Is it worth having your accountants in house or using someone external?
For many companies, the decision between managing accounting functions in-house or outsourcing them to external services is a pivotal one, with an impact on efficiency, cost-effectiveness and overall performance.
According to recent statistics from the UK’s Office for National Statistics, approximately 50% of UK businesses employ an accountant or bookkeeper, while the remaining 50% rely on external services for their financial needs.
From bookkeeping, expense management and tax planning, we determine whether it’s worth having your accountants in-house or using someone external.
The cost of in-house vs external
One of the primary factors influencing the decision between in-house and external accounting services is cost.
In-house accountants typically entail fixed expenses, including salaries, benefits and overhead costs such as office space and equipment – and salaries usually start from £40,000 per year (Source: Accountant For).
On the other hand, outsourcing accounting functions allows for a variable cost structure, where companies pay only for the services they need, often resulting in significant cost savings. For small businesses doing under £1 million turnover, the average cost for accounting services is around £20,000, but this can increase significantly as the company grows.
It is essential to weigh these savings against the potential benefits of having dedicated, on-site professionals who intimately understand the company’s operations and intricate financial processes.
Does someone in house have expertise in your field?
In-house accountants offer the advantage of being readily available and fully immersed in the company’s day-to-day operations, especially if it is highly specific such as medical, tech or science. This close location can give a deeper understanding of the business’s financial systems, allowing them to be more strategic and valuable.
In-house accountants can also develop specialised knowledge of industry-specific regulations and compliance requirements, especially in heavily regulated industries such as pharmaceuticals and finance, ensuring they meet relevant standards.
On the other hand, external accounting firms bring a breadth of expertise gained from serving multiple clients across various industries. They offer access to specialised skills and resources that may not be available in-house, such as tax planning, forensic accounting or international financial reporting standards.
In fact, with the rise of AI in accounting, there are ways to get access to information that previously was not available – and this could be a very interesting area of growth in the coming years.
Ultimately, the decision hinges on the company’s specific needs and the level of expertise required to navigate its financial challenges.
Which options are more scalable and flexible?
Business environments are inherently dynamic, often requiring rapid adjustments to accommodate growth or respond to market shifts. In this regard, external accounting services offer scalability and flexibility that may be challenging to achieve with an in-house team.
Outsourced firms can quickly adapt to fluctuating workloads, scaling their services up or down as needed, without the burden of hiring or downsizing internal staff. This agility is particularly beneficial for startups and small businesses seeking to minimise fixed costs while maintaining operational efficiency.
Larger enterprises with consistent and predictable accounting needs may find greater value in investing in an in-house team capable of providing continuous support and strategic guidance.
Is someone in-house more confidential?
The handling of sensitive financial information is a key concern for businesses of all sizes.
In-house accountants operate within the confines of the company’s infrastructure, offering a greater degree of control over data security and confidentiality. Companies can implement stringent protocols and access controls to safeguard sensitive information from external threats.
However, outsourcing accounting functions does not necessarily compromise confidentiality. Reputable external firms employ robust security measures and adhere to strict confidentiality agreements to protect their clients’ data.
In fact, outsourcing can mitigate the risk of internal fraud or conflicts of interest by introducing an additional layer of oversight and accountability.
Strategic alignment and value addition
Accounting functions can play a crucial role in shaping strategic decisions and driving business growth.
In-house accountants possess an intimate understanding of the company’s goals and operational nuances, enabling them to align financial strategies with broader organisational objectives. They have the opportunity to become trusted advisors, offering proactive insights and value-added services that extend beyond traditional accounting functions.
While external accounting services may lack the same level of familiarity with the company’s ethos, some businesses may value an external vantage point that can offer fresh insights and unbiased perspectives.
Closing summary
The decision to manage accounting functions in-house or through external services has implications that extend beyond mere cost considerations. While in-house accountants offer the benefits of proximity, expertise and control, external services provide cost-effectiveness, scalability and specialised knowledge. Ultimately, the best approach for your business depends on the unique needs, goals and resources of each business.
