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In house vs. Outsourced Accounting: The War Continues in 2020
When a business grows, its financial requirements grow concurrently. As a result, owners (who usually don’t have accounting know-how) undergo a tough time deciding whether they should hire an in-house accounting staff or go for another option – Outsourcing – that many companies consider a smarter step toward excellent financial management. In house accounting vs outsourcing is the major decision that businesses can take.
By outsourcing accounting and bookkeeping functions to a reliable service provider, businesses and even CPA firms can reap numerous benefits over hiring an accountant or giving an existing employee the responsibility of bookkeeping.
Many businesses usually find it difficult to choose between in house accounting vs outsourcing. Therefore, to understand the differences and pros & cons of both, read through this article.
In-House Accounting vs Outsourcing: The Ultimate Comparison
1. The Cost Factor
Cost, due to apparent reasons, becomes a big concern when it comes to business decisions. Hiring an employee requires major funds and an assurance of getting justified returns.
Outside bookkeeping service providers in countries such as the US and Canada usually charge $20-$50 per hour. Whereas, an experienced bookkeeper can cost you $30-$40 an hour also on a contract basis. Even a business with minimal accounting work might have to spend $100-$150 a month.
Hiring a full-time accountant costs you even more. It is not only about the amount you pay to them as salary but also the added benefits including, health insurance, sick leaves, perks, pension, etc. And, it is usually challenging to find a skilled and reliable accountant that doesn’t cost much.
In this case, the other option – accounting outsourcing services might turn out to be more cost-effective. In general, some outsourcing companies charge for services at an hourly rate while others usually offer a flat, all-in-one monthly fee structure with complete billing clarity. Also, as the market is full of companies with this business model, one can find a competent outsourcing company offering quality services at affordable costs.
Accounting and bookkeeping outsourcing service providers in locations where labor costs are low, for example, India and the Philippines, usually charge $10-$15 per hour.
2. Quality Assurance
Having an in-house team of accountants and bookkeepers brings numerous advantages; one that you can meet them in person anytime you want to, and in case of any urgent accounting work, you can get it done instantly. However, you might not be able to reap a bunch of benefits if you have deficiencies in accounting resources.
Quite the contrary, when you acquire outsourcing services, you get access to an entire team of experts having sufficient knowledge, skills, experience, and a keen eye for detail. As a result, the quality of work done for you is much higher.
3. Uneven vs. Consistent Efficiency
Having an in-house accountant might comfort you, but their mistakes might go further unnoticed. As per the norms of the IRS, organizations are responsible for the inaccurate submission of business financials & taxes that their accountants usually do. Whereas, outsourcing companies generally have a team of supervisors that evaluates their accountant’s work, leaving no room for errors, and delivering accurate reports consistently.
Secondly, if your only accountant leaves your company without prior notice, you would probably rush to find an equivalent and, additionally, spend and energy on making them familiar with your accounts or accounting processes. This can affect efficiency.
Unlike that, outsourcing eliminates any of such risks. In case one employee of your outsourcing partner leaves, they can assign your work to anyone from their pool of experts. With outsourcing, businesses and CPA firms can rest assured about operational consistency.
4. The Question of Loyalty
This is one of the most overlooked factors in the business world.
As per one research, 22 to 28% of businesses have experienced employee fraud. Moreover, corporate scams are more likely to affect businesses where the older the employees are, the more are chances of fraud by them, and the bigger the fraud size would be. Adding to that, process complexity can help someone to keep the scam under the table.
Such instances are way less frequent with outsourced accounting due to multiple reasons. They usually have auditors that ensure no fraud activities are being carried out. They are concerned strictly about the credibility factor. Their involvement in scams can make their entire business fall.
Thus, loyalty and reliability are two big reasons to consider outsourcing over in-house staffing. In-house accounting vs outsourcing offers distinct advantages and trade-offs in terms of cost, control, and expertise.
5. Working Hours
In-house accountants will typically work 9 to 5 for you, 40 hours per week. So when they’re in the office your work is in the process; but past 5, any urgent accounting requirement is delayed till the next working day.
On the other hand, accounting outsourcing companies usually work 24×7 or at least for some extended hours. This factor grabs the attention of companies working beyond typical business hours, such as restaurants, web-based service providers, cinemas, etc.
Outsourcing Accounting is Still Among the Hottest Trends
Over the past few years, many businesses have attempted to think out of the box and outsource their accounting tasks to legit accountants. Once you get to know where the outsourcing industry is heading toward, you will become able to understand and decide if outsourcing will turn out to be the right decision for your business or not. To get help with this, take a look at the following stats.
