The Pros and Cons of Outsourced Accounting

When you are considering outsourcing your bookkeeping or accounting needs it is natural to wonder what the pros and cons are as you try to find the best solution for your needs. Typically, business owners and hiring managers will ask questions and do research to try to help them decide whether to outsource or keep the role internally. 

An employee contemplatively looking at a wall that has “outsourcing” written on it surrounded by business icons

In some cases, holding onto the role internally means hiring an in-house accountant, but at many small businesses, the alternative is simply tasking other employees with these kinds of functions. And, to no one’s surprise, the lucky person who gets the accounting work added to their to-do list tends to be the business owner. 

​So, how will you know if outsourcing is right for your business? If you have been wondering about any of the following questions, our team can help you determine if outsourced accounting is going to be your best option:

• “Is outsourcing really worth it?”
• “What is the cost of outsourcing your accounting?”
• “How fast can an outsourced accountant get started?”
• “Is outsourcing your accounting better than doing it in-house?”
• “How do I find the right third party accounting provider?”

Ready to get started? We will answer your questions in this guide to accounting outsourcing:

The Benefits of Outsourced Accounting

• Strategic Planning

The biggest benefit of outsourcing is that it allows business leadership to focus on what they do best – leading the company. When business owners, executive leadership, and team managers do not have to worry about bookkeeping and accounting activities, they can devote more time to the kind of strategic planning activities that fuel growth.

• Efficiency

It is absolutely critical to mention the fact that experienced accountants are trained professionals with deep knowledge of the work they are doing, which means that they are almost certainly going to operate more efficiently than other team members who are trying to hold down these roles.

This is important to remember because many business owners look at the amount of time it takes them to complete bookkeeping and accounting tasks and are hesitant to hire those functions out because they assume that the work will take that long for a third party provider to do as well. However, that is rarely the case because professional accountants have the depth and breadth of experience needed to work more efficiently by utilizing better technology and industry resources.

• Cost

If one of the benefits of using an outsourced accounting provider is greater efficiency of the work being performed, it logically follows that outsourcing would be less expensive than asking your executive leadership team to do these tasks. However, outsourcing is far more affordable even when compared to hiring an in-house accountant.

Why is outsourcing less expensive than hiring? Outsourcing allows a company to forgo the initial costs of recruiting (searching for candidates, verifying credentials, onboarding, and training) as well as ongoing employment costs (health insurance, PTO, retirement benefits, and employment taxes). The result is a far more cost-effective (not to mention speedier!) solution.

• Flexibility

When a full-time accountant is hired their contribution must justify the investment in finding them, which means that their employer is incentivized to keep them for the long-term. For smaller companies, this means keeping them on payroll even when work is slow and incentivizing them to stay with things like periodic raises and bonuses. As a result, companies can end up overpaying for the work they actually need done.

Outsourcing allows companies to pay for exactly what they need when they need it without the same commitment. Fractional engagements can include anything from ongoing part-time work to short-term project work, audit support, expansion consulting, or tax filing help. At a time when business costs are on the rise this flexibility is another huge benefit of outsourcing.

• Increased Opportunities

As our team explains when discussing the benefits of outsourcing, “Outsourcing allows smaller businesses to act larger than they are, gaining access to some of the same expertise, networks, opportunities, and economies of scale that bigger companies typically have available to them. Small businesses can gain access to highly skilled professionals that they cannot afford to hire internally.” And while this has always been true, during the current accounting labor shortage outsourcing has become a crucial way for smaller companies to compete with their larger counterparts.

• Succession Planning

For business owners looking to retire, outsourcing also aids in succession planning because when too many activities are under the umbrella of one person, it makes it difficult to extricate them from the business. By outsourcing accounting roles, these functions will be carried out and documented in a way that is replicable by another hire in the future.

The Disadvantages of Outsourcing

• Control

The biggest objection to outsourcing we hear from business owners is a perceived loss of control. As our team explains,

“The number one reason business owners choose to manage the various operations of their businesses themselves is simply because they want to retain control over these areas. Small business owners are type-A personalities, making them likely to have their hands in many different areas because they want a say in how things are being handled. They think the outcome will be better when they are at the reigns because they are confident in their own abilities and leery to hand off areas of the business.

​Business owners and managers that are anxious about delegating should be reassured by the advantages listed above to ease their worries. Knowing that outsourcing will give them more time to focus on the overall effectiveness of the business should be enough of an incentive to help them to let go of accounting tasks because doing so will allow them to be better connected to the business as a whole.

The Gray Area in The Middle

• Experience-Level

Typically, outsourced accounting providers will employ a team of accountants with experience that spans a wide range of industries, company lifecycle stages, and business sizes. Sometimes this experience is as a result of a long career in accounting that is now being capped off with fractional work as part of a retirement transition strategy. Other times, these accountants are earlier in their careers but are learning faster than their peers because they are working on a variety of accounts simultaneously, getting hands-on experience across multiple companies. This is typically seen as an advantage because these team members bring added experience to the role as a result.

However, some niche industries benefit from having in-house personnel that can take the time to master a steep learning curve and stay with the company as it grows. Whether you will find more experience from a third-party accounting company or an in-house hire likely depends on your company’s specific business needs.  
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• Distance

Often times using an outsourced accounting solution means working with an accounting team that is geographically dispersed from the rest of your organization. In the past this was one factor that kept some companies from outsourcing their financial needs. But with most companies offering either hybrid or remote work these days, this is typically less of a concern now.
However, companies that still really value in-person or in-office work may find that they prefer to hire in-house instead of outsourcing; or they will want to look for accounting companies that offer on-site work options.

• Connection

Connection to the company is another area where there is some debate about whether outsourcing is a better option than hiring in-house. Some business owners feel that third party providers simply lack the connection to the company culture to work for the business effectively. They argue that unless an employee “has skin in the game” they cannot be trusted to make the best decisions of the company. And yet, others argue the exact opposite: that third-party providers are the only one that have the objectivity needed to make sound business decisions regardless of what is going to be popular. Again, this is gray area depending on which aspects of their job you are discussing. While third-party accountants are likely not going to share the same kinds of camaraderie with their coworkers, they may very well bring a stronger code of ethics to the role because they do not need to worry about doing what is going to be well received by those same coworkers.

If you are considering outsourced accounting services, please reach out to us! We would love to discuss your company’s unique needs and figure out what kind of support we can provide to allow you to focus on growing your business. Whether you need a full-time outsourced accountant, part-time accounting support, or interim accounting help, we have the staff with the right experience to fill the role.