4 Questions to Ask If You’re Waffling Between In-House and Outsourced Accounting

It’s hard to know exactly when it’s the right time to hand over some of your work to an outsourced agency, especially when it has to do with your money. So how do you know if you need in-house or outsourced accounting? Exploring these four questions will help you decide.

Outsourcing has become one of the biggest business trends in the past few years. Grand View Research values the global outsourcing market at around $245.9 billion and expects it to rise 9.1% annually until 2030.

It’s not hard to understand outsourcing’s popularity. Business leaders that outsource some of their functions free up their internal teams to concentrate on core projects. Plus, they get to tap into the latest technologies and tools by proxy—and without making an investment themselves. And what could be better than having a contractual arrangement that’s much less expensive than the typical cost of bringing an employee aboard?

Yet outsourcing isn’t for every company. Take financial roles like accounting and bookkeeping, for example. Though an UpCity survey shows that 15% of accounting responsibilities are outsourced at American businesses, some CEOs feel more comfortable keeping those tasks in-house.

So how can you know whether it’s time to outsource all or some of your accounting and finance workflows? Answering a few questions will help you know whether it’s a good time to bring an outsourced element into the mix.

1. Can you stay on top of your accounts receivables?
   Having a predictable cash flow is essential to being able to efficiently run your company. In fact, 82% of young companies fold because of cash flow problems, according to SCORE. One way to create a better rhythm of incoming cash is through better management of your accounts receivables.

   When you let customers, vendors, and other partners lapse on their payments, you can end up losing money. But if your in-house team is too strapped for time to stay on top of almost due and overdue accounts receivables, you have little chance of remedying the situation.

   In this case, outsourcing can be a boon by resulting in earlier collection results by days or even weeks. Dr. Anthony Decoste, President and CEO of Global Virtual, says he’s seen outsourced accounting services drop overdue accounts receivables ratios by 37 percentage points. That’s enough to make a tremendous impact on your cash flow.

2. Do your annual accounting needs fluctuate significantly?
   Every company has a different setup. Accordingly, your organization’s accounting needs will be unique, including those from other competitors in your industry. Therefore, you need to determine whether your accounting needs actually justify a full-time accountant or bookkeeper. The Bureau of Labor Statistics puts the average annual salary for bookkeepers and auditing clerks at $45,000+. And that doesn’t include “hidden” costs like benefits, retirement matches, paid time off, or other perks. That’s a good reason to crunch some numbers based on your current and anticipated accounting and finance needs.

   For instance, maybe your accounting tasks skyrocket seasonally and then slow to a trickle. If you’re paying financial employees to do very little for part of the year, you may be better off partnering with an outsourcing firm.

   On the other hand, your accounting duties may be well balanced enough so that your internal workers always have just enough to do. Perhaps they occasionally could use a temporary outsourced helping hand, of course. However, if they’re working steadily, they’re generally providing a decent value in exchange for their employment.

3. Are you worried about one or two employees being in charge of your finances?
   Checks and balances are essential to preventing innocent errors, as well as more serious crimes like deliberate fraud and embezzlement, at your company. But if you only have one or two employees taking care of your accounting, you probably aren’t engaged in the due diligence that would protect your business.

   This isn’t to suggest that you shouldn’t trust your team members. You hired them for a reason. Nevertheless, the U.S. Department of Justice estimates the yearly business cost of white-collar crimes at up to $1.7 trillion.

   One way to bypass this problem is to hire out at least some financial and accounting operations. Or, you could always use an outsourced accounting vendor to provide the checks and balances you don’t have time to undertake in-house. Either way, you’ll be lowering the risk of having to deal with the fallout from an “inside job.”

4. Have some financial duties fallen to workers in non-accounting positions?
   Overextension can be a reality for small businesses on a significant growth trajectory. Often, a startup will launch with just a few employees. In time, each employee begins to develop a core purpose but may still need to wear plenty of hats. A survey by ZenBusiness reveals how common the “jack of all trades” concept is: Only 7.3% said their work duties fell within their job title’s sphere. This practice only lasts for so long before it starts to become counterproductive.

   What’s wrong with everyone diving in? Though it sounds like a great prescription for teamwork, it’s more likely to become a great prescription for headaches. When employees who have never been trained on accounting principles or best practices take up financial to-do items, they’re more apt to make mistakes. Worse, they may be unaware of regulatory and compliance expectations.

Rather than keep parceling out accounting duties to anyone who has a little free time, consider investing in an outsourced accounting solution. You’ll shift the risk burden while giving your workers breathing room to handle other pressing projects that are in their wheelhouses.

No doubt about it: Outsourcing your accounting can help you optimize your business and streamline your systems. You just have to decide whether the time is right.

Written by Dr. Anthony Decoste.
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