Accounting is an integral part of any business, whether big or small. Accounting is the process of recording, classifying, and summarizing financial transactions. It is a crucial part of any business because it helps in keeping track of the financial performance of the business. As a business grows, the need for accounting services increases. However, businesses have two options when it comes to accounting: outsourcing accounting services or keeping the accounting functions in-house. In this post we will explore the differences between outsourced accounting and in-house accounting and evaluate the pros and cons of each option.
Outsourced accounting is a process where a business hires an outside accounting firm to handle the accounting functions. The accounting firm is responsible for maintaining the financial records of the business, preparing financial statements, and handling tax returns. The outsourced accounting firm works remotely, and the business sends its financial data to the firm. The firm then processes the data and provides financial reports to the business.
Pros of Outsourced Accounting:
- Cost Savings: Outsourced accounting can be cost-effective, especially for small businesses. Outsourcing eliminates the need to hire a full-time accountant, which can be costly. With outsourced accounting, businesses only pay for the services they need. This means that businesses can save money on salaries, benefits, and other costs associated with hiring an in-house accountant.
- Access to Expertise: Outsourcing accounting gives businesses access to a team of experts with a broad range of skills and experience. Outsourced accounting firms specialize in accounting and financial management, so they have the experience and expertise to handle various accounting functions, including financial analysis, tax planning, and bookkeeping.
- Time Savings: Outsourcing accounting can save time for business owners and employees. Accounting functions can be time-consuming, and outsourcing these functions can free up time for business owners and employees to focus on other aspects of the business.
Cons of Outsourced Accounting:
- Lack of Control: Outsourced accounting means that businesses relinquish control over their accounting functions. The outsourced accounting firm handles everything, and businesses have limited control over the process.
- Security Concerns: Outsourcing accounting means that businesses are sharing sensitive financial data with a third-party firm. This can be a security concern, especially if the outsourced accounting firm does not have adequate security measures in place.
- Communication Challenges: Outsourcing accounting can present communication challenges. The outsourced accounting firm may be located in a different time zone or country, making it difficult to communicate effectively.
In-house accounting is a process where a business hires an in-house accountant to handle the accounting functions. The in-house accountant is responsible for maintaining the financial records of the business, preparing financial statements, and handling tax returns. The in-house accountant works within the business, and the business provides all the necessary financial data.
Pros of In-House Accounting:
- Control: In-house accounting gives businesses complete control over their accounting functions. Businesses have the ability to customize their accounting processes to meet their specific needs.
- Easy Communication: In-house accounting provides easy communication between the accountant and the business owner. The accountant is located within the business, making it easy to communicate and collaborate.
- Familiarity with the Business: In-house accounting provides an accountant with an in-depth understanding of the business. The accountant is familiar with the business processes and can provide insights and recommendations that are specific to the business.
Cons of In-House Accounting:
- Cost: In-house accounting can be expensive, especially for small businesses. Hiring an in-house accountant means paying a full-time salary, benefits, and other costs associated with employment.
- Limited Expertise: In-house accountants may have limited expertise and experience. They may not have the same level of expertise as an outsourced.