As operating accountancy and payroll becomes ever more complex, many businesses are considering outsourcing these functions.

While there are some important benefits related to out sourcing, some are put off the idea by the amount of information it will be necessary to provide to the outsourcing company, the potential costs and the apparent loss of control.

The main consideration must be “what are the benefits to me and my business if I outsource my accountancy and payroll functions?” Will you be able to use the time saved more profitably? Perhaps through spending more time promoting your business, networking, building stronger relationships with customers, sourcing new lines or suppliers, and in general, doing what you do well, focussing on the sharp end of your business?

Many small business owners like to be in total control of all financial aspects of their business, but need to consider whether they have the necessary skills to keep up with the many changes resulting from recent legislation, or would it be better to outsource to someone with the specialist knowledge and skills who could do the same job, in a more cost effective way.

There is admittedly a lot to consider, you will need to check that the outsourced supplier is properly qualified and registered with the Financial Services Authority, and happy to provide references from other clients of your size and market sector. Look for qualifications such as ICB (Institute of Certified Bookkeepers), ACCA (Association of Chartered Certified Accountants) CIMA (Chartered Institute of Management Accountants), and AAT (Association of Accounting Technicians). You should expect to find that they use various accounting software packages such as advance spreadsheets, Sage, MYOB, IRIS, QuickBooks and Xero.

Depending upon the services you choose to outsource you will need to provide information to the outsourcing company. If you intend to outsource all aspects of the company’s finances you will need to provide:

There might be some further information needed, as requirements change depending on the business sector, as well as each individual client's needs.

The level of costs will, of course, vary depending on the number of services to be provided, and the chosen firm. Making a decision on cost rather than capability and reputation can be a costly mistake, especially as the provider might not be qualified to provide certain services and you may not receive the right service or advice on time. This can not only get your business in trouble with tax authorities, but can cost the business financially in penalties and having to put things right.

Payroll in particular is becoming increasingly complex as a result of changes in taxation and ever increasing legislation. Errors can end up being costly, and there’s always the risk of making a late statutory submission.

Employing a dedicated payroll manager can be very costly, whilst the ever changing legislation and increased administrative burden make it difficult for non-payroll experts within a company to keep up. When you add in the need for cover during staff holidays or in the event of illness, outsourcing payroll to a specialist provider makes sense on many levels.

Outsourcing your payroll management to a specialist payroll provider will enable them to handle every aspect including making BACS payments, issuing payslips online, organising P45s, P60s and P35s as well as any reports. They will be able to liaise with third parties such as HMRC and pension providers and supply you with a hard copy of pay slips, P45s, P60s etc.

You can also use your outsourced payroll provider to manage your Auto Enrolment obligations and liaise with the chosen pension scheme, keeping track of the changes relating to age and status relevant to the scheme from the information they already hold from administering your payroll. Not all outsourcing companies will be qualified to give advice as to which scheme to choose, but they should all have the appropriate HMRC approved software to administer your scheme.

Making the right choice of outsourced accountancy and payroll provider will save time and money, avoiding penalties for late filing or non-compliance, your time freed up for more profitable activities, costs on running your accounting and payroll practices in house saved and the cost of outsourcing is, of course, tax deductible.

Outsourcing makes sense.