In regards to managing the financial health of your business, one crucial decision stands at the forefront: in-house vs outsourcing accounting. As a business owner or manager, you are well aware of the significance of keeping your financial records in check and ensuring compliance with tax regulations. However, determining the best approach to handle your company’s accounting needs can be a challenging task.
In this write-up, we will dive into the practical aspects of both in-house and outsourcing accounting, offering valuable insights to help you make the right financial decision for your business.
Let’s get started without further adieu.
What is In-House Accounting?
In-House Accounting refers to the traditional method employed by organisations to manage their financial functions. It involves hiring at least one person, usually an accountant or bookkeeper, to handle the company’s financial tasks. In larger organisations, the in-house accounting team comprises a financial director, along with several qualified business accountants and financial specialists.
This team works directly for the company, giving direct control and customised financial support while fostering a deeper understanding of the organisation’s financial needs.
What does an In-House Accountant do?
An In-House Accountant is responsible for managing the entire accounting and financial requirements of a business, which typically include tasks like —
- accounts payable,
- accounts receivable,
- stock management,
- asset register,
- bank reconciliations,
- inter-entity reconciliations,
- financial management reporting,
- providing business advice,
- and offering strategic advice to support the company’s financial decisions.
What is Outsourcing Accounting?
Outsourcing accounting is when a company contracts with an outside accounting firm to handle its accounting needs, including bookkeeping, payroll management, and financial reporting. These firms can offer specialised expertise, such as services like tax planning and compliance, that may not be offered by an internal team.
For small businesses looking for expert financial support without the hassle of maintaining an internal accounting department, outsourced accounting is frequently an affordable and effective alternative.
What does an Outsourced Accountant do?
An outsourced accountant can handle various accounting and financial tasks, including payroll, accounts payable, accounts receivable, stock management, asset register, bank reconciliations, inter-entity reconciliations, financial management reporting, and provide valuable business advice and strategic guidance.
Companies that specialise in accounting services employ these accountants, and businesses looking for their expertise hire them through a contract or service agreement.
In House vs Outsourcing Accounting: Which One to Choose
It is crucial to have a comprehensive understanding of the disadvantages and benefits of in-house vs. outsourcing accounting before making a decision for your company. Let’s delve into each option to help you make an informed choice about what’s best for your business.
What are the Pros and Cons of In-House Accounting?
If you are considering accounting outsourcing vs hiring an accountant, it’s essential to weigh the following in-house vs outsourcing pros and cons first.
- Integration with the team: In-house accountants become like family within the company. They fit in well with the team, feel connected, and take responsibility for their work. They work together with others towards common goals, providing support and collaboration beyond their financial duties.
- Greater control: With an in-house accountant, you have direct control over their work and can access ongoing support and information promptly.
- Investment and accountability: Providing a salary makes in-house accountants feel more invested in their work and accountable for their performance.
- Finding the right fit: Finding the right accountant can be tricky because you need someone trustworthy who fits well with the team’s dynamics and culture.
- Recruitment time and costs: Hiring can take a lot of time, and if you use external recruiters, it may cost you more money.
- Limited bandwidth: As your business grows, your in-house accountant may have trouble handling the increased workload, and you may need to hire more people to help.
- High turnover: It’s sad when in-house accountants leave because they don’t see enough opportunities to grow within the company, which means you have to go through the hiring process again and again.
- Time and resources for supervision: Training and supervising an in-house accountant can be time-consuming and take you away from focusing on your core business.
- Reluctance to offer feedback: Sometimes, in-house accountants may hesitate to give feedback or share ideas for improvements, which can hinder progress.
- Cost considerations: Having a full-time accountant on staff can be costly, especially with additional expenses for professional development and employee benefits.
- Flexibility concerns: If there’s not enough work for your in-house accountant, it can be uncomfortable to reduce their hours or workload.
- Communication barriers: It’s tough to ask for clarification from someone you consider an “employee” if you don’t fully understand financial matters.
What are the Pros and Cons of Outsourcing Accounting?
