Accounting is a business-critical function regardless of how large or small your operation is. Consistent accounting oversight and financial clarity let organisations optimise and grow with greater confidence. Alternatively, things can get messy quickly without the right checks and balances in place.
Once the role of accounting is large and complex enough, the dilemma becomes: “Do we hire an internal accountant or continue to outsource to an accounting firm?”
The route, traditionally, was to grow to a certain size and bring on in-house accounting staff. But today, it’s not so cut and dry. Technology allows businesses to track, monitor and do much more with their accounts without specifically requiring accounting skills.
The low-level work that an in-house resource would have once needed to do is in capable hands with accounting software.
In-house accounting vs outsourced accountants: What’s the difference?
If you’re debating whether or not to hire an internal accounting person, it’s safe to assume you understand the difference between them and an outsourced accountant. But just to be clear, let’s spell it out.
In-house accounting
Someone hired full-time by you who would work exclusively for your organisation looking after the accounts functions. E.g. bookkeeping, reporting, managing accounting software, managing payroll and advising on business financials, etc.
Outsourced accountant
An individual or firm that you engage as needed, generally paid by the hour, who is able to perform a range of accounting tasks.
Where the two cross over is in bookkeeping, payroll management and advisory services. Tax and VAT services, statutory audits, and more complex, specialist accounting services may not always be within the skill set of an in-house accountant. It would depend on the particular skills of the person you hire.
Generally speaking, no one person can be an entire finance and accounting department. You have certified accountants, financial controllers, financial directors, management accountants, tax accountants, etc. An internal finance person will still need to outsource certain tasks in many cases.
Why hire someone in-house?
The reason for hiring someone in-house is usually that external accounting costs are increasing or the internal financial tasks are becoming more complex. For example, more staff are being hired, and payroll management now needs to be done by someone skilled in this area.
The easiest way to work out whether it’s worth bringing someone in-house is to analyse exactly how much you need that person to do. How many hours it would take them to do it. And whether their salary is less than hiring an external resource to do the same level of work. You also need to assess what tasks would still need to be outsourced and calculate your total cost for accounting services.
Why hire an outsourced accountant?
If your internal accounting needs are less than a full-time job, outsourcing simply makes the most financial sense. But when those internal tasks start to mount, there are still benefits to outsourcing over hiring in-house. For one, if you outsource to a firm, you have access to the entire spectrum of accounting services—much more than you would have with just one person or a small team in-house.
Outsourcing also gives you much more flexibility. Outsourced accountants can step in as needed and stay on the bench (unpaid) when they’re not. They can also introduce solutions that support the internal financial functions without being a high salaried full-time resource. For example, they could introduce a payroll system that administrators can manage. They could set up the accounting software that can then be managed in-house. They could even do your cost/benefit analysis to determine whether or not it is financially savvy to bring in an internal accounting resource.
What do businesses really need from their accountant these days?
Accountants can play a role at every stage of a business’s growth. From the financial assessments to form the company in the beginning, right through to loan applications, government audits and consultation. Without them, many of these steps would not be possible. But do you need them full-time?
The short answer is “probably not”. The requirements most businesses have for accounting professionals are high-level. They’re simply not needed in day to day operations. The accountant you need to audit your books or introduce your payroll solution is not the same resource you need to upload expenses and track incomings and outgoings. Not only would an internal accountant be severely underutilised in that capacity, but you would also be spending a great deal of money on their salary. It wouldn’t justify them doing data entry work.
Businesses today need accounting for:
- Bookkeeping
- Tax and VAT services
- Payroll services
- Setting up workplace pensions auto-enrolment
- Statutory Audits
- Forensic accounting
- Implementation of accounting software
- Consultation services – business acquisitions, exits, expansion, etc.
Much of these tasks are once-off services or solutions that require only a few hours each week, month, quarter or year.
In summary, extremely large organisations can benefit from having an internal accounting or finance department. When you grow to the level that can justify multiple staff in the finance team, each with different skillsets, then in-house accounting has real value. For the majority of businesses, however, that’s a scale that will never be necessary.
Outsourced accountants fill this large gap in between, giving you the flexibility to pick and choose the skills you need only when you need them. For comprehensive business accounting solutions, The MGroup has a team of specialists in different business accounting and tax services to support your financial management and growth, however and whenever you need it.
Contact our team today to learn how we can help.