Here’s a common question that business owners and founders in the Philippines regularly ask themselves: Should I build a team of in-house accountants and bookkeepers or should I engage accounting services to manage the finances of my PH business?
Of course, the answer can often depend on a variety of factors: available resources, company size, company age, cost, financial objectives, management’s financial expertise, investment strategy and much more.
In this article, however, we outline some key benefits of engaging accounting services and identify why it might be exactly what your PH business needs!
1. Compliance is Complex in the Philippines!
Whether you are a small family business, an SME or a large corporate enterprise operating in the Philippines, your company will have an ongoing range of compliance obligations.
As tax and compliance in the Philippines must be considered on a monthly, quarterly, bi-annually (industry dependant) and annual basis, if you do not have a competent accountant or accounting services provider for your business, it will be quite difficult for the company to ensure adherence to the many requirements and obligations under the local PH compliance framework.
By engaging an accounting services provider, your business can benefit from a treasure chest of skills, knowledge and experience to help ensure compliance with all relevant laws, updates on finance and tax legislation as well as all other accounting-connected compliance activities that might relate to the specific industry in which your business is operating.
As such, there is a high chance that one or some of the accountants or bookkeepers working for your accounting provider will already have come across the exact same finance or compliance issue or query that is affecting your business! They may have already resolved a similar issue while working with another client!
The key point here is that when you engage an accounting services provider, you have access to the knowledge, skills and expertise of a team or pool of experts – not just a single accountant or bookkeeper.
This is a significant benefit for a company operating under a particularly complex and far-reaching compliance framework!
2. Independence and Objectivity
It can be a real source of comfort for owners, founders, investors and shareholders to have an external and independent accounting services provider keeping track of company finance and compliance requirements.
The accounting provider can often be the financial Gatekeeper!
In circumstances where the accounting provider is a reputable company with a strong track record, business owners and managers should be able to concentrate on growing the business, confident in the knowledge that their finance function is under control.
For many companies in the Philippines, an annual audit of the company’s finances is required under law. This audit must be performed by a competent auditor that is entirely independent of the company and independent of the accounting provider.
While audit season is generally a busy time for businesses, the audit is a very helpful safeguard system that can help to ensure a company is managing its finances and compliance obligations properly.
However, the statutory audit only happens once a year – at the end of the year. A year can be a long time when it comes to finance management and compliance in the Philippines!
By having an accounting services provider managing and reporting on your business finances on a regular weekly and monthly basis, the business benefits greatly from independent financial oversight and monitoring.
Finally, where there is an independent auditor auditing the work of that independent accounting provider each year, business owners should be able to have full confidence in the financial governance of their business!
3. Technology and Systems
Cloud accounting systems such as XERO and Quickbooks Online are now being used extremely effectively by startups, SMEs and even larger corporates across the Philippines for finance management.
Accounting systems are now efficient, powerful and inexpensive and can help ensure the business has an optimized, automated and progressive finance function.
A big step forward from excel sheets and manual generation of reports!
However, for companies seeking to transition away from the traditional or manual way of managing their accounts and finances to an online finance system, change management is not always easy – particularly if the company does not have the technical expertise in-house with the knowledge (and desire!) to drive the transition to technology!
By hiring an accounting services provider that uses cloud accounting solutions to perform all of its services, your business can really benefit from the following services to move to an online finance management system:
- Set-up and optimization of the cloud accounting system;
- Alignment of the accounting system, and particularly, the Chart of Accounts, with the business model of the company;
- Alignment with the local Philippine compliance framework (e.g. withholding tax requirements);
- Development of streamlined processes and controls for accounts receivable and accounts payable;
- Automated generation of financial reports;
- Tracking of financial KPIs
In short, by selecting an accounting services provider that leverage technology to provide its service, the company can effectively outsource the change management process and transition to a more effective and streamlined online solution for finance management.
The impact of Covid-19 has encouraged many businesses in the Philippines to move their finances online. The future of accounting services through technology is already here!
4. Accounting Processes and Financial Controls
Accounting services providers will usually work in accordance with set systems, processes, timelines and controls. From the provider’s perspective, this is a key requirement for scaling their own business as a service provider.
Engagements are often in the form of a Service Level Agreement (or SLA) between the accounting services provider and the business which would clearly identify the various tasks, timelines and deliverables that must be completed each week, month, year, etc.
However, as a result of this process-driven system of working, the company or client itself can also benefit from aligning with these processes and systems!
Let’s take an example. Let’s say that the accounting provider’s process requires that all company sales invoices or official receipts must be provided to their accountants by Tuesday each week and then recorded in the company books by the following Thursday. If this is followed, in theory, the company can ensure that documentation is provided on a timely basis, that tax filings are submitted on-time and that sales data will be accurate at months end!
5. Enabling Growth and Scale
As mentioned above, when engaging an accounting services provider, your business immediately benefits from a pool of experts, tried and tested systems and processes and a wealth of experience of working in the same industry or market.
However, an accounting provider can also help and support a business to grow.
One example is in the area of recruitment. The costs, resources and time associated with hiring and building an in-house accounting or bookkeeping department are eliminated when a company engages an accounting provider.
For example, let’s say you have an accounting team in-house. What if one of those accountants or bookkeepers leave after 6 months? The company will a) have a position to fill, b) a knowledge gap to restore, c) costs and resources associated with offboarding and onboarding and d) a potential disruption across the finance function of the business.
In contrast, when engaging an accounting provider, if one of the accountants or bookkeepers leave the team, it will be the provider’s job – not the company’s job – to ensure there is an adequate replacement. Any potential disruption due to staffing issues can be avoided!
Another example is when a company has to manage periods of high-growth. Let’s take an online retail business for example. They may go through an unexpected period of growth where sales increase significantly over a short period of time. For an in-house accountant, this can sometimes be a little overwhelming if they do not have the resources to manage the increase in transaction volumes.
However, if this happens, an accounting provider can quite quickly move an extra resource into the team. As the systems and processes are already set up and streamlined by the provider, the new team member should know what needs to be done almost immediately!
In short, by engaging an accounting services provider that relies heavily on processes and systems, a business can really scale without worrying about the finance function being left behind!
CloudCfo – Expert Accounting Services Provider for Businesses in Manila and the Philippines
CloudCfo is the accounting services provider for startups and SMEs in the Philippines.
We help PH businesses to grow their business through the use of cloud accounting technology together with a reliance on robust financial controls, systems and customized processes that align with each specific business model.
Contact the CloudCfo Team today and discuss your accounting needs with our accounting experts!