Inflation has struck hard. Running any business is more difficult than ever. With rising costs, businesses are looking for alternatives that can ease the pain caused by inflation. The average cost of an in-house accounting can range from $60,000 to over $160,000 annually, including salary, benefits, and overhead. These have risen even further in the last few years because of a nationwide shortage of qualified accounting professionals, making it increasingly complex and expensive for small businesses to recruit and retain in-house talent.
For many businesses, this has culminated in a dilemma deciding to outsource or hire an in-house accounting team. The question, though partially based on cost, is far less straightforward than a simple yes-or-no. Other factors, such as data security, operational control, expertise, scalability, and long-term business strategy, all play an integral role in determining which approach will best meet a company’s needs.
This blog is intended to help small business owners understand how much outsourced accounting costs in comparison to in-house, the benefits, and the trade-offs between the cost of outsourcing accounting versus in-house accounting.
Cost of Outsourcing Accounting v/s In-house Accounting
| Service Type | Typical Cost (Monthly) | Typical Cost (Annually) | Included Costs |
|---|---|---|---|
| Outsourced (Bookkeeping Only) | $500–$1,200 | $6,000–$14,400 | Only what you use; firm handles tools & training |
| Outsourced (Full-Service) | $1,000–$5,000+ | $12,000–$60,000+ | Payroll, bookkeeping, payroll, controller, etc. |
| In-House Accountant (US avg.) | $5,693 | $68,326 | Salary only; excludes benefits, taxes, overhead |
| In-House Accountant (US top earners) | $7,916 | $95,000 | Salary only; excludes benefits, taxes, overhead |
Other Factors to Consider When Contemplating Your Next Projects
1. Expertise and Quality of Work
The question of outsourcing versus in-house often starts with the consideration of the level of expertise each would provide. The comparison might be subjective and vary depending on a firm’s expectations. Outsourced accounting firms typically provide businesses with access to a team-based model, including bookkeepers, staff accountants, controllers, and even fractional CFOs-often without having to hire multiple full-time employees.
In-house accountants have intimate familiarity with your operations and can quickly align processes with the unique needs of your business. Unless you build a full internal finance team, you may be limited to the skill set that one person can provide. That may not include areas of advanced tax planning, forecasting, or audit preparation.
2. Data Security and Compliance
Financial data demands robust security. Usually, outsourcing companies invest a lot in cybersecurity infrastructure, such as data encryption, secure portals, firewalls, and compliance-related tools that protect customer information. In-house accounting gives businesses that feeling of direct control over who has access to financial data. However, most small business owners tend to underestimate both the cost in comparison to the cost of outsourcing accounting and the level of expertise necessary in maintaining secure systems; hence, they become more vulnerable to internal errors or outdated tools.
3. Operational Control
For many entrepreneurs, operational control is key. In a typical setting, an outsourced accountant standardizes workflows at the expense of internal management’s flexibility. You will have to work according to the provider’s preferred processes and timelines. In contrast, an in-house accounting accountant provides you with full control of operations, enabling you to quickly change priorities, request immediate updates, and further integrate accounting into other departments like sales and operations.
4. Scalability and Flexibility
As businesses grow, their finances become more complicated. Scaling with the business, outsourcing means firms add payroll, reporting, tax, or CFO insights without growing headcount, which is perfect for early-stage and fast-growth firms. This type of scaling within an in-house team involves hiring, training, and increased software costs, along with management. Having an internal team will indeed bring long-term stability, but it requires more investment and greater time to develop.
5. Business Continuity and Risk
Continuity is a behind-the-scenes yet critical aspect of accounting. Outsourced firms usually function with team-based support; this means that your financial work may continue regardless of such eventualities as illness, turnover, or vacation days. You are never left without any coverage. If that single in-house accounting ever decides to leave or otherwise becomes unavailable, though, the business is usually much more vulnerable to interruption. Knowledge gaps will slow operations down, and hiring replacements may take a number of weeks or even months, many times at great cost.
6. Long-term Strategy and Vision
Accounting is not just about recording transactions; it’s a way to strategize over overall finance. Outsourcing can provide access to high-level strategic professionals, such as fractional CFOs, at a fraction of the cost of a full-time hire. In turn, larger or more mature businesses may need an in-house accountant or finance team that works closely with leadership and participates in planning meetings in order to develop a deep understanding of the company’s vision. Still, building such a department requires higher investment and long-term commitment.
Conclusion
There is no one-size-fits-all decision when it comes to a choice between outsourcing your accounting and hiring an in-house accountant. Each option proffers some unique advantages and potential drawbacks, with the right choice depending on your business’s size, growth stage, budget, and strategic goals.
The cost of outsourcing accounting tends to be a more cost-effective, expert, and flexible platform that best suits the needs of startups and small businesses looking to manage finances without bringing on high overhead. Building your accounting team in-house offers greater control, integration, and long-term strategic benefits as your business grows. Essentially, the final decision should always balance immediate needs with future growth.