If you feel that your business needs a wider range of financial expertise and a professional who can take more control over your finances, hiring an outsourced accountant could be a good option.
Let’s explore the pros and cons of working with an outsourced accounting service in a detailed way.
- Time-saving hiring process: So, is it better to outsource accounting? When you outsource accounting, you save valuable time since the service provider handles the accountant recruitment process for you.
- Focus on your passion and core business: Outsourcing accounting lets you focus on what you love doing most – pursuing your passion and core business activities.
- Expertise and business advice: Outsourced accountants have specialized skills and experience, working dedicatedly to enhance your business’s profitability and cash flow.
- No training or supervision required: No need to spend time training or supervising the outsourced accountant, as they are already skilled, giving you more time for other business tasks.
- Scalability: As your business grows, the outsourced accounting service easily adapts to meet your increasing financial needs.
- Resolving employee productivity issues: Outsourced accountants can help identify and address productivity challenges among your employees related to financial processes.
- Tailored engagements: You have the flexibility to use the outsourced accounting service as much or as little as you need, and the service can be tailored to suit your specific business requirements.
- Improved work/life balance: With the burden of financial tasks off your shoulders, you’ll have more free time to achieve a better work-life balance.
- Limited face-to-face contact: Some business owners prefer in-person interactions, which might be limited to an outsourced accounting provider.
- Risk of choosing the wrong firm: There is a risk of selecting an accounting firm that doesn’t align well with your business’s needs or values, necessitating careful research and understanding your specific requirements.
- Cost considerations: At first glance, outsourcing accounting might appear more expensive, but it’s essential to assess the value of the services provided in the long run.
Key Considerations: Outsourcing vs In-House
When deciding between outsourcing and hiring an in-house accountant, keep these essential factors in mind:
For cost consideration between internal accounting vs. external accountants, outsourcing, in general, may be more cost-effective than hiring a full-time accountant. With outsourcing, you can customise payment terms based on required hours, making the service scalable in relation to your earnings. It allows you to adjust hours as demand levels change, offering flexibility in terms of cost.
While in-house accounting might seem to provide more control over quality, it comes with the responsibility of monitoring their work. Outsourcing services ensure availability when needed and adhere to accounting best practices, ensuring compliance with industry standards and professional duties.
Outsourcing offers more consistency as accounting services have policies in place to ensure precise and accurate work. With an in-house accountant, you might face issues if they lack organisational skills, leading to inconsistent work and potential inaccuracies.
In-house accountants can take sick leaves or resign suddenly, leaving you with unfinished books. Outsourcing ensures a reliable and continuous service without worries of sudden disruptions.
Outsourced services are committed to your business as they aren’t seeking other opportunities like an in-house accountant might. They value your business and remain dedicated to their work for your company.
In-house accountants work set hours, but outsourcing provides availability whenever you need them, even during emergencies or urgent situations.
By carefully considering these above factors, you can make an informed decision that best suits your business’s financial requirements and long-term goals.
Are you in need of outsourced accounting services? Seed Plus is here for you! We are your trusted business partner, dedicated to contributing to your growth. With our expertise, we make sure that your financial data is accurate and organised, giving you easy access to essential information. We offer flexible services based on your needs, including bookkeeping, financial statements, cash flow budgeting, and more. Let us handle the numbers while you focus on your core business, and together, we’ll achieve success and profitability.
In short, deciding between in-house vs. outsourcing accounting depends on your business’s needs and goals. For small organisations seeking a dedicated team with a deeper understanding of their culture, in-house accounting might be the right fit. On the other hand, if your business is focused on growth and requires specialised expertise, outsourcing accounting can be a cost-effective and efficient solution. Ultimately, the decision depends on your business’s unique requirements, goals, and available resources. Carefully assess factors such as cost, quality control, consistency, dependability, loyalty, and availability before making a choice.
When should you outsource accounting?
What is the in-house bookkeeper’s salary?
Can I use both Internal Accounting and External Accountants simultaneously?
Contact our office: (03) 6153 0180 to discuss your scenario