Key Statistics on Outsourcing:
- “78% of businesses all over the world feel positive about their outsourcing partners.”
- “71% of financial service executives outsource or offshore some of their services.”
- “Financial companies are among those that outsource the most. About 70% of retail and transportation firms do the same, while job outsourcing statistics show that the top spot remains reserved for pharmaceutical companies. Roughly 82% outsource services.”
Outsourcing accounting services might help you if your current situation is like:
- You are investing more than required time in organizing your books while ignoring other important business aspects.
- You are just perfunctorily completing the accounting work as you are not familiar with accounting practices.
- You need professional accountants, but it seems quite expensive for you.
- You want to ensure that reliable professionals manage your books and that you can examine your business accounts from anywhere.
Before choosing an option, thoroughly understand your business scenario
Before you decide to get accountants onboard or outsource, it is vital to know that every business is different, and no one answer can cover all the questions about various business issues. Thus, it is strongly recommended to assess your business operations and find out where you require outside help and take professional advice in addressing the problems.
You may put yourself in three situations described below and try to determine which option is better for your business – in house accounting vs outsourcing.
Situation 1 – You are considering to hire a full-time accountant in your office.
Businesses and CPA firms require to maintain a balance between earnings and spendings, a positive cash flow, to be precise. Being a businessman, you must know that an on-role accountant can add more expenses to your business accounts. The most notable disadvantage here is that you may need to extend your office space, get a computer system, purchase one accounting software (catching up with the trend), and pay for employee benefits.
• Quick resolutions when required.
• More control of the employee
• Highly Expensive
• Experience is Limited
• No assistance in solving accounting problems
• Not exposed to multiple problematic situations
Situation 2 – You are planning to perform your business accounting or giving this responsibility to an employee while using accounting software.
Giving an employee the role of a bookkeeper, especially for a potentially growing business might become a little dangerous due to several reasons. The biggest danger is that the employee will have no knowledge of accounting processes and be unable to help you with financial planning.
• No hiring hassles
• Lack of accounting knowledge and experience
• Inability to provide financial insights
• Increased risk of costly mistakes
Situation 3 – You are planning to outsource to an accounting outsourcing company.
The pros and cons of this particular situation are difficult to determine as each outsourcing firm will have different service costs, policies, work schedule models, etc. The vital thing to consider is what you get from your outsourcing partner.
• Are your questions answered promptly?
• Are they offering a fixed cost package?
• Are they commuted to deliver quality services?
• Are they ready to provide complete accounting services?
• Are they willing to provide you with professional financial advice?
• Will they represent you in case of an audit?
Finding the Perfect Outsourcing Partner
As the outsourcing market is full of companies, it might become difficult for you to know where to start your talent hunt. With the help of the internet, 60% of your research work will be done as you can find a countless number of outsourcing firms across the world. But the real efforts are yet to be put. You need to choose and prepare a list of the companies that seem reasonable to you.
Then, compare them with each other and shortlist a few out of them. Contact them and ask as many questions as you can to get the utmost clarity about their services, cost, policies, contracts, etc. You may also ask if they offer a discount on a personalized bundle of multiple services.
If you are planning to outsource your business accounting or reduce the workload of your accounting firm, then this is the perfect year. Outsourcing can help your business use its resources for more critical operations, gain insights, and with time, attain growth. You might already be outsourcing accounting functions and thus would know some of the primary advantages of outsourcing. If not, get to know them now.
1. Improved Accessibility
Most outsourcing companies today use cloud accounting software, allowing you to review your financials at any time, from anywhere, even during vacations.
2. No Hiring Costs
It’s usually expensive to recruit, hire, and train an accounting team, whereas outsourcing accounting functions saves hiring and training costs.
3. Business Insights
Your outsourcing partner can help you with improving the financial situation of your business as they will keep a close eye on your cash flow, profit & loss statements, etc.
4. Data Security
The confidential information about your accounts and finances will be safe with your partner as most companies use secured servers for data storage and sharing. Additionally, most cloud accounting software offer data recycling options and disaster recovery.
There are many significant benefits you can reap when you leverage the skills, expertise, and experience of accounting professionals at your outsourcing partner’s company. They can help you run your business operations smoothly & profitably as they will take care of your finance and accounting in a competent and well-organized way while reducing your tax burden and providing accounting services with a personal touch.
It is now would be fair enough to say the outsourcing wins over in-house staffing, especially when it comes to being applied to growing businesses and CPA firms. In house accounting vs outsourcing – a crucial decision for your financial needs. If you need further help in choosing between the two, get all your questions answered professionally. Get in touch with Cogneesol, send us your query at [email protected] or call us at +1 833-313-3143.
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