Procurement, production, research and development, supply chain management, logistics, marketing, sales, customer relationship management – the list of functions a business has to undertake to sustain and grow is seemingly endless these days. However, there is one common aspect to all these functions: ‘Finance’. Often, while handling all these complicated day-to-day operations; finance, accounting and compliance take a back seat. According to IFAC, the percentage of small businesses placing accountants at the peak of their list for trusted advisors is only 30%. The accountants considered for the study were the in-house accounting department. But what is the reason for the lack of trust? Inaccurate data, incomplete reporting, lack of transparency, and inconsistent practices were identified as some of the reasons.  

Potential Challenges in Achieving Accuracy and Consistency with In-House Accounting Function  

1. Complex regulatory environment
There are multiple regulatory authorities in India such as RBI for banking, IRDAI for insurance sector, SEBI for listed entities, the MCA for companies, CBDT and Income Tax Department for Direct Taxes, GST Council for GST. The pain point is that each of these regulators have their own set of regulations, compliances and frameworks which could sometimes contradict each other. Besides, there are constant changes via circulars, notifications, amendments etc. It becomes grueling for the in-house accounting team to keep track of all the changes. 

2. Staff Attrition
Staff attrition in in-house accounting disrupts continuity, increases recruitment and training costs, and can lead to process inefficiencies, ultimately affecting financial accuracy and overall organizational stability. 

3. Manual processes
As a country, we are progressing in digitalization and automation. However, the dependency on manual processes cannot be overlooked. With these manual processes come the chances of human errors that could lead to inaccurate accounting. 

4. Lack of standardisation
The ever-evolving environment of the accounting function makes it cumbersome to frame standard practices across industries. Moreover, the diverse nature of business operations and financial transactions further complicates the implementation of a one-size-fits-all approach. 

5. Poor internal controls
Weak internal controls, lack of segregation of duties and checks could result in inconsistent performance and reporting. 

6. Inadequate training
The staff needs to stay updated about the changes in the regulations and introduction of new regulations. This could be challenging considering the day-to-day schedule of the staff.  

Would Outsource Accounting solve these issues?  

Outsourcing your accounting and statutory compliance function to an outsourced accounting service provider could be beneficial.  

1. Expert and specialized knowledge
The service providers for outsourced accounting services have a team of individual subject matter experts for each area who can give informed technical opinions on various issues in their domain. They are experts in the matters of law, taxation, accounting and assurance services. So, you would not have to worry about making inadvertent errors that would cost you fortunes in the form of penalties and fines.  

2. Dedicated Single Point of Contact (SPoC)
The outsource accounting firms provide each client with an account manager who shall be the single point of contact for the client. The client need not have to coordinate with multiple people for various issues. 

3. Blend of automation into the processes
Service providers subscribe to tools and software that reduce the manual efforts required to perform a task which increases the efficiency. Besides, these tools come with internal checks which reduces the chances of human errors.  

4. Standard Operating Procedures (SOPs)
Service providers of Virtual CFO services develop SOPs specific to each client to ensure that there are no inconsistencies in the processes followed.  

5. Effective internal controls and checks
Virtual CFO service providers help the clients design internal checks and controls to ensure the completeness, accuracy and reliability of the records maintained. They also play an active role in assessing the effectiveness of these controls by addressing any deficiencies that are discovered during the day-to-day operations. 

Inhouse Accounting Vs Outsource Accounting: A Comparison 

Criteria  In-House Accounting  Outsourced Accounting Services 
Control and Supervision  ✔ High control and supervision  ✘ Less direct control 
Cost  ✘ Higher fixed costs (salaries, benefits)  ✔ Variable costs, generally lower 
Expertise and Specialization  ✘ Limited by in-house team’s knowledge  ✔ Access to specialized expertise 
Scalability  ✘ Less flexible, harder to scale quickly  ✔ Easily scalable 
Security and Confidentiality  ✔ Direct oversight of data security  ✘ Potential risks with data sharing 
Technology and Tools  ✘ Depends on internal resources  ✔ Access to advanced tools and software 
Focus on Core Business  ✘ Potential distraction from core activities  ✔ Frees up management to focus on core business 
Consistency and Stability  ✔ Consistent team, stable presence  ✘ Potential for provider changes 
Compliance and Updates  ✘ Risk of outdated practices  ✔ Up-to-date with latest regulations 

What is Best for Your Business?  

Decide what is the best by evaluating control, cost, expertise, scalability, and focus. Assess your need for specialized knowledge, budget constraints, and growth plans. Consider outsourcing for flexibility and cost-efficiency or in-house for direct supervision and tailored solutions. Choose based on strategic alignment with your business goals and capabilities. 

How Does InCorp Address the Shortcomings in Outsourced Accounting Services?  

While it is a general conception that outsource accounting would lead to less direct control, potential security risks, delays and communication barriers, we, at InCorp are addressing these issues through our standard practices as listed below: 

  • In Virtual CFO services, we have a Single Point of Contact (SPoC) for each of our clients. Any client queries and information exchange are routed through this SPoC to ensure we do not face any communication gaps with respect to the deliverables and expectations.  
  • The SPoC from our Virtual CFO services division co-ordinates with all the other departments including direct taxes, indirect taxes, outsource accounting division and secretarial division in the organization that is involved in providing the services to the client.  
  • This ensures that the client would also have access to all the updates by just being in touch with the SPoC.  
  • We have standard operating procedures in place to ensure that the data shared with us by the clients are accessible only to authorised personnel.  
  • Our staff from all the divisions undergo trainings frequently to address any shortcomings in the delivery of the services.

Why Choose InCorp Global? 

Outsourced accounting services can be beneficial for businesses in terms of cost savings, expertise, efficiency, reduced risk of errors, fraud, and enhanced data security. Reach out to us at info@incorpadvisory.in to outsource your core and/or non-core accounting functions to us. With a single point of contact, you can be rest assured that you will not have any complains. You can alternatively reach out to us on (+91) 77380 66622. 

(This blog has been co-authored by Nikkitha KJ)

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