In-House Accounting vs. Outsourced Accounting: Which One is Right for Your Business?
Financial management is crucial to company success. As a business owner, it is important for you to stay on top of the financial health of your business so you can properly allocate your funds and anticipate any financial risks before they can have significant effects on your company’s growth.
To help you effectively keep track of your financial health, you can either hire in-house accountants or outsource your accounting processes to seasoned accountants. Both options have their own advantages and disadvantages, so it can be difficult to choose which one is ideal for your business needs.
Hiring in-house accountants will help you steadily manage your finances and keep your financial processes compliant with tax laws in the Philippines. Engaging with outsourced accounting providers, on the other hand, will aid you in cutting labor costs and overhead expenses so you can allocate more budget on other aspects of your business.
Cost of Hiring Accountants in the Philippines
According to GrowthForce, the cost of hire is a determining factor for small-and-medium enterprises (SMEs) when they decide between having their own accounting teams or outsourcing such work to third-party providers.
A recent salary report from PayScale shows that the average monthly salary of full-time accountants is Php 29,000 while bookkeepers earn Php 20,000 per month on average.
In comparison, outsourced accountants have lower fees. Since they are only employed on a project basis, companies only pay for the services rendered. According to the Pacific Crest Group, businesses are able to save on employment costs and unnecessary overhead expenses when hiring an outsourced provider.
It is important to note that in the Philippine setting, there is a salary gap between accountants who are certified by the Philippine Institute of Certified Public Accountants (PICPA) and those who are not. Accountants who are accredited by said agency are referred to as Certified Public Accountants (CPAs) and are held at a higher standard for passing sets of training and accreditations. Thus, they earn 10 to 15% more money than non-CPAs.
Management of Internal Controls
Establishing internal controls allow you to place layers of checks and balances to protect your assets. AccountingTools defines this process as an “interlocking set of activities” intended to safeguard all resources, minimize accounting errors, and ensure that each accountant performs work in accordance with established procedures.
According to Lalea and Black, LTD., most small businesses employ not more than two CPAs to work on their internal accounting. However, there are higher chances for “honest mistakes” and fraud with this arrangement. Entrepreneur states that 80% of embezzlement cases occur at small businesses, and 30% of such cases happen because the company did not establish a checks and balances system.
Medium says organizations can profoundly reduce the possibility of fraud when they outsource their accounting and bookkeeping functions. A dedicated team of CPAs will check the client’s books of accounts, financial statements, and other accounting documents, which thereafter undergo additional reviews from other CPAs to ensure there are no discrepancies or errors in the records. This reduces the chances of any manipulation of the client’s books of accounts.
Quality of Work
Shellbourne Accountants states that the advantage of establishing your own in-house accounting department is the ability to consistently keep track of your financial health in every stage of development of your business. Thus, helping you focus more on the non-financial aspects of your enterprise.
On the other hand, engaging with outsourced accounting firms is ideal if you do not have the budget to hire and retain your own accounting department. Unlike in-house accountants, they can act as financial advisors and provide special services that are difficult for general accountants to perform, i.e., financial monitoring, financial modeling, accounting manual preparation, and due diligence. According to Medium, they specialize in a wide range of accounting services and can extend assistance on creating a solid business plan to help you stay within your budget.
Choosing Between In-House Accounting and Outsourced Accounting
As businesses adapt to the evolving corporate landscape, they need to effectively manage their financial health to thrive. Both in-house and outsourced accounting provide benefits to companies of varied sizes, but their importance to your business will ultimately be based on your needs.
If you want to acquire a dedicated team to handle your accounting processes on a stable, long-term engagement, then having in-house accountants is ideal for you. However, you have to consider the amount of investment you need to hire and retain them. This option is mostly ideal for established companies and scaleups.
Conversely, if you only need to avail of certain accounting services for a short-term basis, engaging with outsourced accounting providers is a better option. Most of these providers specialize in complex accounting processes, which are usually difficult for general accountants to perform. Startups and SMEs looking for quality services with a low budget can benefit from their services.
It is crucial for companies to assess which option to choose. If you are looking for long-term benefits, then in-house accounting will be right for your business. But if you only require short-term or contractual assistance, outsourced accounting will fit your budget and requirements.