As the intensity of the pandemic wanes, a more serious threat of global economic recession is growing. Very recently, the head of the IMF suggested significant chances of a global recession in 2023 due to widespread inflation, a massive hike in interest rates, a slowdown in China’s economic expansion and the escalation of sanctions associated with the Russian-Ukrainian conflict. Given these disruptions which also follow each other, any business will no doubt feel anxious. A few strategies to help businessmen survive such economic crises are flexible organizational system, efficient allocation of resources and reduced overhead. Business operations outsourcing brings all of these strategies together under one umbrella.
The financial condition determines the ability of any business to survive in the market. Therefore, bookkeeping and accounting operations are one of the major business operations that should be outsourced, especially when a recession is imminent. Entrepreneurs, due to their habit of undertaking accounting practices themselves, may be tempted to cut accounting services during the economic downturn. However, during this period, the support of accountants is even more crucial. The outsourced accounting practice is a prudent strategy to better manage a company’s finances. For virtually any business, large or small, this is an economical and convenient option. It is one of the reliable foundations to keep businesses afloat during an economic crisis.
Why outsource accounting?
Spending on an exorbitant in-house team in the presence of feasible alternatives outside the organization is no longer a wise business decision. Outsourced accounting offers many advantages. They include professional expertise, data consistency, time management, secure accounting, quality control, access to the latest technologies and above all cost optimization. Many companies outsourced bookkeeping or accounting as a tactic to stay afloat when the global economy bottomed out during the Great Recession of 2007-2009.
Benefits during the economic downturn
Business accounting and tax systems are under unprecedented pressure during such uncertainties. Thus, the broader perspective of outsourced accountants on the local, national or international financial situation comes to the rescue of businesses to help them survive the recession.
It does not matter whether outsourced accounting services are purchased locally or globally, the important fact is that they provide flexibility to the business and reduce its costs. Additionally, today’s technology makes these services available online, which helps to further reduce costs.
A business can make long and short term strategic decisions using accurate forecasts created using the latest technology, good bookkeeping and accounting expertise. Such strategies are essential in these stressful times. These strategies can also help reduce the tax burden.
In addition, many companies make deep and indiscriminate spending cuts during recessions. These difficult financial times require getting rid of unnecessary expenses. The outsourced accountant can help identify achievable cost reduction opportunities, prioritize selected revenue streams, and determine how to do so without significantly harming the company’s sales or profits. The financial implications of downsizing can be understood by using the expertise of accountants, who can also help undertake such measures. On the other hand, it is also difficult to fire employees and recruit them again after market changes. But outsourced accountants can easily adapt to changing market conditions.
The need for office space is removed when there is not a large corporate staff, saving overhead. Businesses can reallocate saved resources to areas of the business that directly contribute to success or provide return on investment with reduced overhead.
Unlike typical economic downturns, this recession gave businesses ample time to take the appropriate steps to stay afloat during this time. The demand for outsourced accounting services has also increased. This increase is evident in trends in the global finance and accounting outsourcing market, which forecasts a value of US$53.4 billion by 2026, from US$37.9 billion in 2020, with a CAGR of 5.9%.
Outsourced accounting makes it easier to grow a business, identifies areas where costs can be saved without sacrificing quality, and zero-based budgeting can be practiced. It is the most practical choice, with or without a recession, to upgrade the accounts payable system and web technologies while making a profit.
The opinions expressed above are those of the author.
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