It is an undeniable reality of the business landscape of the 2020s that every company owes a large part of its success and continued prosperity to the financial management and accounting function. Accounting experts at Expertise Accelerated have been warning entrepreneurs for the first quarter of the year that they must, at all costs, get their accounting function sorted out and running before matters hit the fan and there is no time left to prepare. One of our most recent articles, titled “The Advantages of Outsourced CFO Services for Start-Ups”, gave start-up owners and budding entrepreneurs tips on leveraging outsourced accounting solutions to prepare for the predicted recessionary onslaught of the decade. However, a number of entrepreneurs and small business owners still remain skeptical of the legitimacy of outsourced accounting services compared to in-house accounting functions.
This leads us to the topic: How does outsourced accounting fare against in-house accounting?
We understand that entrepreneurs have every right to be fully informed on what they are getting into before signing up for an accounting solution that seems almost too good to be true. But the fact of the matter is that it is true.
According to the report by Grand View Research outsourced accounting industry is among the fastest-growing BPO industries today, with a projected Compound Annual Growth Rate (CAGR) of 9.1% from 2023 to 2030. When we have such overwhelming evidence of the viability and legitimacy of outsourced accounting, there should be absolutely no doubt in the minds of entrepreneurs that it is indeed every bit as valid and lucrative as it purports to be. However, there are cases where in-house accounting may be the superior option for businesses. This is a case-by-case question, and this article is aimed at entrepreneurs who are on the fence about what to choose for their business accounting needs and need a push in the right direction. To this end, let’s compare the two modes of accounting in terms of what they can offer to a business and help you make the right choice for yourself. Time is short and action must be taken before the floodgates of recession open, so think fast and be decisive!
Table of Contents
In-House Accounting vs Outsourced Accounting
Cost
The primary battleground of comparison between the two modes of accounting is cost. For small businesses, which account for 99% of businesses in the US, the cost is the most influential factor when making business decisions, and unfortunately for in-house accounting, outsourced accounting wins the day here.
The simple fact is that the cost of everything is going up across the board, and people’s purchasing power is declining rapidly. Therefore, spending must be done very selectively, and unfortunately, in-house accountants for small businesses are analogous to a Rolex for a starving beggar, i.e., a luxury they cannot afford. Let’s take a quick peek at the numbers to make sure, just in case. Builtin reports the average base salary for a simple in-house accountant in the US amounts to a whopping $73,331, and this isn’t even factoring in the average cost of a CFO, which Salary.com helpfully reports to be a staggering $424,464. These numbers are ludicrous and cannot be afforded by anything less than the utmost upper echelon of businesses, which is why in-house accounting is quickly losing its footing in the US business landscape.
Outsourced accounting, on the other hand, is gaining traction fast because of how affordable it is. Here at Expertise Accelerated, we pride ourselves in providing US businesses access to the highest quality of offshore outsourced accounting talent, vetted by a renowned veteran of the US accounting landscape and EA CEO Mr. Haroon Jafree himself, at a fraction of the US counterpart’s cost, and it does not simply end there. EA promises US businesses accounting and process optimization support that surpasses any other in-house or outsourced alternative regarding to quality and results.
Control
Control is another key factor that entrepreneurs must factor in when deciding how to handle the accounting function. Most entrepreneurs want to be involved and have a degree of control over the accounting function’s activities. Finance is, after all, the lifeblood of the business. One misstep can prove dire for the business, so control is a make-or-break factor for some entrepreneurs. In this regard, in-house accounting is technically the better option, but it is an immensely close competition.
An in-house accountant is present in the office, and if worst comes to worst, entrepreneurs can even drive to their accountant’s home in the middle of the night to address an emergency. Outsourced accounting solutions are inferior in this regard, as communication is largely remote, and should an emergency pop up, entrepreneurs may find themselves left hanging dry if their outsourced accountant is unavailable. This is undoubtedly a massive concern that can cripple business activities; however, it is not as likely as we may consider it.
While the worst-case scenario is certainly grim, in reality, communications technology and cloud accounting have made it so a remote professional can always be available. In addition, outsourced accounting services know the dangers of lack of control very well and enforce strict measures to ensure that communication with the business is never broken and things run smoothly.
One caveat, however, is that many outsourcing companies act as middlemen, and entrepreneurs do not have direct control and contact over their hired remote talent. Essentially, what many companies do is they take on a business’ accounting workload and hand it over to their accountants. Any and all communication is between the clients and the administrative staff rather than with the accountants handling the work.
Expertise Accelerated, however, differs from traditional outsourced accounting services. EA’s unique staff augmentation model of outsourcing links entrepreneurs directly with the remote accounting professionals they will be hiring, with EA management facilitating the relationship and overseeing the whole operation. In this way, entrepreneurs can become intimately familiar with their outsourced accountants as if they knew them in real life, like an in-house accountant.
Expertise
This is a tricky one, and there is no clear winner regarding to the expertise department. Experts in an industry may be found in in-house accounting and outsourced accounting, and one is not necessarily better than the other. So, instead of asking whether in-house accounting offers better expertise than outsourced accounting, the question is more about the accessibility of said expertise.
On paper, local in-house accountants look superior in the question of expertise, as they are keenly aware of local rules and regulations and provide access to business connections in the area that outsourced accounting services simply may not have. The reality is, however, that while this may be true on paper, we always have to go back to the question of cost; finding an industry expert to join your in-house accounting function will raise the already sky-high cost of an accountant to the moon.
Outsourced accounting services, while lacking that intimate knowledge of the locality, can still provide immensely useful industry expertise. When it comes to market trends and financial analysis for example, or industry best practices and help with decision-making, a remote professional is just as good a judge of data as an in-house one, and industry insight is certainly not bound by physical proximity. So yes, while you do lose out on some additional perks of having a local industry expert on the team, a cost analysis will likely show that the cost for those perks is simply not worth the money and outsourced accounting experts suffice just as well.
Expertise Accelerated is especially keen in this regard, and US businesses can expect high-quality advice informed by industry expertise and knowledge when dealing with EA’s outsourced accountants and finance professionals. EA’s mantra of providing US businesses with accounting solutions tailored to fit their requirements remains true to its word, recruiting expert accountants as per the client’s needs and giving them specialized training to meet their demands.
Conclusion
To summarize, US businesses must get their accounting function sorted before the recessionary pressure becomes too great. To that end, the question of whether in-house accounting is better or outsourced inevitably pops up. Settling the debate by comparing in-house and outsourced accounting pros and cons in regard to cost, control, and expertise, outsourced accounting services seem to be the superior choice on paper. It is important to note, however, that this is not a cut-and-dry answer, and some businesses may work better with an in-house accountant. For example, financial outsourcing for accounting firms is a ridiculous proposition, as is IT outsourcing for a software firm. This question requires entrepreneurs to research their own business and what works best for them and make an appropriate decision, this article simply provides the bare facts for entrepreneurs to consider in the overall decision-making process.