Outsourced vs In-House Accounting – The best option?
Outsourced vs In-House Accounting
Surprisingly, many small and medium-scale enterprises use the traditional methods of hiring a full-time in-house employee or a team of accountants and bookkeepers to manage their back-office functions. With the evolving world, it is the time when you leverage the expertise of third-party consultants and their advanced technologies without worrying about investing too much into the training/learning of your employees or technology to carry out the necessary tasks.
There has been a long-going debate about outsourcing or hiring in-house employees to manage your business’s accounting and bookkeeping function. The decision to choose one would depend upon a thorough analysis of the organization’s needs, nature, and type of business operations.
This article discusses the baseline differences between outsourced accounting/ bookkeeping and appointing an in-house team of accountants and bookkeepers.
What is the difference between in-house and outsourced accounting and bookkeeping functions?
There are many basic parameters on which outsourced and in-house accounting services and bookkeeping Services can be differentiated.
1. Quality and training
In-House accounting Quality and training :
When you plan to hire an accountant or a bookkeeper for your company, you would want to look for the overall qualification and experience of the candidate to ensure that they are the best in their job. If not, you may either not hire the candidate and go for the high-paid employee with adequate domain knowledge or spend on training the hired candidate. Further, as the regulatory requirements keep changing, you must continuously assess the need for the employees’ training and incur an ongoing expense to ensure that your job is done accurately.
Outsourced accounting Quality and training :
On the other hand, the employees of the outsourced accounting and bookkeeping service providers are already experienced and experts in the industry as they have worked with multiple clients from multiple industries. They are well-versed with the latest trends and updates of various sectors; you do not have to worry about the qualification and accreditations of the employees because that is something the management of the agency will focus upon. They will never onboard a person who is not qualified or certified, as it is a matter of client service delivery and the firm’s reputation.
2. Internal controls
Internal controls in In-House Accounting:
Undoubtedly, when your hire a person who is sole in charge of the functioning of the entire department, the person would have complete access and control over the input, as well as output, and this increases the chances of manipulation. Suppose your company has merely one or two employees working in your company’s accounting and bookkeeping department. In that case, the business is at higher risk as it may penetrate any scam or fraud (such as cash embezzlement) against the company and its resources, causing monetary and qualitative loss. Fraudulent activities are the biggest drawback of hiring full-time employees in a small or mid-sized company without sufficient hierarchy.
Internal controls in Outsourced Accounting:
However, with outsourcing your accounting and bookkeeping requirements, the control solely remains with you. You can control the flow and volume of information and keep the confidential information of the company safe with you, drastically reducing the scope of any fraudulent activities.
3. Financial reporting process
Financial reporting process of In-House Accounting:
The financial reporting process for every business is different because of the variation in needs, the total number of transactions, industry considerations, etc.; the in-house accountants, bookkeepers, or controllers can provide you with detailed financial reports and statements. But often, the in-house team lacks proper knowledge and experience in providing detailed, systematic, and accurate analysis of the financial statements and smart reports necessary for making informed business decisions on time.
Financial reporting process of outsourced accounting:
The team of experienced employees of your outsourced accounting and bookkeeping agency is proficient in preparing accurate financial statements and delivering them on time to ensure that the business does not miss out on meaningful dates, which may lead to penalties for delayed compliance or late fees on bank overdrafts. Plus, having timely access to accurate financial statements, analytical dashboards, and reports increases the efficiency of the data-driven decision-making process, improving your chances of getting better and desired results in no time.
4. Cost difference between In-house vs outsourced accounting
In-House:
It is not surprising that in-house employees are an expensive choice. You must bear a lot of additional overheads in training and development, employee benefit funds, social security, payroll taxes, and costs involved with screening, interviewing, and onboarding an individual in the first place. Further, sometimes one single employee may not be capable enough to manage the entire accounting function, and you may hire more people without effectively utilizing any of them to their fullest. Most small and medium-scale enterprises cannot afford to spend this amount, so the need for and importance of outsourcing comes into play.
Outsourced:
Unlike in-house employees, the employees of the outsourced company do not get all these benefits from the clients they work for. Instead, they get all of this from their direct employer. No doubt that the outsourcing company inbuilt the employee cost into the service charge they recover from clients. Still, these get distributed amongst numerous clients and do not get heavy on any single pocket. So, as a client of an outsourced agency, you do not have to spend a lot to seek their services, except for the professional service charge. You have to pay for the services you are willing to seek from the experts.
Which one should you choose?
The answer to this should depend on your understanding of your business. To take your final call, you first need to identify and evaluate the actual requirement, budget, and purpose that needs to be fulfilled for your business. With answers to these questions, you may determine whether you want to hire an in-house employee/(s) or outsource your accounting and bookkeeping function to experts.
Whenever you determine the need to outsource your bookkeeping and accounting function, you must recall the name of CFO UAE. They are a team with sheer brilliance, expertise, and commitment to deliver nothing less than excellence.
