Companies, both big and small, are encouraged nowadays to embrace technology and incorporate it into every aspect of their business, including finance and accounting. There are many accounting software available these days that claim to streamline, accelerate, and enhance accounting-related tasks. However, others may argue that it is better to outsource these functions instead to companies that offer accounting services in the Philippines.
Which option should you choose if you’re operating a small business in need of some accounting help? To help you decide, we’ve listed down the pros and cons of both alternatives.
Specialized software for accounting designed with the business owner in mind can provide many advantages. But, you must be careful when choosing the right software for your business needs, as a wrong decision might be costly for your business.
• Data Accuracy and Compliance
Today’s accounting practices call for stringent financial reporting guidelines and strict regulations, making data accuracy even more crucial since serious errors can lead to big problems for the company or even legal ramifications.
With an accounting software, you’ll no longer worry about data accuracy because it simplifies record keeping and fully automates financial transactions, including calculations — reducing errors and ensures data integrity.
• Time Savings
Because everything is fully automated, accounting software does the job in a much less time. This helps increase staff productivity, as they will be free to move on and focus on other important tasks.
• Managed Inventory
Businesses managing a lot of products know that it is important always to be up-to-date with how much is in stock. Some accounting software can help with this by automatically tracking inventory when you process orders and alerting you when you are running out of stock.
• Up-to-date Reports
Because your accounting software has all the financial information of your business, it is easy to generate various reports that you might need in making strategic business decisions. The types of reports vary, though, depending on the software you choose and the information provided.
The cost of accounting software varies depending on which you would choose. While those available for small businesses may not cost an arm and a leg, bear in mind that there can be other related costs as well.
For instance, certain software may require a bigger RAM or a faster processor, which you may need to spend extra money for. Aside from this, there are times when you might need to pay for technical assistance or additional costs for other fees such as licensing.
• Registration Requirements
In the Philippines, companies using a Computerized Accounting System (CAS) must apply for a permit to use it or any of its components. It should be applied before the system is used, or the enhanced system is adopted.
Issuance of the permit can take anywhere between 10-40 days and will cost you time, effort and money.
• Talent Requirements
Just because you have an accounting software, doesn’t automatically mean you’re good to go. You’ll still be needing accountants who are skilled in using your specific software, which can add to your expenses.
Should you decide to do the accounting tasks yourself, there are accounting software specifically for non-accountants. However, you will still experience a learning curve when converting from one software to another or when you’ve never used one before.
If you’ve never done accounting previously, learning the accounting terms themselves can already be stressful enough and trying to learn how to use accounting software will add more to your stress.
Software needs to be upgraded now and then. But then again, don’t forget that even the equipment necessary to operate the software, such as you PC or laptop needs to be maintained and upgraded, too.
• Technological Risks
Financial data is confidential information, and you’ll always need to take measures to protect it against data loss. This can happen via hacking, power failure, or even viruses.
Computer fraud and security breach are also some main concerns that you should address.
Another option is to delegate or outsource your accounting tasks to experts. There are many reputable accounting firms in the Philippines who you can partner with.
Accounting is no easy task especially if it’s not your expertise. By hiring an accounting partner, you will be sure that the people tasked to help you are experts in the field and know what they are doing.
They are familiar with all the accounting guidelines and practices and will ensure that they will be followed in the course of managing your accounts.
• Time Savings
Delegating your accounting tasks to these experts will give you more time to focus on the other core aspects of your business. You’ll also no longer need to spend time or effort on hiring, training, and maintaining an in-house accounting staff.
• Cost Savings
Outsourcing your accounting tasks will save you money that you’d normally spend for an in-house staff, such as salary and benefits, as well as furniture and equipment. Compared to purchasing software, you won’t have to worry about add-on costs such as training and maintenance.
• Management or Financial Advice
Because your accounting partners have access to your business’ financial data, they can use these to come up with reports, interpret them, and provide you valuable management or financial advice that you can use to make strategic business decisions.
• Contractual Obligation
When partnering with an accounting firm, you will typically sign an agreement with them that details their deliverables. Having this contract makes it less risky for your business compared to hiring an in-house staff and purchasing software.
In case something goes wrong, you can hold the accounting firm liable.
Hiring an accounting firm may be less costly compared to purchasing software. However, their services will not be free, as they’ll be charging you with a cost commensurate with the services they provide you.
• Security Risks
Since you’ll be trusting your accounting firm, which is an outsourced company, with confidential information — risks are inevitable and there won’t be a guarantee that your partner will not make some mistakes at some point.
If they are simple errors that can be easily rectified, it’s all good. However, huge mistakes can be detrimental to your business.
• Less Control
You will have no control over how your accounting firm manages their business and their staff. If you are the type of person who likes to oversee everything, then delegating power to another company over highly confidential and valuable information may not sit well with you.
• Distance, Time or Language Barriers
You can outsource your accounting tasks to firms that may not be located in your area. By doing this, though, you might encounter difficulty when it comes to communicating your needs and problems across long distances or even different time zones.
Purchasing accounting software and hiring an accounting firm both present their sets of advantages or disadvantages. Take a good look at your business and your particular needs to figure out which alternative will suit you best.