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 now, 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.

COMPARING IN-HOUSE ACCOUNTING VS OUTSOURCING

In-house accounting and outsourcing are distinctly different in both approach and outcome. In-house accounting involves managing finances internally. You might have more direct control but this often comes at a higher cost and with limited expertise. In terms of in-house accounting vs outsourcing cost, outsourced accounting provides a diverse range of expertise and advanced technology, typically at a more economical rate

While in-house accounting may offer closer oversight, outsourcing stands out as the optimal solution for many businesses, particularly for its efficiency, cost-effectiveness, and ability to adapt to varying needs. This makes outsourcing a superior choice for businesses aiming for strategic financial management without the overhead of an internal team.

WHAT ARE THE BENEFITS OF OUTSOURCED ACCOUNTING?

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 is in place to provide several layers of oversight, reducing mistakes and the potential for fraud.

Tailoring Your Services.

With outside help, you can tailor your services and utilize specific expertise only when it’s necessary. For example, you 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

Delving Deeper into Your Finances.

In addition to having more accurate records, outsource vs in-house accounting gives you 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.

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.

When comparing in-house vs outsourcing accounting, you’ll find that 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.

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. TGG’s repertoire of industry knowledge and data act as fuel for your business.

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.

Checks and Balances.

No one wants to think about fraud or theft, but having just one person handling cash, payments, and 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.

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, and IT equipment all are incremental costs for in-house personnel. Many businesses estimate that these supplementary costs account for an additional 20-30% on top of the salary itself. Using an outsourced accounting model, you can save money and apply it more strategically to your business.

WHAT ARE THE BENEFITS OF IN-HOUSE ACCOUNTING?

In-house accounting provides direct and immediate access to financial data and accountants, which can be crucial for businesses requiring real-time financial decision-making.

The in-house team is deeply integrated into the company’s culture and operations, fostering a closer alignment with the company’s immediate goals and strategies. This proximity allows for a more personalized approach to managing finances, potentially leading to quicker responses to internal financial queries and issues. Additionally, having an in-house team can lead to stronger internal controls as the staff is directly invested in the company’s success and better understands its intricacies.

However, it’s worth considering that these benefits come with their own set of challenges, such as higher costs for salaries, benefits, training, and infrastructure. Small to medium-sized businesses, in particular, may find these costs burdensome, especially when compared to the scalability and diverse expertise offered by outsourced accounting services. Ultimately, while in-house accounting has its advantages, outsourcing can often present a more cost-effective and flexible solution for businesses looking to optimize their financial management and focus on growth.

COST COMPARISON: IN-HOUSE ACCOUNTING VS. OUTSOURCING SERVICES

When weighing the decision between in-house accounting vs outsourcing, one of the most critical factors for business owners is cost.

In-house accounting typically involves direct expenses such as salaries, benefits, training, and overhead costs associated with maintaining an employee or a team. These costs can escalate quickly, especially for small to medium-sized businesses.

In contrast, outsourcing accounting services often leads to a reduction in overall expenses. Outsourced firms provide a team of experts and the latest technology, eliminating the need for individual employee training and the costs of accounting software or hardware. Moreover, outsourced services offer a scalable solution, allowing businesses to pay for only the services they need, when they need them. This flexibility can be especially beneficial for businesses with fluctuating accounting demands.

Remember, it’s important to note that the most cost-effective choice can vary based on the specific needs and size of the business, making a detailed cost-benefit analysis essential for an informed decision.

WHAT ARE THE SIGNS THAT 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, nonprofits, marketing, technology, and professional services.

SO, IS IT BETTER TO OUTSOURCE ACCOUNTING SERVICES?

When comparing in-house accounting vs outsourcing pros and cons, the balance often tilts in favor of outsourcing, especially for small to medium-sized businesses seeking efficiency and scalability.

Outsourced accounting provides access to experienced professionals and advanced technology, without the significant overhead associated with full-time staff. This not only streamlines financial management but also allows business leaders to concentrate on core business growth and innovation.

At TGG Accounting, we specialize in providing comprehensive outsourced accounting solutions tailored to your business needs. Contact us today and discover how we can partner with you to transform your financial management and drive your business forward.

Matt Garrett( Founder & CEO )

Matt Garrett is the Founder and Chief Executive Officer of TGG. He is a regular speaker across the country on behalf of Vistage educating business owners on the need for sound financial practices, and is Vice President of the Board of Directors of FINACA. Under Matt’s leadership, TGG has received the following recognition: INC. 5000 top companies in the U.S. five years in a row; one of “San Diego’s Fastest Growing Companies” the past four years; and is among San Diego’s “Best Places to Work.”