Choosing Between in-house Accounting and Outsourcing: Determining the Optimal Approach for your business

What is the meaning of in-house accounting?

Break down the basics. In-house accounting? Internal staff handle the accounting. In-house accountants handle technical support, human resources, and bookkeeping in addition to number crunching. Finding one person who can handle all of these tasks and do them well is difficult.

Despite the drawbacks, some companies prefer to have their numbers done by an insider team. Employees are often asked to perform manual tasks like transaction categorization and reconciliation to close the month instead of focusing on strategic initiatives. This also explains the high turnover in the in-house model. This causes significant employee burnout.

Is in-house accounting cheaper?

Should you hire an accountant? Cost is always the big question. Internal teams have many costs.

Your accountant’s pay comes first. The median accountant salary is $45,560, according to the BLS. The Bureau also reported that benefits added 31% to this cost beyond salary. The total cost is $59,683 per year or $4,973.58 per month. Additionally, tax preparation mistakes and cleanup can cost you. If this seems more expensive than expected, compare it to outsourced costs.

Hire more accountants as your company grows to handle the workload. Another salary and training, often done by other bookkeepers, are added to your workload. Not to mention the time, money, and resources required for recruiting and interviewing. This may work on a small scale, but how will the team divide these tasks as the business grows? Will efficient processes grow them?

Finally, turnover must be considered. Bookkeeping can be physically demanding and lead to burnout, so people don’t stay long. Training someone to leave for another role is risky because replacing a professional employee can cost 50–60% of their annual salary. From $23,000 to $27,000 on a $46,000 salary.

Based on the example above, if an accountant leaves after a year and costs $59,683, your company would spend $86,683 before hiring a new accountant. Most companies evaluate in-house accounting without considering business and personal time lost and additional expenses. These extra costs make the in-house option less appealing.

Benefits of in-house accounting: Despite high costs, companies value the following:

• Control all financial activities and improve processes.
• Reach out to the team for questions or changes, ensuring responsiveness and collaboration
• Build trustworthy relationships with accountants and maintain confidentiality.

In-house accounting cons:

The benefits of in-house accounting also have drawbacks:

• Higher operating costs, including accountant salaries and benefits
• Focused on bookkeeping rather than process improvement
• Lack of resources for bookkeeper support during process changes or best practices reviews
• Higher costs for a single employee compared to a team for accounting operations.
• The company is responsible for financial errors, including legal fees and penalties.
• Operations scaling will be more challenging than the initial hire.

Approximately 60% of small businesses still use in-house accountants. After five years under the same management, only 43% of small businesses use in-house accountants. More outsourcing as they grow.

Accounting outsourcing means what?

Understand what it means to hire outside accounting services. You hire a third party to do accounting and/or online bookkeeping. A third-party provider can handle payroll, accounts receivable, accounts payable, and expense reporting. Simple: they work off their assets.

This may be a big step for some businesses.

Is accounting outsourcing cheaper?

Yes, outsourcing accounting is simpler and cheaper—the costs of hiring and training your staff and the risk of turnover matter. Outsourcing your accounting to a professional team often provides more experience and expertise. Mistakes that cost time and money to fix are greatly reduced.

To quantify, recall those turnover rate numbers. As mentioned, replacing a $46,000-a-year professional employee can cost $23,000. You could outsource your accounting to Velan for about the same price. You can immediately hire accounting, technology, and entrepreneurial experts to handle all your financial needs. This saves $35,683 to $47,683 compared to outsourcing at $12,000 to $24,000. New salesperson, office manager, marketing campaign, etc. That’s annual savings! For simpler small businesses, the dollar savings can be even greater.

The right outsourced accounting solution will also support growth as a company grows. Third-party solutions’ processes must be considered. Cost efficiencies are difficult to achieve if they only perform manual tasks for you without process improvements.

Choosing outsourced accounting services offers benefits beyond cost savings, including:

• Utilize cutting-edge accounting technology to automate and reduce manual tasks. To streamline your business, the right partner will evaluate your entire operation.
• Adaptability to changing regulations, enabling best practices for industry needs.
• Ensure staff focus on essential priorities by assigning the right people to the right jobs.
• Split responsibilities to avoid conflicts of interest
• Easier scaling as business grows
• Zero turnover

Cons of outsourcing accounting:

Consider also the concerns many bookkeeper hirers have:

• Unsuitable outsourced accounting solutions may result in unexpected fees and limited deliverable flexibility due to resource constraints.
• Traditional CPA firms prioritize tax preparation over providing detailed visibility for business decisions in outsourced bookkeeping.
• Some companies won’t improve their processes.
• Hourly charges may vary greatly depending on the season if there is no fixed rate.

Outsourced accounting examples: Global Industry Analysts Inc. predicts a $53.4 billion market by 2026. This shows that large corporations are outsourcing more as a strategic move.

A large example: is Boeing. The aerospace giant announced it would outsource accounting to India in September 2022. Their reason? “Streamlines operations, increases efficiency, and simplifies processes” is what outsourcing does”.

Walmart did the same in 2018 by outsourcing finance and accounting to Genpact. Walmart, like Boeing, said outsourcing would streamline operations. Walmart also believes outsourced accounting is essential for growth and customer satisfaction.

Benefits of outsourcing accounting

Hiring a small business accounting service has many benefits. Like large corporations, you can streamline operations, boost productivity, and improve efficiency.

Other benefits of hiring bookkeeping services for small businesses include repurposing talent for strategic initiatives. Accounting and bookkeeping tasks are often delegated, taking time away from bigger tasks.

Bookkeeping often falls to the controller.

Therefore, search “small business accountants near me.” You’re relieving your team and laying the groundwork for business growth. You will also strengthen your business’s cost structure, which will benefit you in the long term.

Outsource Small Business Accounting

Thank goodness you don’t need to Google “bookkeeping services near me.” A fixed price is offered by Velan for simple bookkeeping for small businesses. You can trust our accountants.

Velan offers outsourced accounting and operational improvements. To create the best accounting process for your business, we look beyond bookkeeping to analyze all business operations. Our fixed monthly price includes actively seeking ways to improve, not just taking over. Velan can help you understand the benefits of outsourcing your accounting operations.