Outsourcing Accounting: The Benefits of Accounting Services

According to a 2024 global survey by the accounting firm Deloitte, 54 percent of the companies surveyed outsource financial processes—including accounting—to external service providers. There are many reasons for this: Some organizations lack the necessary time, while others simply lack experience in this area. Especially during growth phases, when product development and effective marketing take center stage, the documentation of business transactions can fall by the wayside.

However, resources should also be allocated to accounting. If this is not done, errors and inaccuracies can creep in, leading to problems with the annual financial statements as well as tax risks, and ultimately drawing the attention of the tax authorities.

However, careful and accurate bookkeeping not only helps ensure compliance with legal requirements but also affects a company’s prospects for success. It can provide clear insight into the company’s financial situation and thus lay the foundation for strategic decisions.

While the number of business transactions to be recorded is still manageable immediately after a company is founded—and simple accounting solutions are sufficient—founders must look for more sustainable solutions as the number of documents to be posted increases. To better focus on their core business and ensure long-term growth, many startups and scaleups choose to outsource their accounting.

Outsourcing Accounting—Here Are Your Options

External accounting services, accounting firms, or interim accountants can handle all accounting tasks, which can be particularly relevant for companies with limited internal resources and expertise. However, complete outsourcing is not always the best approach. This is the case, for example, when organizations want to retain a certain degree of control and do not wish to have all business transactions processed externally. In such cases, financial service providers can flexibly handle individual tasks from various areas of accounting.

These include:

• accounts payable,
• accounts receivable,
• fixed asset accounting,
• Financial Accounting
• and payroll accounting.

External tax advisors can also handle part or all of the bookkeeping process. In addition, they can represent their clients before tax authorities.

Regardless of which services a startup or scaleup uses, it is advisable for founders to acquire a basic understanding of these services so they can better understand the work of the service providers.

The Outsourcing Process Flow

Depending on which of the external service providers listed above a company chooses, the steps involved in outsourcing may vary slightly. Typically, the process is as follows:

1. Drafting a Service Agreement: At the outset, a contract is drawn up to protect both parties. This contract specifies both the scope of the services to be provided and the timeframe for their completion.

2. Provision of Documents: To ensure that accounting can be performed properly, the client must provide all necessary documents. The specific documents required depend on the agreed-upon services. Generally, a master data sheet—including the company’s tax ID and business registration number—as well as all payment receipts are required.

3. Organization of Workflows: Before the service provider begins work, both parties should designate specific points of contact who will be available to answer questions. In addition, it should be clarified in advance how any future supporting documents will be submitted. This is usually done digitally. If special software solutions are required for this, they should be set up and tested before the collaboration begins to ensure a smooth process from the start.

Simplifying the Process with Accounting Software

To prepare accounting records as accurately and efficiently as possible for outsourcing—and thereby achieve time and cost savings—it is advisable to use a high-performance accounting program. This program provides companies with a comprehensive overview of their finances and meets the basic legal requirements for proper bookkeeping.

Furthermore, many accounting software programs offer the ability to generate reports. These are not only valuable for external service providers but also help the company provide reports to investors when accounting functions are outsourced. Even if the partnership between the company and the service provider ends, the software remains useful because all transactions are documented within it and can easily be continued by the new service provider or the company’s in-house accounting department.

That's why many startups rely on external accounting services

Companies that outsource their accounting benefit from a wide range of advantages. In addition to the time saved for core activities mentioned earlier, these include the following:

Extensive expertise

Expert knowledge is essential for proper bookkeeping. External accountants are specialists in their field and bring not only relevant expertise but also experience gained from working with various clients. They are well-versed in accounting standards and current legal regulations. This ensures that financial data is recorded and reported accurately. In addition, they can usually identify opportunities for optimization in accounting and financial management more quickly than other stakeholders.

Cost Avoidance

Even though outsourcing accounting incurs costs, it often leads to cost savings in the medium term. This eliminates the need to hire in-house staff specifically for accounting, thereby avoiding expenses related to recruiting, salaries, benefits, or training. Even if the client terminates the contract with an accounting service, there are no labor law issues or costs—such as severance payments—for the client.

