Maintaining properly kept financial records is essential for any business—large or small. This is especially true if you want to ensure long-term growth. Whether you own a startup or a successful SME, accounting and bookkeeping must be integral to your business strategy and forward planning.
Understanding Bookkeeping
Bookkeeping involves keeping records of the financial affairs of a business, including all daily financial transactions, however minor. These records are vital for VAT reporting and submissions, profits tax reporting and submissions, and future business loans, sales, or exit planning. Adequate financial reporting is no longer optional for businesses.
While a business is still young, maintaining financial records might be a shared task or an ‘add-on’ responsibility for staff—provided they have adequate training and commitment. However, as the business grows, this task becomes more challenging and time-consuming. Staff must be proficient in efficient accounting software, with cloud-based applications being highly recommended.
In-House vs. Outsourcing
Companies face two options: hiring an in-house, suitably qualified team for various accounting duties, including bookkeeping, auditing, and tax accounting, or outsourcing these tasks.
Factors Influencing the Decision
The ideal solution largely depends on the company's size. For large corporations, an in-house finance team is a must. For startups and SMEs, hiring an in-house team can be costly. Here’s why outsourcing accounting services is an ideal solution for startups and SMEs in China:
Benefits of Outsourcing Accounting Services in China
Cost-Effectiveness Outsourcing is significantly cheaper than hiring an in-house team. Engaging an experienced accountant can be time-consuming and costly, but outsourcing allows you to access the right expertise at a fraction of the cost.
Trustworthy The relationship between the accountant(s) and the business owner should be built on trust. Outsourcing places responsibility within the terms of the client contract directly on the service provider, ensuring proper record maintenance.
Real-Time Access Anytime, Anywhere Cloud technology enables businesses to access and provide data to their outsourced accounting team in real-time from anywhere. This eliminates the need for hefty software investments, as outsourced services typically include necessary software tools.
Flexibility Outsourcing allows businesses to define specific tasks and adjust services as needed. As the business grows, the contract can be extended to include additional accounting activities, providing flexibility and scalability.
Temporary and One-Time Tasks Businesses might occasionally require ad-hoc assistance, such as handling value-added tax implications for import, sale, or export of products and services. Outsourcing provides the necessary expertise for these temporary needs.
Key Considerations for Outsourcing
Outsourcing must offer tangible benefits for your business and reputation. According to Deloitte’s 2016 Global Outsourcing Survey, cost-cutting is the primary reason firms outsource, followed by focusing on core business activities. Deloitte’s findings highlight three key aspects:
Initial Investment in Relationships Invest time initially to ensure outsourcing relationships will generate long-term value.
Strategic Advantage While cost savings are important, achieving a strategic advantage and maintaining a good reputation with suppliers is crucial.
Strong Processes Establish strong processes for transition and governance with suppliers to ensure smooth operations.
Conclusion
Outsourcing has a time and place and may suit your business needs. Selecting a partner who understands and respects your goals is vital. Establish solid rules and expectations before starting, maintain constant communication, and build in contingency plans. This approach ensures that outsourcing delivers maximum value to your business.
By optimizing these factors, you can make a well-informed decision on whether outsourcing professional services like bookkeeping in China is cost-effective for your business.
Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.
Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.
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