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In-House vs. Outsourcing: Finance Advice from Accounting Experts

One of the most important decisions that small business owners need to make is whether to keep their accounting function in-house or outsource it to a specialist. In the very early days, keeping track of your own finances might give you a sense of control and prove to be a useful tool when it comes to decision-making. However, as the business grows, the demands that this puts on you will increase dramatically.

In this guide, we take a closer look at some of the important considerations with both approaches so you can make the right decision for you and your business.

Do it yourself

If you’re considering keeping your business’s finances in-house, then it pays to know a little more about exactly what you’re letting yourself in for. No doubt you’ve already managed the finances up until this stage so you will have some idea of the tasks involved. However, as your business grows, so will your to-do list. It will include:

Keeping a close eye on cashflow

In the first few years of trading, cashflow is the one thing that can really catch businesses out. If you’re keeping your accounting in-house, then you need to be particularly careful. Steps you should take include:

  • Investing in a cloud-based accounting system
  • Putting clear payment terms in place and writing them into customer contracts
  • Invoicing as soon as work is complete
  • Setting up a formal process to chase aged debtors
  • Exploring ways to reduce stock levels without impacting sales
  • Always making room in your cashflow forecasts for payment slippage
  • Managing debt wisely

Financial planning

Taking the time to draw up budgets and forecast your income and costs for the year ahead is a critical step in the sound financial management and success of your business. The information these forecasts will provide should allow you to make informed and speedy decisions.

Your ongoing performance should also be measured against the plans you have in place, and adjustments should be made whenever necessary. It’s essential to build some ‘headroom’ into your plans as there will always be unexpected costs lurking around the corner.

Cost control

In any small business, income can be volatile. Whether your business is subject to seasonality or simply experiences occasional drops in sales, this situation can be extremely dangerous if your costs are not managed carefully. Keeping your fixed costs as low as possible and monitoring your variable costs on a monthly basis is a must. You should also be prepared to shop around and change suppliers to keep your costs down.

The benefits of in-house

If you do choose to go the in-house route, there’s plenty to keep you busy. When you run a small business, time is not something you’ll have a lot of, so you may need to hire an accountant or financial controller to help keep your finances on track.

Whether you plan to hire a specialist or look after your finances yourself, there are some benefits to keeping the process in-house:

  • You always get the quickest answers to any questions you have
  • There will always be someone available when they’re needed
  • You can access your accounts at any time, from wherever you are
  • You have more day-to-day control over your finances

Outsourcing it

While there are certainly some advantages associated with keeping your small business’s finances in-house, many businesses decide that outsourcing is the right choice for them. Not only does it give them access to the specialist advice and expertise that many small businesses need, but it also frees up the business owner to concentrate on running the business without being distracted.

The benefits of outsourcing

There are a number of benefits associated with outsourcing the accounting function. These include:

  • Management – As well as reduced exposure to non-compliance and penalties, there’s also increased reassurance that information provided to third parties likes banks and HMRC is accurate. If it’s not, then you will have some comeback. There’s also the ability to call on the sector-specific expertise you may not be able to access in-house.
  • Employment – Outsourcing the accounting function means there are no concerns about sickness or holiday cover, and there’s a reduced risk of employee fraud and error.  It will also reduce the requirement for staff training.
  • Costs – The cost of an outsourced team is likely to be considerably less than hiring an experienced finance professional in-house. There will also be reduced office space requirements and recruitment costs.

Value your time

As a small business owner, your time is money. If you can keep a close eye on the finances of your company while dedicating yourself to the other areas where you’re needed, then there’s no reason not to keep the accounting function in-house.

However, if you find you are spreading yourself too thin, investing in outsourced expertise in areas such as accounting and finance is a sound investment that will provide peace of mind.

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