Furthermore, there is no need to purchase or maintain hardware, and employees do not need to be trained to use accounting tools. In addition, external accountants often already have access to financial tools, which can help reduce software costs.

Low Risks

Another advantage of outsourcing is that it reduces liability risks. This is the case for two reasons. First, specialized external service providers are familiar with the tax authority’s requirements and exercise the necessary due diligence in their work. Second, depending on the terms of the contract, service providers may be partially liable for errors in bookkeeping. Tax advisory firms are even required to be liable in all cases for damages incurred by their clients as a result of culpable breaches of their professional duties.

Greater financial predictability

When using accounting services, companies only have to pay for services actually rendered, and there are no fixed salary costs that are independent of the workload. Instead, these are typically fixed costs, such as monthly service fees, which are easy to plan for. The use of fixed costs in the context of accounting outsourcing creates a clear cost structure. This enables companies to better manage their finances and use their resources more efficiently.

A Quick Response to the Skilled Labor Shortage

Due to the shortage of skilled workers, it is currently difficult to find staff for the finance sector . According to a study by the management consulting firm Horváth & Partners, 11 percent of positions in finance and controlling departments were unfilled in December 2022. The Skilled Workers Index from the recruitment firm Hays also reached a similar conclusion. According to the index, demand for finance professionals peaked in 2023 and declined only slightly in 2024. Companies must therefore go to great lengths to find qualified employees. As a result, accounting services are an attractive alternative for many firms. They are generally ready to go more quickly, as they already have a team of accountants and the necessary resources in place. This allows companies to avoid a complex and time-consuming hiring process.

Is it worth outsourcing accounting?

Despite the advantages mentioned, many business owners wonder how sensible it really is to outsource their bookkeeping. After all, there are also factors that speak in favor of doing one’s own bookkeeping. Especially for the self-employed and freelancers, it can make sense from a cost perspective to handle bookkeeping on their own. After all, with the right software, it’s relatively easy to manage on your own in environments with a small staff, even if it does require additional time.

Another argument in favor of in-house accounting is complete control over the processes. When tasks are outsourced, clients do not always have unrestricted access to the relevant data and information, which can be detrimental if, for example, service providers fail to meet deadlines or do not deliver the desired quality. If such problems arise, organizations that have outsourced their processes are dependent on the external party to resolve them reliably.

Nevertheless, the larger a company is, the more complex its accounting requirements become, and the issue can become a significant time drain for management due to a lack of routine. As operating income increases, so does the complexity—and consequently, the workload involved in accounting. This requires the allocation of more resources. Outsourcing accounting tasks can alleviate this burden and is therefore an attractive option for startups, scaleups, as well as small and medium-sized enterprises (SMEs).

Ultimately, whether outsourcing accounting makes sense for a company is a decision that must be made on a case-by-case basis. If the founders feel overwhelmed by their core business, don’t have time for further training in accounting, and want to avoid errors in their bookkeeping, they should consider outsourcing their accounting.

What should you look for when choosing an external accountant?

Organizations have different needs, and not all service providers can meet them equally well. To avoid risks and find the best possible support for your company, you should therefore always check whether the following criteria are met when selecting accounting services:

Relevant industry knowledge: External accountants who have already worked with companies in the same industry understand the specific challenges and can offer tailored solutions.

Easy Accessibility: Being able to easily reach service providers is essential for effective collaboration. It is particularly convenient when communication takes place through channels that the company placing the order already uses internally. This also reduces the risk on the client’s side that important messages will be overlooked or answered late.

Cost Transparency: It should be clear from the outset which services will be provided and at what prices. A detailed cost breakdown helps avoid hidden fees or unexpected expenses. This reduces the risk of misunderstandings and makes it easier for the client to plan their budget.

Robust Data Protection Policies: Since accounting involves the processing of sensitive financial and personnel data, high data protection standards are essential. Service providers must use secure channels for exchanging information and ensure that all data protection regulations are followed. It is advisable to look for relevant certifications such as ISO 27001. These certifications demonstrate that companies have implemented information security management systems that ensure reliable protection.

