Inhouse Accountant – Do You Really Need One?
Starting and running your own business can be challenging. From writing a business plan to market research, securing funding, managing time and cash flow, and hiring the right people – it involves an incredible amount of hard work.
That’s why at some point in your entrepreneurship journey, you’ll need help from an accountant.
But what is the best option for your business – should you hire an in-house accountant or outsource to a third party? Should you manage it all yourself?
This guide takes you through all you need to know about the role of an in-house accountant in a business and the pros and cons of hiring one. Will they help set your company up for success? Let’s find out.
What Is In-House Accounting?
In-house accounting is the traditional form of business bookkeeping. It is performed by employees within a company rather than relying on outsourcing. The accountant oversees the financial health of the business.
In-house vs. outsourced accounting firm
The functions performed by accountants in outsourcing firms are similar to in-house accountants. However, professionals in outsourced accounting firms work for a third-party company, not the organization they perform the accounting work for.
Outsourced accounting similarly offers high-quality work because most accounting firms employ skilled CPAs and stay up to date on certifications and training.
What does an in-house accountant do?
The typical duties of an in-house accountant include day-to-day bookkeeping, creating budgets, bank reconciliation, financial planning, providing financial analysis, and preparing for taxes.
An in-house accountant’s services depend on the business’s needs and their specialist service.
The Pros and Cons of Hiring an In-House Accountant
There are potential benefits and drawbacks to hiring an in-house accountant. And there’s no right decision to make when deciding on external or internal operations.
Before you decide, assess how often you need accounting functions to be done and your company’s needs. The number of financial transactions processed in a week or month and the size of your company will likewise be essential considerations in terms of cost efficiency.
Here are some benefits to in-housing your accounting activities.
Pros
1. Physical proximity
A short walk to the office next door is easier than a phone call or an email to someone on the other side of the country. Someone in the same building as you will be available during working hours. Because let’s face it: no one enjoys being put on hold.
A study even showed that proximity makes collaboration easier. When workers are collocated, it takes less effort to start interacting. Chance encounters lead to conversations, and common ground is developed through repeated encounters. [1]
2. Specialization
By hiring a full-time accountant, you can choose how things work and set the tasks they will perform. However, with outsourcing accounting services or third-party accounting firms, their predefined packages may not always fit your business needs.
An accounting team may also have specialized expertise. This is helpful on your part as regulations, standards, and financial laws have become more meticulous now than before.
In-house accountants have more refined skills and advanced degrees to help you navigate compliance tasks. Other accountants may even have deep knowledge of investments, business valuation, and other key areas.
Incidentally, a staggering 80% of US businesses fail in the first 18 months, and poor financial management is one of the main causes. [2] Despite the dire consequences, many business owners still prefer to go it alone when managing their money.
They don’t use accountants at all. They don’t realize that accountants can do more than just tax filing. They can create a forecast and comprehensively assess your finances to keep your business in a prosperous state.
3. Saves time
Running a business can easily consume all your productive time. It can even be more challenging to maintain complete oversight over your finances, especially if your company employs more than one person.
Hiring an inhouse accountant or a team of accounting professionals can solve this problem. They can handle money-related work faster than you are alone because they were specially trained for it.
They may also be equipped to implement the right accounting software or cybersecurity systems to ensure the security of your financial records.
Envoice is a multifunctional tool for automating labor-intensive accounting tasks. No bottlenecks, no time wasted. Request a demo today and see for yourself how it works.
4. Helps your business grow
As your business grows, so do your budget and financial needs. An in-house accountant can be your valuable sounding board to support you in making such growth possible.
Accountants can assess your business operations, help you with financial planning, fix problems before they eventually drain your finances, and ensure your finances and accounts are in place for future business planning and successful expansion.
5. Security
Security is a significant concern for your business finances. Hiring an in-house accountant will enhance your business’ security. That’s because they will be more aware of data protection rules and may even use specialized accounting tools that offer a professional service.
Of course, there are downsides to hiring an in-house accountant too. That’s why some businesses prefer to outsource because it’s more efficient. Here are some of the drawbacks:
Cons
1. The high cost of interviewing, hiring and training
A lot of time and money goes into recruiting, onboarding, and training new employees.
If you work with a recruiter to do this quickly, you may have to spend about 20 to 30% of your new employee’s salary. Then, there’s the cost of your accountant’s salary or wages. The average salary of an in-house accountant in the US ranges from $58,881 to $63,332 per year. [3]
There are also additional costs, such as paid time off, benefits, overhead, retirement, etc. Last, there’s a financial and contractual commitment to the employee. It means you can’t simply let them go without a financial obligation.
2. Potential internal fraud
Most businesses operate based on trust. However, any employee can commit fraud. An in-house accountant or a controller has more access to sensitive financial data. They also have opportunities to cover their tracks.
In fact, a survey shows that 80% of embezzlement cases happen at small businesses. In 30% of these embezzlement cases, there was a loss of more than $500,000. [4]
Fraud can be prevented by having multiple people involved in several transaction phases.
3. Costly accounting and bookkeeping mistakes
If you employ an in-house accountant to handle your daily financials at work, you’re relying on one person for a critical function. But because human beings can be fallible, even an accountant can make a mistake, especially if they’re tired or inexperienced.
With Envoice, you can say goodbye to typical accounting errors. It ensures your accounting records are organized accurately and properly – every single time. Try it for free.
4. Possible downtime
When an in-house accountant leaves on vacation or is sick, you won’t have the support of a financial expert in your company. You won’t have to worry about this if you outsource an accounting team to do the job.
Other members can still assist with the accounts or financial reports when one person is away.
When Is It Time to Hire an In-House Accountant?
Here are the obvious indicators that your business needs an in-house accountant:
- Your company is growing quickly, or the company structure is getting complicated.
- Daily accounting tasks, such as tracking expenses, entering data, digitizing receipts, and matching transactions, eat up your time.
- You’re arranging complex financial transactions with banks or alternative lenders for greater cash flows.
- You overload your current accountant and often think you can use help from someone dedicated to your accounting needs.
- You’re making a lot of money (it means more money to keep track of). As to how much money is considered “a lot,” it depends on your business or the industry.
The combined approach with Accounting software
Accounting software can add great value to businesses. It helps increase the firm’s profitability, performance and efficiency of operations.[5]
So, one option you have as a small business is to take a combination approach. Aside from outsourcing your tax and accounting work to a firm, you invest in good accounting software that can handle a great deal of work and is easy to use.
Some accounting software tools have features like bank reconciliation and receipt capture. With that, you can have more confidence in the accuracy of your accounting data. Capturing receipts provides proof of purchases and automatically records the correct charges.
Envoice, for instance, frees up your accountant’s time by automatically scanning data from receipts and invoices. It can help decrease the processing time and bookkeeping costs. It also has a mobile app for generating expense reports and submitting receipts.
Read our article about how to make your accounts payable paperless to learn more about how accounting tools can help.
Some Last Thoughts
If you decide to hire an in-house accountant, ask them which software they prefer. If you choose to manage books yourself, examine how user-friendly the accounting platform you’re planning to use is. Remember that the whole point of using the tool is to improve your workflow and make your job easier.
If Envoice sounds like a good choice for your accounting needs, sign up for a free trial.
Article Sources:
[1] http://www.psychology.sunysb.edu
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