If you’ve been running a small business for a few years, it’s likely that your questions have evolved from the earlier days of “How do I attract more customers ?” to questions more along the lines of “How can I utilize my time better?” and “What questions don’t I know to ask that could grow my business faster?”
You might be evaluating how productive and profitable your systems are, including how you’ve been managing your bookkeeping.
How much does it cost to get a bookkeeper on board?
How much is the pay scale for an accountant?
Being a business owner, you know it’s more than just the cost of hiring or their salaries, but also the additional costs of just having an employee.
A Bad Accountant is Bad For Business
Small and mid-sized businesses need a team of at least 5-6 employees for financial operations, each with different roles. The progress in your business and its size will decide if you need to employ a full accounting department with roles such as staff accountant, bookkeeper, accounting manager, CFO, and controller.
Wages or salaries, plus the cost of benefits, PTO, IT, overhead, and overtime-these fully loaded costs add up for setting up an accounting department of your business. There are benefits you have to give employees without question too.
In-house accounting has been the traditional form of business bookkeeping around the world, but companies are increasingly turning to outsourced accounting solutions. With advancements, many businesses are transitioning to outsourced accounting services as a more cost-effective, efficient, and viable alternative to in-house accounting.
Outsourcing your bookkeeping and accounting simplifies budgeting the cost and helps remove the burden of hiring, managing, retaining, and Training Staff. Also in companies, it’s been difficult nowadays to get the best out of the employees.
3 Common Costs Associated With In-house Accounting
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Wages and Benefits
Wages are fairly predictable costs, but they can vary depending on various factors. These include the type of business you’re in, its location, the volume of accounting work, and the accountant’s skills and experience. You might also have to provide benefits, such as healthcare and retirement plans.
Other expenses are payroll taxes and workers’ compensation. Hidden costs include employee turnover, overtime, embezzlement of funds, and penalties and fines. Inexperienced accountants may make mistakes that might end up costing you more in lost opportunities.
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Overhead Costs
An in-house accounting department will need resources such as office space, supplies, computers, and other equipment. You’ll also need to invest extra costs in hiring, training, and managing them.
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Time
Most people don’t consider this intangible cost when opting for an in-house accounting department. You must analyze the time spent on handling accounting issues versus the value you receive. Time spent hiring, training, and handling employee turnover could be better used in increasing your overall productivity.
What Are the Benefits of Outsourcing Accounting Services?
Outsourcing solves most of the inefficiencies associated with in-house accounting. One of its biggest advantages is the significant cost savings. You’re given a fixed quote for certain types and amounts of bookkeeping services. Since you only pay for exactly what you need, there won’t be any hidden costs.
The famous instruction by Peter Drucker is “focus on what you do best, and outsource the rest.” There’s an important reason for this. While it may seem attractive to keep all of your processes in-house, the costs of doing so tend to multiply, as we’ve seen. The cost of outsourced bookkeeping, on the other hand, is always directly related to the services you require.
In a survey, 59% of companies cited cost reduction as their motivation for putting this into practice. Why? Outsourcing tasks to trained professionals allow you to stick to smaller budgets and only pay for what you need. This is usually far more cost-effective than hiring a full-time employee. – Steve Mayne, for Entrepreneur.com
Outsourcing provides a solution to the issue of initially hidden costs. when you contract with an outsourced bookkeeping firm, what you see is what you get. you’ll have a set contract with defined benefits and features. you’ll pay the same for that contract from month to month, and you’ll get the results you expect. you won’t have to worry about managing individual people and their needs, that’s what the outsourcing firm exists for.
You also save time and reduce overhead expenses. This allows you to focus on your core business and improve productivity, which ultimately increases profitability.
Other Benefits of Outsourcing Are:
- Improved Data Security
- Outsourced accounting solutions include the latest cyber and cloud security features. You’ll get this benefit at a more affordable cost than you would have if you’d implemented it in-house.
- Minimal Risks
- Outsourcing removes the stress of having to deal with the latest regulations, taxation, and compliance. Since you’re dealing with experts, they’ll handle all these tasks on your behalf. This gives you more time to focus on more productive personal and professional pursuits.
- Faster Decision-making Process
In-house bookkeeping can hamper decision-making in several ways. Other than TBD answers to some questions, you must also keep up with complex accounting policies. You’re also expected to handle ever-changing technology needs, as well as employee performance. With outsourcing, all you need to do is define your accounting objectives and they will be met within the specified period.
Comparing In-house vs Outsourced Accounting
Hiring and managing an in-house accounting department is a costly distraction as well as time-consuming. With a cloud-based method of bookkeeping and accounting, the Owner and management will typically spend less and get back more time to grow your business.
Quality of Work
The In-house accountants, employed by your company, usually vary widely in their backgrounds and skillsets. Unless you’re hiring a new employee who’s fresh off the job market with the required skills, it’s hard to control who’s already sitting in that position within your company.
A company’s in-house accountant might be a certified chartered accountant (CA) with a thorough understanding of the generally accepted accounting principles (GAAP), or they could be a self-taught accountant that was simply hired because of connections with the CEO. Those are two drastically different situations but have different results for the company.
Outsourced accounting always focuses on the high quality of work. These firms exclusively employ exceptionally skilled CAs, so their clients get the benefit of quality accounting services. Plus, accounting firms expect their employees to stay 100% up to date on training, certifications, and even with the technology.
Hours of Service
An in-house accountant typically works a 9-to-5, 5-days-a-week schedule. When they’re available, they’re probably just stepping away from you and eager to help – but when they’re out of the office, you’re left hanging and waiting.
By outsourcing, you unknowingly work with a team of accountants that offers extended hours i.e help whenever you need it. This is very beneficial for companies where typical business hours don’t apply, like restaurants, entertainment, and web-based businesses.
Fraud Prevention
This is an accounting-related issue that usually people don’t consider: preventing fraud within your organization.
“A business is much more likely to experience fraud when it uses in-house accounting rather than outsourcing.” This is an unfortunate fact.
The reason is very simple. An employee can be far more tempted to “cook the books,” embezzle, or commit other types of fraud.
Employees have more access to confidential information and can more easily persuade others to go along with a scheme.
As an example, look at the embezzlement scandal at a company that is itself a financial services company. Nathan J. Mueller, an in-house accountant, was able to steal $8.5 million from the company by having checks and other funds rerouted to him.
During an internal investigation at ING, it was revealed that Mueller did it simply by tinkering with the company’s own payroll and mail systems.
Outsource companies would never have had access to the company’s other systems – plus, they always have an incentive to avoid any kind of impropriety. They focus on removing manual processing.
Businesses should ensure that they streamline the financials. When you integrate your financial systems and automate processes, operations become streamlined.
By increasing the amount of data into your accounting system, you can produce management reports that provide true insight into performance and profitability. This will lead to the exponential growth of your business.
Final Thoughts
In-house bookkeeping can hamper decision-making in several ways. Outsourcing removes the stress of having to deal with the latest regulations, taxation, and compliance. Since you’re dealing with experts, they’ll handle all these tasks on your behalf. The best part is, there is no extra cost for this.
But if you are more concerned about data security and want total control, it’s better to hire an in-house accountant.
In any case, you will need good accounting software. I would definitely recommend using ProfitBooks because it’s packed with all the important accounting features and it provides a detailed audit trail.
The best part is, it’s free to use! Create your free account on ProfitBooks today.
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