Wide Range of Services: Even if it isn’t always necessary, it can be advantageous for external service providers to offer services in other financial areas—such as financial planning—in addition to bookkeeping. Clients can access these additional services directly as needed. Since the external bookkeeperis familiar with the company’s specific circumstances, supplementary services can be implemented more quickly than if new providers were brought in.

What are the costs of outsourcing accounting to external service providers?

Depending on the qualifications of the service providers, prices for accounting services can vary widely.Tax advisors, for example, often charge more than bookkeepersbecause their scope of work is broader and their responsibilities are greater. In addition, tax advisors undergo longer and generally more demanding training.

A company's specific needs also influence the cost of outsourcing accounting services. If the work consists only of basic accounting services, the costs will be lower than for complex tasks such as tax planning and preparation, even if the scope of work is comparable.

In addition, the pricing model may vary depending on the service provider. While some providers charge an hourly rate, others charge a flat fee, offer packages for a specific number of bookings, or adjust their prices based on the scope of the accounting work.

Other factors that play a role include the complexity of the client’s business, the desired frequency of bookkeeping, the contract term, and the service provider’s location.

The Importance of Artificial Intelligence (AI) in Outsourcing

In a 2024 survey conducted by the auditing and consulting firm RSM Ebner Stolz, one-third of the study participants reported using AI in their company’s accounting department. This figure is expected to rise in the future, as a study by PwC Germany found that 59 percent of respondents reported currently working on a digital transformation of their company’s finance function, and 62 percent said they consider AI relevant to such transformations.

The growing importance of AI is evident not only in internal finance departments but also in accounting services. External accountants can use this technology in various areas to save time and resources on their assignments. For example, standard processes such as document processing can be automated: AI-powered systems can read and post documents, thereby preventing manual errors. It is also possible to conduct automated compliance checks. Intelligent systems can verify financial data in real time for compliance with legal requirements, allowing potential risks to be identified early on.

In a global survey conducted by Deloitte in 2024, companies offering outsourcing services in various sectors were asked about their use of AI. 81 percent reported that they use AI in their outsourcing services or plan to do so in the near future. According to the survey, service providers that rely on AI-powered solutions achieve, on average, about seven percent higher customer satisfaction than those that do not use AI. About half of the organizations that use this technology for their services also report a noticeable reduction in their workload, while about a quarter have benefited from lower costs or improved service quality.

Further technological advances are expected to boost the efficiency of AI-powered accounting processes even more in the future. However, this development also presents challenges, such as integrating the necessary technologies, implementing strict data protection measures, and the need for ongoing training. Companies that offer accounting services are therefore faced with the task of laying the groundwork for the use of AI early on so that they can keep pace with developments and remain competitive in the future.

Conclusion: Outsourcing accounting can create significant added value

Overall, outsourcing accounting offers many benefits for companies, including error prevention, expertise, time savings, cost savings, and the opportunity to focus on business growth and development. Given this, it is likely that demand for outsourcing services will increase in the coming years.

A study by the market research and consulting firm Grand View Research supports this forecast. It predicts that the global market for financial and accounting business process outsourcing is expected to grow to $110.74 billion by 2030. Compared to 2023, when the market reached a volume of approximately 60.31 billion U.S. dollars, this would represent nearly a doubling.

In the field of accounting, this expected trend can be attributed to several factors. On the one hand, the increasing complexity of compliance requirements is making it ever more difficult for organizations to ensure the legal compliance of their accounting practices internally. On the other hand, due to demographic changes, the shortage of skilled workers in the finance sector is not expected to ease in the near future, meaning that it will remain a challenge for companies to recruit qualified accountants. Furthermore, ongoing digitalization is making outsourcing increasingly attractive. Thanks to the use of new technologies, service providers are already able, in some cases, to automate individual steps in the accounting process, thereby making their services faster and more cost-effective. In-house accounting departments are often unable to achieve the same level of efficiency in their processes, as setting up and maintaining the necessary systems requires specialized knowledge that many organizations lack.

Whether a company should consider outsourcing its accounting, however, always depends on the individual needs of that company. Regardless of the final decision, it is advisable—especially for startups—to seek initial consultation in order to avoid mistakes as early as possible and lay the foundation for reliable accounting.

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