Business owners wear many hats, including bookkeepers. However, every growing business will reach a point where it’s practical, smart, and economical to hire an accounting professional. The question is – do you hire virtual accountants or traditional accountants?
It’s important to understand the differences between a traditional and virtual accountant for small businesses. Weighing the pros and cons can help you determine which one is right for your business.
What is a Traditional Accountant?
A traditional accountant is an in-house accountant. They are a part of your team and a bona fide employee. Because you’re their only client, they know your business inside and out. If you have questions about reports or statements, a traditional accountant will be steps away to answer them.
An in-house accountant can help with:
- Tax preparation
- The preparation and analysis of financial statements
- Identifying ways to improve value, cut back on costs, and increase profits
- General accounting/bookkeeping tasks
Like any other employee, you’ll have to go through the hiring process and incur the costs of having an additional team member.
- Always available to answer questions
- Dedicated to your business
- Has a deep understanding of your business and its financials
Traditional accountants have their advantages. They’re readily available and accessible when you need assistance during office hours. They may be able to provide advice or solutions that an outside party may not have known to look for. Their intimate knowledge of your business is an advantage, but it can also be a drawback.
- Because they are in control of the books and have access to sensitive financial information, there is an increased risk of fraud with a traditional accountant.
- Traditional accountants are employees, so you’ll incur the costs of hiring, training, benefits, and other employee-related costs.
- The hiring process can be time-consuming and tedious. It may be challenging to find the right accountant with the experience and knowledge you require.
Costs are a major concern with a traditional accountant. Research shows that the average U.S. business spends $4,000 and 24 days hiring a new employee. Hiring costs can include:
- Marketing and promotion of the position
- Job board postings
- Outsourcing the recruitment process
- Background checks, drug testing, etc.
- Pre-hire assessments
Even if you find the right accountant in a short period of time, you still need to consider the cost of:
- Training: An accountant will need to be brought up to speed on your procedures, company culture, and current accounting setup.
- Office Supplies and Setup: Having an additional employee will mean having to spend more on office supplies. Ideally, the accountant will have their own office, and that will also add to hiring expenses.
- Benefits: If you want to attract an experienced accountant, you’ll need to offer attractive benefits that go beyond medical insurance.
- Payroll Taxes: Hiring a new employee also means higher payroll taxes, including Medicare tax, Social Security tax, and state and federal unemployment tax.
Simply put, hiring a traditional accountant means having to deal with another employee and all of the logistics that go along with it.
Additionally, having a traditional accountant can increase the risk of fraud. In-house accountants know your business and its financials inside and out. That can be a double-edged sword. They can provide excellent guidance and advice, but they also have access to sensitive data and documents.
Annually, businesses lose an estimated 5% of their revenue to occupational fraud. Of course, not all cases of fraud are linked to accountants, but their easy access to accounts and financial information can increase the risk.
What is a Virtual Accountant?
A virtual accountant is exactly what it sounds like – an accounting professional that you deal with virtually. They are not employees, and they do not work in your office. In addition to you, they have other clients.
Most virtual accountants provide all of the same services a traditional accountant offers but without the added expense and hassle of having an additional employee. They typically work remotely and communicate with clients:
- Over the phone
- Via email
- Through video chat
- More affordable compared to in-house accountants
- May provide a wider range of services
- Less risk of fraud
- Easy to scale as your business grows
There are several advantages to choosing a virtual accountant over a traditional accountant. The most obvious benefit is the cost savings. Hiring an employee is expensive. Once the employee is hired, you still need to consider the costs of benefits, their annual salary, payroll taxes, and other employee-related expenses.
With a virtual accountant, you don’t incur any of these expenses. The accountant you work with is not an employee, but they provide the same level of service as a traditional accountant.
Additionally, it’s hard to beat the convenience of a virtual accountant. It’s simply a matter of finding a professional who meets your needs and budget. Many virtual accountants offer additional services that can benefit your business, such as tax planning and consulting.
With a virtual accountant, the risk of fraud is typically lower for several reasons.
- They are independent of your business. It’s not in their best interest to engage in fraud with clients – not if they want to stay in business. Along with the legal repercussions, fraud would damage their reputation beyond repair.
- Virtual accounting firms often have protocols and processes in place to reduce fraud risks, such as limiting authority to sign off on payments. Virtual accountants often answer to someone who oversees their work within the firm, creating a system of checks and balances.
While there’s no surefire way to prevent fraud, working with a virtual accountant can reduce the risk.
- Virtual accountants have other clients, so you may not receive the complete, individualized attention you would get with a traditional accountant.
- Getting answers to questions and concerns may take a little longer.
With a virtual accountant, you lose some of that individualized attention you get with a traditional accountant. However, in urgent situations, you shouldn’t have a problem getting the help you need.
Hiring an accounting professional is not a decision to be taken lightly. It’s important to consider the advantages and disadvantages of each type to determine which one is right for your business.
To learn more about how a virtual accountant can help your business, click here to schedule a call with us today.