Is It Better To Employ An Accountant Or Use An External Accounting Firm?
For companies just starting out, they may initially go with an external accounting firm to keep things simple. It avoids the need to boost the payroll at a difficult time when expenses are flying at them left and right.
However, a little later in the life of the business, they may find it difficult to get the kind of reporting and responsiveness from a firm of accountants. This can lead to some frustration on the part of management.
In this article, we examine whether it’s better to employ an accountant or stick with an external accounting team as a company grows.
Sticking with the External Accounting Firm
The accountants (or solo accountant working from home) are there to provide a service. They do this usually for a large roster of clients that each have their own demands.
In many business relationships of this kind, the accountant will have a bookkeeper who will enter the financials for the month. Then various reports will be run off to confirm the current financial position of the company.
Sometimes the company will keep their own financial accounts too. This will mirror what the accountant sees. However, it’s still somewhat restrictive because the accountant is a third-party and has other clients to deal with. Time spent on the phone or answering email gets billed out creating a worrisome ticking clock that can become an aggravation.
Employing an In-house Accountant
An in-house accountant provides better access to the financial information. They’re available either on a full-time or part-time basis to discuss what’s best for the company. Getting the answers to financial questions is quicker and their cost to the company is a known factor.
It is difficult to attract good accountants to work for newer companies. They worry about the longevity of the business and their job security. Also, there’s often less possibility of being promoted in a smaller company making it not as desirable for potential hires.
Accountants are also in more demand presently. So, what is driving growth in the accounting field? The globalization of business and the shift to online sales vs local/national sales certainly has something to do with it. So, in answering the question, on balance, smaller companies must do more to attract talented accountants.
The salary and benefits package will need to be comparable to what they would receive at a larger business. It’s also necessary to consider any other factors affecting recruitment such as accounting software, working conditions, health or pension benefits, and so forth.
Which Approach is Best?
A major concern for newer entrepreneurs is employing someone and worrying that they won’t have enough work to keep them busy. It’s naturally something that inexperienced business owners fuss about when employing people for the first time.
To get past these concerns, it helps to figure out how much work there will be for an accountant to do. The business must be sufficiently complex or busy enough to warrant employing someone either part-time or full-time. Otherwise, it’s best to stick with an external accounting firm until the company is large enough to require an accountant on-staff.
There Are Exceptions
For companies that are rapidly expanding and trying many different smaller projects that require project management accounts produced to validate financial models and early concepts, having someone on staff who can do that is highly valuable.
In which case, an accountant – most likely a management accountant specifically – is going to be necessary to support the goals of the business going forward. Trying to do this through an outside firm is going to be costly because there will likely be many updates to financial plans as they move through various stages.The decision whether to hire an accountant or use an accounting firm has to be determined on a case by case basis. The right answer depends on what the needs of the business or the management team are.
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