With the complexities involved in accounting, every business needs to make the right decision on whether to hire an in-house accountant or outsource their financial services. Companies need to know the best time to outsource or when to decide.
Some of the key factors to consider in deciding when to hire in-house or outsource include:
1. The Stage of the Business
Every business goes through stages of development before it becomes a big organization. As mentioned earlier, one mistake that costs many small businesses or entrepreneurs is to outsource too early before they obtain sustainable financial muscle to afford the services.
Before you decide on whether to hire, in-house or outsource, you need first to understand the stage your business lies in. Every successful business goes through seven stages which are:
Solo entrepreneur: at this stage, the business person works alone and is in the process of doing something for themselves.
Partnership: if one man agency doesn’t feel enough, the person may seek a partner to expand their services and gain more ground.
Steady operation: as the income becomes steady, you can increase the number of employees to ten at most. But still, at this stage, you can’t afford to outsource your finances, so you just assign one accountant to take care of your interests.
Local success story: at this stage, the business has already established a name for itself, and with the income steady, you can consider outsourcing your services like the finance department.
Further down the line the stages are:
Usually, the last three stages of the business are the best to consider outsourcing since the company has attained stability levels to support outsourcing its finance services as a strategy to increase its revenue income.
2. The Cost Difference Between In-House Hiring and Outsourcing
Outsourcing finance services is not only cheaper compared to having a full-time accountant, but a business gets an assurance that their accounting records lie in good hands.
In-house hiring may seem like a welcomed idea since the company gets to keep its records private and monitor activities. However, it may result in extra expenses since they have to pay the accountant as a regular employee.
A full-time bookkeeper’s annual salary averages around $40,000 and a full-time intermediate accountant’s salary is around $60,000. Together, these two employees could potentially cost your business more than $100,000 a year, and that doesn’t take into account any overhead costs you will incur.
Depending on the services your small or medium business require, outsourced bookkeeping and accounting services can range between $1,000 to $5,000 a month. Even at the top of that range – at $5,000 per month – it would cost your business $60,000 a year and you wouldn’t have to worry about paying overhead costs, making the total significantly less than an in-house bookkeeper and accountant.
At Sean M. Hugo, PC, CPA, we make financial services customized to fit your needs. At the lowest end, a $500 monthly investment could take care of your bookkeeping needs. Depending on your business’ needs, the fee goes up from there.
This means that outsourcing finance services is not only cheaper compared to having a full-time bookkeeper and accountant, but a business gets an assurance that their accounting records lie in good hands.
Additionally, with the ever-changing rules and regulations in the finance sector, an in-house bookkeeper may fail to stay updated about various laws passed. This in turn could potentially cost the business through fines for non-compliance.
More so, the records get updated by professionals as soon as updates are made. The cost difference in the two solutions should guide the final decision.
3. Pros and cons of each solution
While holding all factors constant, whether the cost or development stage of the company is favorable, it all boils down to if the solution works for you.
By determining the pros and cons of each solution on your business, you can decide which path to take. Most of the time, the pros of outsourcing out-do its cons by far as compared to hiring in-house.
Some of the pros include:
- You get more to concentrate on your business without worrying about your financial books and records.
- It saves you money to outsource than hire in-house since you only pay for the services rendered on scheduled days.
- You open doors for new ideas from those you employ to take care of your finances.
- Helps you clear on office space since all your record books go with the outsourced accountant for referencing and filling out.
The cons of outsourcing your finance services include:
- Outsourcing means you expose your financial records to a third-party and that can go astray if they turn out untrustworthy or unprofessional.