Did you know that most of the small businesses think that their accountant is their key to success?
Accountants are now ranked above bankers, doctors, IT managers, and other such professionals.
This is because every business entrusts the accountant with the most crucial aspect of their business, the financials. The accountant is responsible for keeping track of every task and managing every money-related activity. Due to which, this job role of the organization receives the most important in every type of business.
However, what about the organizations that outsource bookkeeping and accounting?
While in-house bookkeeping and accounting is a traditional and beneficial method of handling accounts, outsourced accounting bookkeeping is a preferred pathway for many small and medium enterprises. Both routes are useful for different types of organizations. Hence, in this article, we will compare in-house and outsourced services. Based on the distinction, you can decide which pathway to choose and how to handle the financial activities of your business. So, let’s dive in and understand the difference between in-house and outsourced bookkeeping and accounting.
In-House vs. Outsourced Bookkeeping and Accounting
Consider the story of John. John has recently started a small digital marketing business with the help of his friends and family members. Initially, as John has some knowledge of financials, he was managing everything on his own. However, as his manpower grew, he was finding it hard to handle accounting responsibility.
Unfortunately, one day, he received a notice due to some issue in the tax filing.
What would you do if you were in John’s place?
He hired an accountant to handle the tasks and avoid compliance issues and glitches in the system. But, managing the accountant’s payroll was just too much for John. In fact, John felt the need for a team, which was out of his budget.
Hence, John chose the outsourced bookkeeping and accounting. If John was a big organization or MNC, he might have hired a team or utilized outsourced services. Having more funds would have opened both the options for John.
Keeping John’s story in mind, we will move forward to the distinction between outsourced bookkeeping and accounting and in-house accounting.
1. Training and Quality
When hiring an in-house employee for bookkeeping and accounting, you always have to take extra measures to ensure the quality of work delivered by the employee. This also involves assessing the type of work experience, degree, education, certifications, and knowledge. Many accountants are self-taught, which is not at all bad. But, this person can naturally have low industry experience due to a lack of formal education, which is a bad thing. Hence, you need to be very careful while selecting your accountant for in-house hiring.
On the other hand, outsourced bookkeeping and accounting services offer good quality. You would never have to care about accountants. You only have to check the services offered. Rest everything is handled by the outsourcing service.
Even if at a later stage, you have an issue with the type of work delivered by your personal accountant assigned to you by the outsourcing services, you can ask for another person. The outsourcing service would do anything in their power to offer you the best services and quality work.
They will do that all the work related to checking of certifications, qualifications, and experience of the accountant.
This reduces the hassle, especially for small and medium enterprises, which alone gives a significant reason to choose outsourcing accounting bookkeeping over the in-house accountant.
2. Financial Reporting
The financial reporting process means different to every organization. Based on varying needs, transactions, considerations, and other factors, bookkeepers, and accountants offer a comprehensive report to the business. However, the preparation of financial statements is not an easy task, and even with several technological advancements to accompany, trained professionals can only accomplish it. Now, you have to ensure that you hire a trained professional who has the right skill to make reports.
Further, since bookkeepers and accountants are working in-house, they are easily accessible. These individuals have to take up additional responsibilities, such as payroll. These additional responsibilities take time, and the focus of the accountant is divided into various tasks. When that happens, financial reporting efficiency automatically reduces due to other functions like invoice management, data entry, bill management, etc. Sometimes, financial reporting is even pushed to the back due to other activities.
The only option left here is to hire a full team with dedicated roles, which is often not possible.
Outsourced bookkeeping and accounting can resolve this issue by offering seamless financial reports. You can choose the outsourcing service carefully and expect good quality results from them. This business is expected to have a full team to handle the activities of your business. You won’t have to worry about the qualification of the accountant or time spend on financial reports. You only have to worry about the quality of the stories received.
Utilizing outsourcing services help you streamline in-house procedures as well. How? Let’s find out:
When your outsourced accounting bookkeeping is effectively managed, your team is free to handle other tasks relevant to the business. Your organization can coordinate with the outsourcing provider and utilize the financial reports to make better business decisions.
3. Fraud Prevention
One of the most crucial accounting issues that most of the organizations avoid is fraud prevention. Financial fraud is a dreadful thing that can happen to any organization. Unfortunately, it is more common in in-house accounting than outsourced bookkeeping and accounting.
This is because it is easier for the in-house accountants to get hold of the crucial information and misuse it. It is not to say that in-house accountants can’t be trusted. But, this is to say that sometimes financial frauds also happen by mistake. It is easier in-house because it is easier for employees to traverse information. Your in-house accountant will bond with other employees daily, and it is simpler to let out information which should stay private or concealed.
Further, it is hard to deny the fact that many financial frauds happen because invaders can persuade the accountant to intentionally or unintentionally let out sensitive data.
Another way that fraud finds a move in the system is through other systems of the network. It is highly likely that your accountant may be using several systems in collaboration, and someone planning a fraud can enter via payroll network as well.
Once the fraud happens, there is no way to reverse it. You can only assess the extent of it, which won’t bring back the money.
When you outsource, your systems are separate and exclusive. So there is no way of entering your financial reports through your payroll. The outsourcing bookkeeping and accounting services also have an additional layer of security because they are working with several clients. It means that they have to secure the data of several clients, which requires strong security architecture and policies. You will never find employees of an outsourced service revealing any information intentionally or unintentionally because of the stringent security structure.
4. Annual Cost
If cost is the primary factor that can help you decide which accounting and bookkeeping route you should choose, then you should select outsourced services without a blink.
When you hire a bookkeeper, accountant, and other supporting staff, you have to manage them like all your full-time employees. It includes salary, benefits, training, etc. If you hire an experienced person, the cost of the wage can alone place a dent in your financial reports. While the accounting and bookkeeping of your organization will improve, the financials will become very weak. You would be spending more than you would be gaining. It is right in the case of small and medium enterprises.
You would have to take care of the following:
1. Retirement plans 2. Sick leaves
3. Payroll 4. Paid vacation
5.Taxes 6. Training
7. Benefits 8. Appraisals
When you utilize outsourced services, you can remove most of these. The outsourced bookkeeping and accounting provider will manage everything. You only have to pay for the services you have acquired. Most of the time, you can customize your package and only pay for the services you need.
For example, if you are paying INR 40,000 to the accountant, you can acquire outsourced services in INR 10,000 as well.
Additionally, here, it is also necessary to note that you can scale anytime you want, which is not possible in-house. You have to pay a much larger amount when you increase work because you have to hire a new employee. In outsourced services, scaling is not that costly.
Which Accounting and Bookkeeping Service to Choose?
The right outsourced bookkeeping and accounting service is different for every business. You have first to assess your accounting and bookkeeping requirements – whether you want full-fledged end-to-end support or you just need accounting or customize your package.
Once you are clear on your requirements, you select the right outsourced services at a cost-effective range.
Paysquare is an outsourced bookkeeping and accounting services provider that can help you handle your accounting tasks with ease. With our security structure, experienced team, and hassle-free management, you can receive seamless services at cost-effective pricing.
With us, you can customize your package, choose add-ons, and receive expert advice. Through an integrated support team and industry expertise of several years, we can offer a comprehensive solution for outsourced bookkeeping and accounting.
For more information, reach out to us to find out the services you can utilize and receive advice on the best practices that can be beneficial for your organization.