Written by: Todd Ellis, CPA, MST, CGMA
Every business, whether large or small, needs reliable accounting support to keep operations running smoothly—ensuring cash flow is managed, bills and employees are paid, and the business’s overall financial health is well understood. As a business owner, you might wonder whether it’s better to maintain your accounting function in-house or outsource it to a firm that specializes in these types of accounting services. Each option has advantages and challenges; the decision ultimately depends on your business’s unique needs and goals.
The Traditional Approach: In-House Accounting Teams
Historically, businesses have relied on in-house accounting teams to handle their financial operations. This setup involves hiring one or more employees, depending on the size and complexity of the business, to pay the bills, send the invoices, close the books, and produce the financial reports. In-house teams can range from a single bookkeeper in a small business to a full-fledged accounting department in larger organizations.
Benefits of In-House Accounting Teams
- Dedicated Focus: An in-house accounting team works exclusively for your business. This means they are fully dedicated to your company’s financial well-being, providing focused attention and immediate availability when issues arise. They are deeply familiar with your business operations, which can lead to quicker decision-making and problem-solving.
- Cultural Alignment: Employees in your organization naturally align with your company’s culture and values. This alignment often translates into smoother communication and a better understanding of your business’s unique needs and goals.
- Immediate Access: Having an on-site accounting team means you have immediate access to financial expertise whenever needed. This can be particularly valuable in situations that require quick financial analysis or urgent problem resolution.
Challenges of In-House Accounting Teams
- Hiring Difficulties: Finding qualified accountants is extremely challenging today. The current shortage of accountants means hiring can be a long, expensive, and risky process. Additionally, most business owners lack the technical expertise to vet accounting candidates properly, which can lead to costly hiring mistakes.
- Fixed Costs: An in-house team represents a fixed cost, including salaries, benefits, and ongoing training. This can be a significant financial burden for smaller businesses or those with fluctuating needs.
- Need for Multiple FTEs for Varying Levels of Ability: It is unlikely that a business will find one person who can (or will) handle basic transaction processing, advanced accounting, AND strategic financial planning and analysis. This means that a business owner may need to overhire FTEs to get the right range of abilities.
The Modern Solution: Outsourced Accounting Teams
With technological advancements and the shift to paperless operations, outsourcing accounting functions has become increasingly popular. Outsourced teams, often operating remotely, provide a range of services, from basic bookkeeping to complex financial analysis and everything in between
Benefits of Outsourced Accounting Teams
- Cost Efficiency: Outsourcing is more cost-effective for small businesses and startups than hiring a full-time in-house team. You only pay for the services you need, which can result in significant savings, especially during periods of low activity.
- Access to Expertise: Outsourced teams bring a broad range of expertise and experience that is not likely available in-house. These professionals often have experience across multiple industries and stay up-to-date with the latest regulations and best practices. This can be particularly valuable when dealing with complex financial matters.
- Scalability: Outsourced accounting services are highly scalable, allowing you to easily adjust the level of support based on your business’s needs. Whether you’re expanding, downsizing, or facing seasonal fluctuations, an outsourced team can quickly adapt to provide the right level of service.
Possible Challenges of Outsourced Accounting Teams
- Limited Hands-On Access: Outsourced teams often work remotely, so they may not be the best fit for businesses that rely heavily on paper-based processes. For example, an outsourced solution might be less efficient if your company frequently writes manual checks or makes in-person bank deposits.
- Potential for Communication Gaps: While many outsourced teams excel in communication, a lack of physical presence can sometimes lead to misunderstandings or delays in addressing urgent issues. It’s essential to establish clear communication channels and expectations from the outset and to work with a provider who is quite experienced in working with a lack of physical presence. At WS, we have significant experience working remotely with clients. We establish these communication channels at the onset with an in-depth onboarding process that communicates clear communication expectations and guidelines.
Making the Decision: In-House or Outsourced?
Consider your business’s needs, resources, and long-term goals when deciding between an in-house accounting team and an outsourced solution. Here are a few key questions to guide your decision:
- What is the complexity of your financial operations? If your business requires specialized expertise or is subject to complex regulations, an outsourced team might offer the breadth of knowledge you need.
- How predictable is your workload? If your accounting needs fluctuate significantly throughout the year, outsourcing may provide the flexibility to scale services up or down as needed.
- What is your budget for accounting services? Outsourcing can often provide a more cost-effective solution, particularly for smaller businesses or those in the early stages of growth.
- How much luck are you having finding and retaining good people for your accounting team? An outsourced accounting team takes on the risk of hiring, retaining, training, and replacing accounting staff, so you do not have to.
Both in-house and outsourced accounting teams offer distinct advantages and disadvantages. The right choice for your business depends on your specific needs, goals, and resources. For many companies, a hybrid approach—using both in-house and outsourced resources—can provide the best of both worlds.
To make an informed decision, consider consulting with a provider of outsourced accounting services to explore your options. They can help you weigh the pros and cons of your unique situation, ensuring that you choose the solution that best supports your business’s financial health and long-term success.
If you are considering a shift to outsourced accounting or want to explore how an outsourced solution could work to your benefit, let’s talk! Our team is committed to offering outsourced accounting solutions tailored to meet your specific business needs with teams who have worked for and advised various enterprises and organizations.