In a business world marked by uncertainty, month-end and year-end accounting challenges have remained a constant. The resolution of the recent political season and the Federal Reserve’s lowering of interest rates may have given organizations an overall renewed sense of optimism and the momentum to tackle those challenges. However, the complexity and volume of financial tasks during these periods can overwhelm even the most seasoned accounting teams, placing intense pressure on those that may lack the necessary resources. In this article, we explore how outsourcing accounting functions may provide a viable way to alleviate that pressure.
The Challenges of Month-End and Year-End Close
Month-end and year-end closing processes are universally required for organizations of every size and industry. So, too, are the challenges associated with finalizing financial records, preparing reports, and managing compliance with regulatory requirements on a daily basis. These tasks necessitate meticulous attention to detail and a comprehensive understanding of evolving financial regulations. The sheer volume and complexity of the work required of an accounting team can be mindboggling when viewed holistically.
Time constraints are one common concern. Most organizations must meet strict deadlines or face consequences that include steep financial penalties. When pressed for time to close the books quickly, factors such as human error, employee burnout, and lack of oversight become critical.
Limited resources can also contribute to month-end and year-end pressures. Many organizations simply lack the necessary staff or experience to efficiently manage an often-daunting volume of accounting tasks. The current shortage of accounting talent, coupled with the costs of hiring and training new employees, has exacerbated staffing concerns.
Finally, ensuring compliance with ever-changing regulations and maintaining accuracy is a constant challenge. For example, several new accounting standards are effective for 2024 financial statements for nonpublic entities, and mandatory in Q1 of 2025 for public entities. These changes demand rapid adjustments and a proactive approach to regulatory compliance. The incoming administration may also bring about changes to financial reporting that accounting teams must quickly address.
Regardless of the obstacles, it is imperative for organizations to provide accurate and timely financial reporting that helps avoid penalties for non-compliance and provides a clear picture of the organization’s financial well-being. When adhering to month-end and year-end requirements becomes overwhelming, leaders may seek help.
Potential Outsourcing Benefits
The decision to supplement current accounting operations can be inherently challenging. It’s important to realize the effect that a team of accounting professionals, along with a best-in-class process leveraging the appropriate technology solutions, can have on an organization in key areas, including the following:
- Overall Efficiency: Integrating third-party professionals into an organization’s accounting and financial reporting processes can improve efficiency in several ways. In addition to taking on some or all of the accounting team’s workload, such professionals can assist in strategic planning and developing new or improved protocols.
- Cost Efficiency: By outsourcing even a portion of its accounting work, an organization may reduce overhead costs related to hiring, training, and maintaining a full-time in-house team. Resources can then be more strategically allocated.
- Access to Specific Experience: Firms that focus on finance and accounting services can provide professionals with up-to-date understanding of accounting standards and regulations. Outsourced professionals typically possess extensive knowledge of accounting standards such as GAAP and International Financial Reporting Standards, thereby helping ensure compliance and precision in financial reporting. Their expertise can be pivotal in navigating complex financial landscapes and implementing best practices. Using their specific skillsets and experience, such professionals can streamline preparation of the organization’s month-end and year-end financial reports. Additionally, outsourcing firms may offer fractional staffing and enhanced access to global networks.
- Scalability: Outsourcing can offer organizations the flexibility to scale finance functions as dictated by business needs, independent of any internal resource constraints. For example, extra professionals can be brought in only during times of high volume or impending deadlines. As organizational needs change, the outsourced finance and accounting process aligns seamlessly with your goals.
- Renewed Focus: Delegating an accounting team’s workload to outsourced professionals can enable an organization to concentrate on strategic initiatives and core business activities.
- Customized Service: In an outsourced model, support can range from transaction processing to controllership activities and CFO Advisory support. An organization’s capabilities may also be enhanced by leveraging the outsourcing firm’s technology and fractional resources through tailored solutions that align with specific business needs.
The potential benefits of outsourcing are compelling; however, transitioning to an outsourced model involves evaluating other critical factors.
Considerations for Outsourcing
Outsourcing accounting and financial functions can present numerous advantages, but achieving the best possible collaboration requires attention to certain key considerations.
For example, the choice of an outsourcing firm can significantly impact the quality of the services provided. It’s essential to carefully evaluate firms, looking for one with a proven track record and industry-specific experience.
Data security is a major concern throughout the business world. To protect against breaches and unauthorized access, an outsourcing firm must have best-in-class data security measures in place to protect the organization’s sensitive financial information. Technology alone is not enough; processes that safeguard data must be implemented as well to promote the best possible outcome.
Finally, an outsourcing model requires clear communication channels between the organization, the outsourcing firm, and any internal or external auditors. This is especially critical for setting expectations that may prevent misunderstandings and facilitate the preparation of complete and timely reports. Using cloud-based communication platforms like Microsoft Teams can help maintain clear and consistent communication with your outsourcing provider.
Accessing a Strategic Advantage
Organizations that outsource finance and accounting functions during month-end and year-end closes can gain a strategic advantage. By alleviating the pressures associated with these critical periods, focus may shift to opportunities for growth and innovation. When navigating a shifting business environment, outsourcing may emerge as a powerful tool to enhance efficiency and drive strategic initiatives.
BDO’s Outsourced Finance & Accounting Services provides experienced professionals to assist with month-end and year-end closes, as well as aligning outsourcing arrangements with organizational goals. Contact us to learn more about how we can support your financial and accounting operations.