When to outsource your accounting and when you should hire internally
In-house v. Outsource: What’s the best strategy for my accounting function?
When I first got into the outsourced accounting business almost 20 years ago, the concept of outsourcing for small businesses was relatively new. Entrepreneurs were often stuck in the mindset that they had to have someone on the payroll in order to get the results they wanted. Today, the business world has evolved and outsourcing is a common practice for small and mid-sized companies. The concept is relatively simple. You get the experience you need at a fraction of the cost of a full-time person. Whether it’s HR, IT, Marketing, or Accounting, business owners have embraced outsourcing as a progressive way to tap into subject matter experts that help them propel their business forward.
Despite the paradigm shift, I still see business owners that struggle with the question of when to outsource their accounting and when it makes sense to hire someone internally. Because of the turbulent economic times that we find ourselves in, the concept of outsourcing is often the right approach. Now more than ever, companies should be challenging the idea of paying the salary and benefits of a full-time person when an outsourced accounting solution can meet their needs and save them money.
The case for outsourcing
It is no wonder that outsourced accounting has become so popular over the years. When you list all of the potential benefits, it just makes sense.
- Subject matter expertise – When you pick the right outsourced accounting partner, you get more than just bookkeeping. You get a trusted advisor that brings a wealth of experience that can help you set up your systems, define your processes and deliver timely financial statements that help you make smarter decisions. Having someone on your team who understands how to leverage the latest technology applications to improve efficiency and deliver better information is an important benefit of outsourcing.
- Flexibility – By its very nature, outsourcing allows you to scale up or down as the needs of the business dictate. Most outsourced accounting firms work on a month-to-month arrangement, so you aren’t locked into long term commitments and have the flexibility to adjust when necessary.
- Better information – When you get good information, you make smart decisions. Using the right outsourced accounting firm will help ensure that you get timely and accurate financial statements. They should also be able to help you define the right KPIs (key performance indicators) for your business.
- Credibility – When it comes to dealing with bankers and investors, experience matters. Having a resource on your team who can bring instant credibility to your organization and your financials can make the difference between getting your deal done or not.
- Cost-effective – In addition to the important considerations outlined above, outsourcing is often a more cost-effective solution for small and mid-sized companies. When you compare the monthly fee to the total cost of a full-time employee (salary + payroll taxes + insurance + other fringe benefits), the difference can be significant. Do the math to get a true apples-to-apples comparison. You will likely be surprised by the value you get and the money you save.
The case for hiring in-house
While outsourcing is often the best answer, there are certain circumstances where it makes sense to hire an in-house resource. Here are some of the more common reasons:
- Workload– As the workload approaches full time, the economics of outsourcing may not make sense anymore. A reputable outsourced accounting firm should spot this trend and proactively work with you to plan for a transition to a full time, in-house resource.
- Unique needs – There are times when the requirements of the job or the industry are so unique that it is difficult to find a firm that has the experience. In that case, it probably makes sense to invest in a full time resource who you can train.
- Multi-tasking opportunity – In certain circumstances it may make sense to hire someone that can fill two roles. For example, you may be able to hire someone that has bookkeeping experience to cover the simple accounting transactions while also serving as an administrative assistant. In this particular case, it may still make sense to have an outsource accounting firm close the month and prepare your financial statements.
Whatever your circumstance, it is important to know that there are good options available and that nothing is set in stone. If you’ve never considered outsourcing your accounting, now might be the right time to look at it. In good times or bad, outsourcing is a proven, cost-effective model that might just be a great solution for your company.
At Milestone, we are experts at outsourced accounting and would welcome the opportunity to learn more about your business and conduct a free assessment to help determine the right path for you.
Give us a call at 317-810-0165 or email us at [email protected].
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