If you own a manufacturing business and are looking for ways to boost profits by reducing costs and improving efficiency, know that outsourcing accounting tasks can help you achieve these goals.
Through outsourced accounting services, you can focus on core operations. You can even gain insights into improving your firm's financial strategy and status.
Given the many benefits of outsourcing, it's no wonder many businesses, particularly small-sized firms, rely on such services. Indeed, trend discovery platform Exploding Topics says that over one in three (37%) small businesses outsource accounting, along with IT services. Almost a quarter of these organizations say they do so to boost efficiency.
What Is Outsourcing in Simple Words?
In simple terms, outsourcing is when a business partners with a third-party to perform and complete specific operations, services, or tasks that it would typically hire in-house employees for. The third-party provider can be another business or an individual specializing in whatever needs doing.
What Does Outsourcing Accounting Mean and Involve?
When you outsource your manufacturing company's accounting tasks, you'll hire an external accounting firm or professional accountant. They'll handle your company's books, records, and finances off-site rather than in-house.
It depends on what exactly your manufacturing company needs accounting for, but an outsourced accountant can help with:
- Bookkeeping
- Payroll
- Tax preparation and filing
- Accounts payable and receivable
- Financial reporting
Is It Cheaper to Outsource Accounting?
In most cases, outsourcing accounting can be cheaper than having a dedicated, in-house accounting team.
When you hire an in-house accountant, one of the most significant expenses you'll face is their salary. According to the U.S. Bureau of Labor Statistics, in 2024, accountants' median annual wage was $81,680.
You'd also have to account for an in-house accountant's employment benefits and training-related expenses. Don't forget that they'll also incur costs for the office space they'll take up and the tools and technologies they'll need to use.
When you outsource accounting tasks, you won't have to shoulder those other related expenses (e.g., employment benefits, training, office space, tools, and tech). As contractors, the accounting firm they work for will be the one to handle those costs.
Your manufacturing firm, on the other hand, will only have to pay for the accounting services you outsource.
How Exactly Can Outsourcing Accounting Boost Your Manufacturing Firm's Profits?
Outsourcing accounting can help boost your manufacturing firm's profits through cost reduction methods. It can also serve as an invaluable strategy for improving cash flow management and enabling smarter spending.
Lowering Overhead Expenditures
Labor and utilities are some of the primary overhead expenditures that your manufacturing business faces every single day. Outsourcing accounting services can help reduce some of these costs, particularly those associated with retaining an in-house accounting team.
The money your company gets to save by avoiding those expenses can then go toward increasing your bottom line instead.
Establishing and Improving Key Performance Indicators
Another way outsourced accounting services can help is by establishing your firm's manufacturing KPIs, as pointed out by the experts at Accounovation.
KPIs can serve as an excellent benchmark to monitor how your company is performing over a period of time. When you're aware of these, you can determine which areas you're doing financially well in and which ones you can improve to avoid wasting money and resources on.
Delivering Essential Financial Services
Accountants can help with many other matters, such as:
- Developing budgeting and forecasting plans
- Planning cash flows to ensure your firm has the capital it needs to invest in growth
- Analyzing pricing and margins to elevate profits
- Investigating areas of improvement, such as fulfillment rates, labor costs, inventory turns, and production outputs
Your outsourced accounting team can also handle other daily tasks, such as payroll, financial reporting, payables, and receivables. In doing so, they can free up time for you and your team to focus on core operations, including obtaining more customers.
The more manufacturing projects you claim and complete on time, the more profits your business can make.
Being able to focus on core operations also means your firm can keep producing exceptional work output for your customers. Delivering high-quality products and services is integral to keeping your clients satisfied, and the happier they are with you, the more likely they'll return for more.
Returning customers are big profit boosters. As Business.com points out, they typically spend 67% more than new customers. They're also more likely to recommend your firm to others.
Frequently Asked Questions
Can Outsourcing Accounting Help Uncover Hidden Profit Opportunities?
Yes! An outsourced accounting firm that specializes in manufacturing can help you discover hidden profit opportunities by analyzing specific areas where your company is losing profits or can make more money.
An example is with your manufacturing business's cost of goods sold (COGS). An outsourced accounting firm can run a comprehensive COGS analysis to track the expenses associated with specific products, production runs, and batches. In doing so, they can determine if you're wasting money on cost overruns or if you can make more profits by improving your pricing strategy.
Are Outsourced Accounting Services Flexible?
Yes, they are. Flexibility is a primary advantage of outsourced accounting services, allowing you to scale them up or down as needed. An example is during tax season, audit periods, or manufacturing peak seasons (e.g., holidays).
You can get more outsourced accounting support during these times, allowing you to get the financial guidance you need to meet deadlines on time. You can then scale back the outsourced services you pay for during quieter months.
Do Outsourced Accounting Services Require Lock-in Periods?
It depends on one outsourced accounting firm to another, but in many cases, they don't require clients to agree to lengthy contracts. Instead, they typically offer flexible monthly agreements that you can scale up and down as needed.
Generate More Profits With Outsourced Accounting Services
From reducing overhead costs to improving efficiency, these are some of the top ways outsourcing accounting services can help boost your manufacturing firm's profits. They can also help your business mitigate financial losses while assisting you in discovering hidden profit opportunities.
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