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Hiring In-house for accounting and bookkeeping

It’s always cheaper to do it yourself than pay someone else, right? Unfortunately, accounting processes are more complex than fixing your truck, and while many businesses benefit from hiring in-house accounting and bookkeeping, others do not. Still, others find themselves in a hole of incorrect financial statements losing far more from lousy reporting and misinformed decision-making than they ever saved through expense reduction. Knowing which category your business fits in is critical to deciding whether or not to hire in-house for accounting and bookkeeping. 

What is an in-house accountant?

An in-house accountant is a part-time or full-time W2 employee who performs bookkeeping and accounting tasks for one business. Conversely, a professional agency performs outsourced financial work by serving several clients simultaneously.

In-house accountants perform many or all the same tasks as outsourced accountants, including:

  • Routine bookkeeping
  • Account reconciliations
  • Balance sheet accruals
  • Filing income taxes, sales taxes, and payroll taxes
  • Entering vendor bills, routing for approval, and paying as appropriate
  • Managing and accounting for payroll 
  • Enforcing controls to prevent fraud

The benefits of in-house staff include:

  • Committed team members without competing interests
  • No overhead fees to agencies
  • Complete control of management and culture

Is it better to have an in-house or outsourced accountant?

Each business situation will determine whether in-house or outsourced bookkeeping is a better solution. Large businesses generally benefit from in-house accounting, while small businesses benefit from outsourcing. 

Large businesses – in-house

In-house accountants are most common in larger businesses that have significant accounting workloads. Companies with large, complex accounting can support teams of 5+ accountants under a finance manager at significant expense savings vs. outsourced services.

Customer invoicing – in-house

Customer invoicing is generally best performed by in-house staff familiar with contract terms, sales processes, and client relationships.

Manufacturing AP – in-house

Manufacturing businesses need to perform a 3-way match on vendor bills and often (but not always) find this easiest to do when they are in the same building as the material receiving department.

Accounts payable (general AP) – outsource

AP services are easily offshored to low-cost countries like Mexico, India, or the Philippines, with significant savings for businesses of all sizes.

Controller services – outsource

Controllers have expensive wages and rarely spend more than 20 hours per month in small business accounting. However, a controller is a critical check-and-balance to staff accountants, so small businesses benefit by engaging outsourced controller services.

Staff accountants – outsource

Businesses under $20M in revenue rarely require a full-time staff accountant. However, some companies will keep a staff accountant busy by giving them admin duties such as AR and AP.

Bookkeepers – depends

Some small businesses benefit from hiring in-house bookkeeping to manage daily transactions like bank account coding. For example, a construction company with multiple projects needs a bookkeeper in-house to allocate costs properly. On the other hand, many bookkeepers employed by small businesses are underqualified to perform their duties and inevitably fail.

Supervision/management of in-house accountants – outsource

Small business owners often have no experience managing accounting teams. The result is a group of technical employees without proper checks and balances, inadequate mentorship, and opportunities for embezzlement. In these circumstances, an outsourced controller or finance manager provides a critical layer of support and control.

Is it cheaper to outsource accounting?

Most businesses under $50M in revenue will save money outsourcing accounting rather than having it in-house. Outsourced accounting services are more affordable for three reasons:

  1. Low turnover – outsourced accounting and bookkeeping agencies have specialized management processes to minimize employee turnover.
  2. Best practices – a group of accountants shares best practices, whereas isolated bookkeepers and accountants in small businesses fall behind their peers.
  3. Global presence – outsourced accounting agencies often have multi-national talent pools, reducing blended labor costs without sacrificing quality.

These advantages fade away when businesses exceed $50M in revenue and can afford an internal team of 4-5 FTE accountants.

Does my business need an in-house accountant?

There is no hard and fast rule about who needs an in-house accountant. Contact us to discuss the particulars of your accounting needs and help determine if an in-house accountant is right for you.  

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