As outsourcing has permeated every area of business, its benefits are now being introduced to the small-business community. Back-office accounting outsourcing services can process payroll, handle HR, and service accounts receivable and accounts payable using outsourced workers and dedicated software. This can potentially save time and money while streamlining financials into one monthly statement. What’s not to love?
When handing over financial information to any outside service, concerns about security, visibility of documentation, and credentials of the outsourced workers is of paramount importance. Outsourcing back-office services is one of the hottest trends in the global marketplace, but can it help your small business?
L.A.-based IQ BackOffice serves more than 60 companies worldwide, with hundreds of divisions and 15,000 workers using IQ BO’s proprietary accounting software. IQ BackOffice CEO Ken Johnson oversees the company’s 600 employees located throughout California, the Philippines, and India.
“IQ BackOffice offers a full suite of products and services starting with transaction processing,” Johnson explains. “We have software that manages billing and cash application for accounts receivable. We also do bank reconciliation and complete full-service accounting. We produce monthly financial statements using our cloud-based Archimedes technology.”
Johnson elaborates on how outsourcing back-office accounting can help businesses large and small.
1. Outsourcing Accounting Reduces Costs. “The real value [of outsourcing accounting] is that it reduces costs. It generally provides better visibility into a company’s financial operations and better control. Sometimes people think when they outsource they will lose visibility of their accounting, but we actually provide more visibility because we scan documents and make them visible online. We create greater efficiency by automating the entire process.”
2. Back-Office Accounting Uses Dedicated Software. “Our proprietary Archimedes cloud-based processing software sits on top of a business’s current accounting platform. We still use the business’s accounting platform as the system of record. As invoices get approved, they ultimately get moved into the accounting platform for payment and disbursement. Either we do the processing work, or we license the Archimedes software and the organization uses it themselves. It’s very intuitive. We work with large companies where we implement the software, and a lot of users bypass the training and start using it.”
3. Fees for Outsourcing Services Are Based on Your Needs. “IQ Back Office doesn’t charge per user, but on a transactional basis. For accounts payable, we have a fee-for-invoice, which is all-inclusive for every employee. We don’t charge extra for emails or phone calls or follow-up. We build an approval matrix that includes all of the users within an organization. Rather than charge a company $5,000 a month for this service, we charge $3 an invoice. Producing monthly financial statements is done on a fee basis. If someone wants to use our complete service offering, we provide one monthly fee that includes financial statements and all the transaction processing, as well as all disbursements.”
4. Your Documents Are Stored Securely. “We use a third-party data vendor called Rackspace from Chicago. It’s a tier-one hosting facility with a high level of security. I can’t even get into the facility. We have a backup facility in Austin, Texas. Private and publicly traded companies are reliant on us to store all their historical invoices for at least seven years. Our offshore team never touches any physical invoices. They access the data through Archimedes remotely.”
5. Cloud-Based Financial Data Allows for Quick, Accurate Reporting. “The cloud is a very secure method to store and retrieve all financial data, and it gives you tremendous flexibility. With cloud-based solutions, you can report on financial data and provide a good overview of a business’s financial health. If you’re not cloud-based, it makes it much more difficult to capture this data and report on it on an ongoing basis. With cloud-based reporting, a company can drill down to the actual invoice associated with each line-item expense.”
Johnson also offers some advice and questions you should ask when considering back-office accounting for your small business: “Will they reengineer the process and put best practices in place? Demand a software demo to really understand what they’re offering and how they charge for their services. What’s included in the base service price, and are there extra charges later? What is their implementation plan to get you up and running? If it’s much more than eight weeks, that would be a red flag.
“Understand what their quality metrics are and what their service-level agreements are. What is their commitment to turn around invoices from an accounts-payable standpoint? And most importantly, what is their commitment to deliver a monthly financial statement? At month’s end, will they deliver a statement in five, 10, or 15 days? If it’s past seven days, they are not providing good service. For a lot of businesses, the key to success is understanding what costs were in the prior month; then they can react and do something about it. That’s very powerful information.