So, you’re a small business owner and you’ve decided to outsource your accounting to save costs and gain expertise. Smart move. But now you need to determine if it’s really paying off. How do you measure the return on investment of outsourced accounting?

Stick with us and you’ll have a simple way to calculate your accounting outsourcing ROI. You’ll gain the tools you need to determine if your provider is really adding value or if it may be time to make a switch. Let’s dive in and get started.

Measuring Improvements in Efficiency with Outsourced Bookkeeping

For small businesses, some key metrics to consider include:

1. Time Savings

Outsourcing accounting frees up your time to focus on growing your business. 

Calculate the hours spent on accounting tasks now versus with a virtual CPA firm. 

For example, if you spend 10 hours a week on bookkeeping and payroll versus 2 hours reviewing outsourced work, that’s a time savings of 8 hours or over 400 hours a year you’ve gained back.

 2. Cost Savings

Compare your current accounting costs to outsourced fees. 

If you pay an in-house bookkeeper US$ 50,000 a year but can outsource for US$ 30,000, that’s a US$ 20,000 cost savings. You’ll also avoid costs like paid time off, health insurance, and office space.

 3. Improved Accuracy

Experienced accountants have the skills and knowledge to handle your books accurately and ensure tax compliance. 

Evaluate errors or penalties in the past versus outsourced work. Catching even one mistake that saves you from an IRS fine could pay for outsourcing services.

  4. Access to Expertise

Virtual firms have CPAs and accountants with specialized expertise in areas like accounting, payroll, tax planning, audits, and reporting. 

Assess what level of expertise you have in-house versus what you’d gain through outsourcing. Their knowledge and experience can help improve your financial management and decision making.

  5. Improved cash flow

Accurate and up-to-date books make it easier to manage cash flow. Your bookkeeping team will track accounts receivable and payable, monitor monthly income and expenses, and alert you to any issues. 

This gives you better insight and control over your business’s money.

Key Metrics to Track the ROI of Your Outsourced Accounting Firm

To see if outsourcing your accounting is really paying off, you need to track some key metrics. Here are the top numbers to monitor:

1. Revenue and Profits

• Are sales and profits increasing now that you have more time to focus on growth? 
• Compare your financials from before and after outsourcing to see the impact.
• Track your revenue and profits month-over-month and year-over-year. 
• Look for an upward trend.
• Calculate your revenue and profit growth rates. Aim for 10-15% or more per year.

 2. Cost Savings

• You outsourced to save money, so make sure you’re actually reducing costs.
• Compare your accounting costs from before and after outsourcing. 
• Look for a decrease of at least 25-30% or more.
• Also check that one-time transition costs were recouped within 6-12 months through ongoing savings.

 3. Productivity and Efficiency

• With accounting and its related processes off your plate, you and your team should be getting more done. 
• Measure how much time outsourcing is freeing up.
• Track how many hours per week you save by not doing accounting tasks in-house.
• See how you’re reinvesting that time into higher-value work like business development, strategic planning, and serving customers.
• Note any increase in key performance indicators (KPIs) for your department or company.

By regularly reviewing these key metrics, you can ensure your outsourced accounting firm is delivering maximum return on your investment. Make adjustments as needed to optimize your partnership and keep your business thriving.

Conclusion

So, there you have it – some key metrics to track to determine if outsourcing your small business accounting is worth the investment. 

Don’t get overwhelmed by all the data and ratios. 

Start with the basics like reduced costs, improved cash flow and better financial reporting. 

See how outsourcing impacts your business’s bottom line and frees up your time to focus on growth. If the numbers don’t lie, you’ll gain valuable insights into the true ROI of outsourcing and whether your provider is delivering as promised. 

Make sure to revisit these metrics regularly to ensure your needs are being met as your business evolves. 

Outsourced accounting may not be for every small business, but if done right, it could be one of the smartest money moves you make.

If you are launching your business and aiming to effectively manage your finances and accounting, it is highly advisable to seek the expertise of a reputable Finance and Management consulting firm like GJM & Co.

GJM & Co., being a prominent outsourcing firm, provides advice and services for Accounting & Bookkeeping as well as offers Virtual CFO & Controller services.

Our team of experienced professionals at GJM can provide you with comprehensive financial solutions and insights to help you achieve your business objectives. Should you have any queries or need consultation, Schedule a Call today or write to us at info@gjmco.com