting functions may be suspended. But such situations do not arise when an outsourcing company is engaged because the company is not served by an accountant but by a whole team of specialists who work under the principle of interchangeability and substitution.
Outsourcing also minimizes the issue of staff turnover because outsourcing companies always have staff ready to cover for their colleagues under specific replacement procedures.
In Russia, employees must give two weeks’ notice to their employer when they resign, and it is difficult to find a replacement within that time, so this is an important issue.
Accountability for accounting
Accountability for errors
Under tax, administrative and criminal law, CEOs are liable for the accuracy of accounting and payment of taxes.
Errors made by accountants can result in fines and other sanctions from state authorities. It is very difficult to get compensation from accountants for their mistakes. This would require a very well drafted employment contract, and accountants should be entitled to sign all payment documents and statements. But even with well drafted contracts, it is difficult for companies to get compensated because accountants are accountable under the Labor Code which protects the rights of employees more than those of companies.
When a company enters into an outsourcing contract with a third-party company, the service provider is liable under the Civil Code.
A contract with us guarantees that our client will receive compensation if a violation is committed through the fault of one of our employees.
Director’s dependence on accountant
When company directors know little of accounting, do not know where and how to look for the necessary documents and are unable to prepare reporting in their company’s accounting program, they heavily rely on their accountant. If their accountant falls ill, resigns or for some reason has not done the job that needed to be done, problems will arise for these directors. In these cases, it will be necessary to engage other accountants, auditors, tax specialists to prepare reporting in time and avoid problems. And this will cost big money.
The cooperation terms with an outsourcing company are set in a contract. Outsourcing companies are liable to their clients not only professionally but also financially.
Even if the company wants to change service provider or set up an in-house accounting department, the current service provider must transfer the database in good condition as is usually provided in contracts with outsourcing companies.
Why outsourcing is better for your company
We would be pleased to show you how we could improve the accounting processes in your company.
Please feel free to contact us if you would like us to review your current processes and requirements. Our specialists look forward to scheduling a meeting to discuss with your employees and management our possible cooperation. We would also be pleased to assess the accounting processes in your company and offer useful solutions that meet your company’s needs.