In Pursuit of Profit
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As an accounting recruiting firm and financial services provider, we work with businesses everyday who ask, “Should we hire or outsource our accounting needs?”
This question is especially important for companies in the startup phase because they likely have significant cash flow concerns to consider. However, startups may also have other unique characteristics that make this question more challenging to answer, such as:
While every business will have their own unique needs and challenges, it is generally best for a startup to outsource their accounting activities initially and then hire internally as their needs change. Where does that shift happen?
Use this comprehensive guide to inform your hiring decisions throughout the lifecycle of your business and understand the differences between outsourcing and hiring at each stage:
“Fractional accountants” are what companies get when they outsource their accounting activities to a third-party. Using a third-party gives you access to a fraction of the accountant’s available time, hence the name. Some people refer to these types of services as “part-time accountants” or “temporary accountants” but whatever you choose to call them, the concept is still the same.
The accounting firm will employ a team of accountants that share the accounting duties for their clients. While you will typically only have direct access to one accountant at the firm, your company benefits from the expertise of the group as a while because they work together to stay current on applicable industry changes and best practices.
The Benefits of Outsourcing
What are the benefits of hiring a fractional accountant?
In addition to being less expensive, the other chief benefit of outsourcing your accounting needs is the ability to turn a fixed expense (the cost of hiring an employee) into a variable expense (the cost of maintaining a third-party service). This combination makes outsourcing a shrewd strategic decision for cash-strapped startups.
Additionally, fractional accountants can be brought in to do any combination of accounting activities imaginable. They can be used as a standalone position in the earliest days of the business when its needs are less extensive, or they can be brought on later when an in-house accountant or accounting team needs some extra muscle. For startups, outsourced accountants can:
Outsourcing your accounting activities is also much faster than hiring, which is another key benefit for startups that need help quickly.
Hiring an in-house accountant effectively requires extensive planning or work in close partnership with a reputable recruiting agency to ensure the individual you hire will meet your needs and budget.
Keep in mind, over hiring for the role can be just as damaging for a startup as under hiring for it. Before posting a job opening, understand what you are looking for and what you will need to pay to get it both in terms of upfront and ongoing costs.
The Cost of Hiring
The average upfront cost of hiring an in-house accountant is $5,500. That does not include the ongoing costs of salary, payroll taxes, health insurance, technology needs, benefits expenses, and added costs for in-office perks.
These fixed costs are a lot for most startups to bear, at least initially. As the company grows, these types of costs not only become easier to shoulder but also more scalable as other employees are added as well. Your HR team should be able to advise on what kinds of efficiencies can be achieved as more employees are added.
Types of Accountants
But, an accountant is an accountant, right? Wrong. In the “accounting hierarchy” there are 7-8 different classifications (depending on who you ask) ranging from bookkeepers at the bottom to the CFO at the top.
Most startups are looking to hire staff accountants and senior accountants at first, but others may need a higher-level leadership role such as a controller to guide the overall financial direction of the company. Even within those layers, there can be significant variation between individual candidates. Some may be CPAs (Certified Public Accountants) or CMAs (Certified management Accountants), while some may not hold these distinctions. Others may have more experience in one area of accounting than another like non-profit accounting, tax accounting, or audit. Some may have a background in corporate accounting whereas others started on the public accounting side.
There is no “right answer” when it comes to what kind of accountant you should hire. The best accounting hire for your startup is the one that will meet your needs and do the job required to help move the company forward.
Hiring someone who is underqualified into the role will leave a knowledge and experience gap that someone else (usually the owner or a fractional accountant) will need to fill, while hiring someone who is overqualified will demand a higher price tag than is necessary for the role. Understand what you need before you start looking to avoid a costly hiring mismatch.
Should You Hire a CPA?
Do you need to hire a CPA for your startup? The answer is maybe.
While a CPA license is a prestigious designation, it not essential for every role. When hiring managers specifically request a new hire be a CPA, what they are actually looking for is typically a candidate who is hard working, highly accomplished, and committed to a future in the industry. However, these qualities can certainly be found in candidates that are not licensed CPAs.
Many employers look for CPAs when hiring accountants because they know that the CPA exams are difficult to pass, which means that licensed CPAs must be hard working and committed enough to study for and pass them successfully. However, the CPA exams are very time consuming and expensive. In Washington, the fees are upwards of $1,000 and accountants typically need several months of preparation before taking the tests, which total 16 hours of exam time. So, without an employer’s support, many experienced accounting professionals opt to forgo the personal expenses of time and money needed to prepare for and take them despite potentially having the knowledge and skillset needed to pass. For that reason, your startup should only make holding a CPA license a requirement for employment if having that license is critical to the accounting role in your organization, otherwise you will be paying more for a superlative qualification that may or may not benefit your business.
The Realities of Recruiting
These days recruiting an accountant is about more than just posting a job title, description of the role, and salary. In today’s tight job market hiring accounting and finance professionals means understanding what applicants are looking for and selling them on why your startup is a great place to work.
Top talent is looking for employment at companies that:
Using a specialized recruiting firm can help your startup find the kind of accounting/finance talent that will be the right fit for your company’s unique mix of offerings.
The Shift from Outsourced Solution to In-House Hire
So, how do you know when your startup should transition from an outsourced service to an in-house hire? That switch should happen when any of the following occur:
Whether you decide that outsourcing or hiring is the best option for your business, we have the accounting solution to fit your business’s needs. Contact us today for more information about our outsourced accounting services or accounting recruitment services.