Outsourced vs. In-House Accounting

The decision of whether to outsource your accounting or keep it in-house is an important one whatever the size of your business.  Did you know that most business owners rank their accountant as the #1 most important job to their success? 

Accountants are entrusted with company financials and are responsible for sharing accurate and timely financial data with the leadership team to ensure that the decisions that are being made about the future of the company are based in reality, not just a “gut feel”. For those businesses that are in high-growth mode, those pivoting industry, reducing workforce size, or preparing for an acquisition, the need for accurate financial data and accounting services can jump to a high priority overnight.

At Signature Analytics, we want to make sure you have all the data you need to make the right decision for YOUR business.  Let’s discuss the differences between and benefits of outsourced accounting services vs. in-house accounting hires.

There are pros and cons to both outsourcing and hiring in-house staff for accounting functions. Here’s a look at some of the key considerations.

The Pros of Outsourced Accounting Services:

Businesses today are increasingly turning to outsourced accounting leaders to help turn around a struggling business and/or enhance profitability for many different reasons.

Current revenue performance may be declining or stagnant quarter-over-quarter and year-over-year, signaling a dire situation if not addressed.

Current accounting technology and processes may not be driving desired results.

Disruptive market and/or industry competitors have changed the “rules of the game” and there is no CFO-level business advisory role in the company to conduct in-depth forecasting and scenario planning in this new environment. 

The historically hands-on business owner or CEO no longer has the time or expertise to oversee critical changes in the accounting function.

From strategic direction to process changes to accounting team management. Bringing in an outsourced accounting partner can free the owner or CEO to concentrate on other aspects of the business, including providing visionary oversight of the larger organization.

Outsourced accounting teams bring an external perspective to add market-based clarity to the accounting department. With an outsourced accounting team, the business can gain essential expertise to strategically expand market influence.

Based on a strong track record of success in a variety of markets, an outsourced accounting partner can develop and implement new strategies and processes and introduce effective technologies that can update and upgrade the way you do business. An Outsourced CFO business advisor can make the tough decisions necessary to increase efficiency, control costs, and better align resources.

Outsourced accounting can save business owners money

Hiring an outsourced accounting team is more affordable than hiring an entire in-house accounting team. Hiring in-house incurs expensive overhead costs including costs regarding hiring and onboarding, PTO, health insurance, retirement, vacation, workers’ compensation, sick days, and more.

Outsourced accounting can save business owners time and increase profitability and operational efficiency

When you bring in an outsourced team, they’re ready to go.  You save time on training, and while there are time commitments to every outsourced relationship, mentoring, training, onboarding, and managing are removed from the hiring company’s to-do list. 

An outsourced accounting team will have experience in many industries and may be able to provide efficient ways of addressing old problems.  The fresh eyes of an outsourced team may call to light operational gaps or unseen drains on your profitability that can be addressed immediately. 

Outsourced accounting increases access to greater skills and resources

When you hire an in-house accountant, you usually hire a single individual. When you outsource, you have access to an entire accounting team and their expertise. Your day-to-day accounting process from accounts payable and accounts receivable to month-end close and everything in between is handled by professionals with years of experience providing accurate relevant and timely numbers to businesses across industries. If you need a controller, we have controllers, if you need an accounting manager, that can also be accommodated.  You’re not stuck with one person’s limited experience or skill-set. 

Outsourced Accounting can reduce the likelihood of fraud

Research from Price Waterhouse Coopers PwC states that in 2022 46% of surveyed organizations reported experiencing fraud, corruption or other economic crimes in the last 24 months.

Moreover, private companies and small businesses were most often victims. Up to 42% of them fell victim to fraud, with median losses of $164,000. Claims of this size are quick to shut the doors of most small, and even mid-sized businesses.

But why does internal fraud occur more frequently with in-house accountants? Small businesses typically don’t have the same checks and balances in place that large enterprises do.

Small businesses falter when it comes to internal controls. Moreover, with just one person responsible, there is no room for correction.

The Cons of Outsourcing Your Accounting 

With all the benefits that can be realized by outsourcing your company’s accounting team, why would a small to mid-sized business not want to implement this likely competitive advantage? Here are some possible reasons:

The business owner or leadership team wants to maintain full internal control amongst current staff (perhaps for a family-run business) – even if that means sacrificing potential benefits noted above.

• Aspects of the business operation might be deemed confidential or sensitive to a level that rules out bringing in a fractional resource.
• Current leaders want to remain “hands on” in running day-to-day company operations, even if they have little time to address the big-picture strategic direction.
• Although outsourcing pricing is usually custom based on company needs, and includes a value proposition designed for near- and long-term ROI, the business might not be able to financially engage the services of a fractional Outsourced Accounting firm in the short-term.
• The current company culture is in a fragile state and it is feared (rightly or wrongly) that bringing in an external resource will cause unwanted ripples.

Outsourcing is growing in popularity. Hiring an outsourced accounting service provider means your accounting team is not on-site 9 – 5 Monday through Friday… Then again, post-COVID, that model is fading away. 

Accounting isn’t the only function that business owners are outsourcing. 

In today’s ever-expanding “gig economy,” outsourcing entry-level tasks and job roles has become commonplace. But a growing number of organizations are exploring and adopting outsourcing for higher-level functions, too. Small to mid-sized organizations are increasingly outsourcing their non-essential functions – from marketing to IT to HR and of course, accounting – and finding success with this new paradigm.

Many aspects of your business can be outsourced. For example:

• Outsourced Marketing Services
• Outsourced Sales Teams
• Outsourced IT Management
• Outsourced Customer service (offshore, or onshore)
• Outsourced Admins or Personal Assistants
• Outsourced Shipping and Logistics Management

More and more businesses choose to outsource functions within their business to free up their own time, to unburden their existing staff, and access greater levels of experience so the leadership team can focus on what they do best: running their business. 

Outsourced vs. In-House: What Option is Best for My Business?

At the end of the day, the decision between outsourced and in-house accounting is up to you as a business owner. It depends on you, your specific accounting needs, and your budget.

It’s more likely for large corporations to have their own accounting departments. Why? Because they have tight structures and very traditional internal controls.  For more flexible businesses with modern business structures, outsourcing becomes a much more scalable model.  For businesses that are getting aligned with the new world of work in which skill overrides geography and resources and flexibility are more important than strict control, the outsourced model is a veritable no-brainer. 

The Bottom Line

Any business needs to weigh outsourcing’s advantages and disadvantages before taking that plunge. Nonetheless, the reasons for outsourcing can often outweigh the reasons against it. Certainly, for many businesses, having access to accurate financial data, accurate reporting, and scalable finance and accounting leadership can be the difference between long-term success and poor business decisions. 

At Signature Analytics, we support our clients’ day-to-day accounting functions, including:

• Invoicing
• AR management
• Bill processing
• AP management
• Forecasting
• Reporting
• Monthly close
• And more…

Ready to get started with outsourcing your day to day accounting services? Talk to an expert today.