In-House vs. Outsourced Accounting: Which Is Best for Your Small Business?

If you've been handling your small business accounting on your own, you might worry about missing deductions or overlooking important details. Your expertise is in running your business, so, when you’ve reached the end of your rope,  it makes sense to place your trust in an accountant.

But how do you decide between hiring an in-house accountant or outsourcing to an accounting firm? Think of it like deciding whether to cook at home or get takeout. Cooking at home gives you complete control over every detail, but it takes a lot of time and effort. Getting takeout, on the other hand, is convenient and lets you enjoy a professionally prepared meal without the hassle.

At Patrick Accounting, we talk to hundreds of business owners every week who are deciding between hiring an in-house accountant or outsourcing. We hear their concerns and understand their needs. With over 20 years of experience, we've learned what matters most to our clients and what helps them succeed.

There are several options, but knowing the differences is key to determining what's best for your business.

Pros of Hiring an In-House or Part-Time Bookkeeper 

Should you hire an internal accounting expert for your business? Like anything, this comes with pros and cons. Let’s start with the good points.

Direct Control

Hiring an in-house part-time bookkeeper allows you to have someone physically present within your organization. This means immediate access to financial data and the ability to address any concerns in real-time. It might also mean you can utilize this hire for other administrative needs you may have like answering the phones or scanning documents.

Customization

You have the flexibility to tailor the responsibilities of your in-house bookkeeper to your specific needs. This personalization can be especially advantageous if your business has unique financial requirements, complex tax needs, or say, job-costing requirements.

Confidentiality

With an in-house bookkeeper, you can maintain a high level of confidentiality and control over sensitive financial information, reducing the risk of data breaches.

Familiarity

Over time, your in-house bookkeeper becomes intimately familiar with your business’s financial intricacies, enabling them to provide insights and recommendations that are finely tuned to your situation.

Cons of Hiring an In-House or Part-Time Bookkeeper

While hiring an in-house or part-time bookkeeper can seem like a cost-effective solution, there are several challenges and potential drawbacks you should be aware of before making this decision. Let's explore these in more detail.

Limited Expertise

Part-time bookkeepers may lack the breadth of expertise found in an outsourced accounting firm that employs a diverse team with various skill sets. While you may get to customize their role on your team, you will often miss out on tax strategies or best practices that would come with a whole team of experts. 

Cost

Hiring an in-house bookkeeper is expensive compared to your ROI. You have many expenses beyond salary, such as benefits, training, potential office space requirements, and taxes.

Vacation and Sick Leave

When your in-house bookkeeper takes time off, you may face operational disruptions, and covering their responsibilities can be challenging. Let’s say your bookkeeper goes on maternity leave. If you need financial statements sent to your banker, you may get behind while waiting for your employee to return to work.

Pros of Hiring an Outsourced Accounting Firm for Bookkeeping, Payroll, and Taxes

Comprehensive Expertise

Outsourced accounting firms often boast a team of professionals skilled in various financial areas. This diverse knowledge pool means that you have access to a wide range of expertise, and you may find a firm that specializes in your industry. This benefit might unlock potential cost savings or tax strategies that a part-time bookkeeper might be unaware of.  

Cost Efficiency

Outsourced accounting firms can save you money. You only pay for the services you need, without the extra costs and time of hiring a full-time employee. This way, you avoid overhead expenses like salary, benefits, and office space.

Redundancy

Outsourced accounting firms typically have backup personnel in place. This means you get consistent service, even during vacations or employee absences. You are not dependent on just one person for your financial needs.

Scalability

As your business grows, you can easily scale up services with an outsourced accounting firm, adapting to your evolving financial requirements, or adding services as new things come up.  

Consolidation of Partners

With an outsourced accounting firm, you have one primary point of contact handling finance, payroll, taxes, and reporting. This reduces friction in communication and puts the burden of delivering services to you on your team instead of you being the constant middleman for your bookkeeper, payroll company, or CPA.

Cons of Hiring an Outsourced Accounting Firm for Bookkeeping, Payroll, and Taxes

Lack of Immediate Access

When working with an outsourced accounting firm, you may not have immediate access to your financial data, which can be a drawback if you require real-time insights. You might receive financials on a monthly or weekly basis, and it will be on a routine schedule, usually set by the accounting firm.

Less Personalization

While an outsourced accounting firm can offer a wide range of services, they may not be as intimately familiar with your business’s unique needs as an in-house bookkeeper, and will likely want to work with a standard chart of accounts. You may have to have several conversations to get meaningful insight out of your financials.

Loss of Process Control

If you use an outsourced accounting firm, you will not be able to pick and choose the tasks that your firm does for you, as most firms will bucket their scope of services and you won’t be able to deviate from a standard process like you would with an in-house person.

Does Outsourced Monthly Accounting Sound Worth It for Your Small Business?

The choice between hiring an in-house part-time bookkeeper and a year-end CPA or partnering with an outsourced accounting firm depends on your business’s unique circumstances and requirements. If you like the idea of a team of experts managing your finances for you for likely a fraction of the cost of an internal bookkeeper, outsourced accounting services could be perfect for you!

Your next big question is probably about cost, right? That’s a huge deciding factor in making your choice.

To help you understand what you might expect to pay and how it can fit into your budget, read How Much Do Outsourced Accounting Services Cost for Small Businesses?

It also helps to look at accounting as an investment rather than an expense. In fact, a monthly accountant can even help you cut out unnecessary expenses!