In-house accounting has traditionally been the standard for businesses of all sizes. However, more companies are turning to outsourced accounting services to eliminate the stress and cost of hiring. In fact, about a third of small businesses outsource their accounting.
In-house and outsourced accounting both have advantages and disadvantages. Therefore, it’s important to understand what each option brings to the table before making your final decision.
In-House Accounting vs. Outsourced Accounting
In-house accountants are a part of your staff, whereas outsourced accounting services are provided by an outside provider.
Both have their advantages.
- In-house accountants are employees, so they’re available when you need them and are dedicated to just your business.
- Outside providers offer access to a team of experienced, skilled CPAs and may offer other beneficial services.
Some businesses prefer in-house services, and this works well for them. However, a growing number of companies are finding that outsourced services are more cost-effective and offer more value.
Let’s see how both options stack up when it comes to cost, fraud prevention, consistency, and quality assurance.
Costs are an obvious concern for any business owner. However, there can be quite a big difference between in-house and outsourced professionals when it comes to accounting services.
Outsourced accounting services can range from a few hundred dollars a month to thousands, depending on the size and complexity of the operation.
Hiring a full-time in-house accountant will likely cost more. In addition to their salary, you also have to consider the cost of health insurance, vacation time, sick leave, 401K, and other perks that you may offer.
Finding an in-house accountant who is skilled, experienced, and low-paid will be a challenge. According to the Bureau of Labor Statistics, the median pay for an accountant is $73,560 per year or about $35.37 per hour. That equates to about $6,130 per month before you consider the cost of benefits. If you have a large operation and you decide to go the in-house route, you may need a team of accountants to handle your finances. Costs can quickly add up and eat into your profits.
Many businesses find that outsourcing is the more economical and practical option.
Some business owners believe that hiring an in-house accountant will reduce the risk of fraud, but this is not always the case.
As an employee, an in-house accountant has more access to confidential information and can collude with other employees to commit fraud.
ING’s scandal is a prime example of how in-house accounting doesn’t shield a business from fraud. The company’s accountant, Nathan J. Mueller, managed to steal more than $8 million from the financial services company. He did so by rerouting checks and funds to himself. Then, all he had to do was tinker with ING’s mail and payroll systems.
A scandal like this would have been difficult for an outside provider to pull off. Outsourced accounting services wouldn’t have access to the company’s other systems to make such changes. Outside parties also have an incentive not to engage in this type of behavior. They won’t be in business for long if they develop a reputation for stealing from clients.
Of course, this isn’t to say that outsourced accounting services aren’t without risk. Fraud can occur in either situation, but the risk may be lower if you choose an outside party.
Consistency and Quality Control
An in-house accountant is just a few steps away when you need to ask questions or discuss critical financial matters. As an employee, they will always be available during business hours. Because they work for you, you don’t have to wait for call-backs or email replies. That kind of consistency can be a great comfort to many business owners.
But what if you have an urgent issue after business hours? What if your accountant quits without notice? Both of these scenarios leave you scrambling to find solutions when you should be focused on running your business.
Outsourcing eliminates some of these risks. Some service providers offer extended service hours, so urgent matters can be addressed with little delay. If an accountant leaves the service provider’s team, someone else will take over your account.
A significant advantage of outsourcing is that you have access to a team of experienced professionals who are better prepared to answer questions and advise (in some cases). With an in-house accountant, you’re limited to just your employee. Of course, their experience and knowledge are valuable, but having access to a team of accountants can be advantageous.
When it comes to quality control, outside providers may have an advantage. Mistakes can easily go unnoticed with an in-house accountant. On the other hand, outsourced accounting services have internal controls to help minimize the risk of costly errors.
When Does Virtual Accounting Services Make Sense for a Business?
It may seem like virtual accounting services are the way to go, but some businesses may find that in-house accountants are the better solution.
Outsourced accounting may be a good fit for you if:
- You’re spending too much time organizing your books and not enough time on core business tasks.
- You’re concerned about the costs of hiring an in-house accounting team.
- Your business is growing, and you need access to a team of experienced accounting professionals.
Alternatively, virtual accounting services may not be a great option for you if:
- You have the budget to hire full-time accounting employees.
- You want more control over your accounting team.
- You’re not concerned about fraud or costly accounting errors.
Ultimately, choosing between in-house accounting and outsourced accounting is a personal decision that should be considered carefully. Every business has unique needs and goals, and these should be kept in mind when deciding which accounting option is right for you.
Click here to learn more about whether outsourced accounting is right for your business.