Outsourced Accounting vs Hiring In-house: What Business Owners Should Know

Small and medium sized businesses are usually at a crossroads when it comes to their bookkeeping and accounting, especially if they’re growing. “Should we hire a Controller or should we try to do it ourselves?”

There’s a third option that gets frequently overlooked: outsourced accounting services.

Outsourced accounting didn’t really exist ten years ago, but small businesses are turning to full-service outsourced accounting firms more often to increase efficiency, add professionalism and save time and money.

Most business owners assume that having an in-house bookkeeper, Controller, or CFO who can pay bills, run payroll and manage company finances is the best scenario for their business. They believe having a person down the hall will ensure they have a clear view of the company’s financial position, but this isn’t always the best solution.

In this post, we’ll explain why having access to greater financial expertise can be game-changing for small businesses looking to grow.

WHAT ARE THE BENEFITS OF OUTSOURCED ACCOUNTING?

1. Greater Financial Expertise.

When you hire someone in-house, you’re typically assigning most, if not all, of your financial responsibilities to one person. This person may quickly become swamped with work, and often be forced to take on projects and tasks where they lack expertise, putting the financial health of the business at risk.

When you outsource the accounting and finance function, you get the expertise of a whole team. The person with the most appropriate level of knowledge can be assigned work and complete projects more effectively.

Greater expertise means improved financial reporting accuracy. Additionally, outsourcing your accounting means that a team of several people are in place to provide several layers of oversight, reducing mistakes and the potential for fraud.

Outsourced accounting is often most impactful at higher levels, because most small to medium-sized companies cannot afford to have a full-time CFO on payroll. But this can also be true at lower levels for many organizations.

With outside help, you can utilize specific expertise only when it’s necessary. For example, your business can ask for M&A analysis, succession planning, annual budgeting, or strategic financial planning when it makes sense for your business.

Generally speaking, these specific activities (M&A analysis, succession planning, annual budgeting) are not something small businesses need on a weekly or even monthly basis. As a business owner, you may just want to ensure your financial records are organized and accurate. But when it comes time to do annual budgeting, having an expert in the room can be immensely beneficial.

[Learn our 12-step process for annual budgeting for small businesses]

In addition to having more accurate records, you have the opportunity to delve deeper into your finances. With further analysis, you can find more opportunities to bolster revenue or cut spending to keep your business as lean and profitable as possible.

In fact, if you’re currently outsourcing your accounting function and all you’re getting is basic bookkeeping and balance sheet reconciliation, then you’re not really benefiting. True outsourced accounting should include holistic financial management and both operational and strategic advice.

At TGG, we dig deep into financial data that can help smaller companies run with the big dogs. We’re not just providing bookkeeping services, we’re advising clients on how to maximize cash flow and set their business up for long-term success. This can truly turn the tide for a small business and point them in the right direction.

In addition to having more accurate records, you have the opportunity to delve deeper into your finances. With further analysis, you can find more opportunities to bolster revenue or cut spending to keep your business as lean and profitable as possible.

In fact, if you’re currently outsourcing your accounting function and all you’re getting is basic bookkeeping and balance sheet reconciliation, then you’re not really benefiting. True outsourced accounting should include holistic financial management and both operational and strategic advice.

At TGG, we dig deep into financial data that can help smaller companies run with the big dogs. We’re not just providing bookkeeping services, we’re advising clients on how to maximize cash flow and set their business up for long-term success. This can truly turn the tide for a small business and point them in the right direction.

2. Accuracy and Timeliness.

As a business owner, accounting and financial recordkeeping can be time consuming and confusing. This is even true for some of the most financially-inclined minds.

With TGG, you benefit from a highly professional firm with, collectively, hundreds of years of accounting, financial, and operational experience.

Multiple eyes will make for more accurate numbers. Having a dedicated team to review your books will vastly improve the accuracy of your financial reporting.

Outsourced accounting services are inherently flexible. We have the ability to cover vacations, sick time, transitional periods, and all sorts of other things that may otherwise disrupt a financial reporting timeline.

If you just have one person working in-house and they get sick for an extended period of time or go on vacation, your financial records can become disjointed or you may fall behind on your reporting schedule.

3. Best Practices From Working Across Industries.

We work with hundreds of clients, across all industries. This exposure allows us to provide industry benchmarks and identify any potential weaknesses or opportunities for business improvement. Knowledge and data are fuel for your business.

And there’s no need to reinvent the wheel. Most firms that provide outsourced accounting services have seen it all and know how to handle all kinds of different financial situations.

Using best practices and adhering to GAAP (Generally Accepted Accounting Principles), we’re able to have built-in efficiencies that keep our process organized.

We know what works and what doesn’t work. A more experienced accounting service will be able to make suggestions and share ideas to improve business operations and financial performance.

4. Checks and Balances.

No one wants to think about fraud or theft, but having just one person handling cash, payments and the accounting significantly increases the potential for fraud or theft. It happens to almost two thirds of small businesses, so it’s much more common than most people think.

Bringing in an external accounting firm offers more security. Putting systems and procedures in place to provide internal controls can prevent fraud or theft before it happens–further protecting your business.

A layer of review also ensures there will be fewer mistakes, saving time and frustration down the road. With established processes and multiple checks and balances at every step, your finances will be more accurate and more timely.

5. Cost Savings.

As a small business, it’s possible you may not need someone to handle your finances full-time. Outsourcing this function can offer more flexibility and cost-savings.

Bringing in an outsourced accounting team can save you money and keep your books organized and accurate. Plus, your employees can focus on growing the business and not doing bank reconciliations or journal entries.

Additionally, outsourced accounting firms provide access to a strategic financial advisor at a fraction of the price. Hiring someone like this in-house would be prohibitively expensive for your business.

In-house personnel have additional costs beyond salary. Benefits, payroll taxes, office space, IT equipment, etc all are incremental costs for in-house personnel. Most businesses assume that these additional costs represent 20-30% on top of salary alone. Using an outsourced accounting model, you save money and apply it more strategically to your business.

WHAT ARE THE SIGNS OUTSOURCED ACCOUNTING IS RIGHT FOR YOU?

As a business owner, it can be difficult to know when the right time is to bring in outsourced accounting services.

Some situations where it may make sense to bring in outside help include:

• Your company is growing quickly and you want increased oversight and financial management.
• Your in-house bookkeeper recently quit and you need a quick solution.
• Your office manager is handling your bookkeeping and your business is scaling.
• You continually find yourself in a situation where your bookkeeping seems too complex and you worry about the accuracy of your financial statements. (You’re not alone, many business owners face this concern and determine it’s time to call in backup.)
• Your business is preparing for a sale.
• You want to find ways to increase profits.

Bringing in external accounting assistance can be beneficial for businesses in nearly any industry– construction, manufacturing, non-profits, marketing, technology, and professional services.

Every business is different, but there are certain accepted accounting standards that make this function a perfect candidate for outsourcing to a knowledgeable and experienced team. Okay, I See the Benefits but I Still Have Questions.

This post was reviewed by our team of accounting and financial experts. TGG’s mission is to make business owners’ lives better through excellent financial management. We strive to provide the most up-to-date and objective information on accounting-related topics so our readers can make informed decisions based on factual content. All posts undergo a review process with at least one member of our Leadership Team to ensure accuracy.

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