For CPAs who haven’t yet experienced the transformative power of outsourcing, setting up an in-house team to tackle the workload and manage their finances, might seem like the obvious, and only, solution. But while there is nothing wrong with having an in-house team of professionals working for you – and for some firms, this works perfectly well – it can become costly when compared to outsourcing.

From salaries and employee benefits, to office infrastructure, recruitment and training, there are many expenses associated with in-house employees. While these mounting costs may be manageable and worth it for some, others turn to outsourcing for CPA firms as a way of keeping such expenses down, and in some instances, eliminating them altogether.

Here are some of the costs typically associated with in-house accounting:

  • Salaries and benefits
  • Office space and equipment
  • Recruitment and training costs
  • Data security investments
  • Employee turnover and retention

While such direct costs are clear and easy to account for, there are some costs that remain hidden, such as the following:

Time spent recruiting and training

Although this isn’t a direct financial cost, it’s worth pointing out that while in-house accountants are being recruited and then trained, HR and other members of the team are not spending as much of their time on other aspects of the business as they might otherwise have done. This can lead to a period of reduced productivity, which is then repeated every time a new employee is recruited; further increasing costs.

Fraud and mistakes

Did you know that annually, many businesses lose as much as 5% of their revenue to fraud, with some losses amounting to hundreds of thousands of dollars? A shocking statistic, and one that smaller businesses are more vulnerable to. Without sufficient internal controls to spot discrepancies in finances early on, smaller businesses with just one or two in-house accountants working independently, often end up losing companies significant amounts of money in the following ways:

  • Failure to detect transactions that are fraudulent
  • Financial reporting that isn’t accurate
  • Necessitating the use of external auditors to limit damage

In stark contrast with these alarming details, are outsourced service providers, who employ stringent and robust security measures to minimize the risk of fraud, and reduce inaccuracies in financial management.

Risks and penalties related to compliance

Anyone in the accounting industry knows that there are always regulatory changes being made, and tax laws are frequently altering. Unfortunately for in-house CPAs, this means that they have to work hard to remain up-to-date, otherwise the following things can occur:

  • Legal penalties and fines
  • Audit costs
  • Reputational damage

For highly skilled outsourced bookkeeping services, this isn’t an issue, as they continually work to update their knowledge base, and providers are usually made up of large teams of skilled professionals whose expertise can be instantly tapped into. But for an in-house accountant without the necessary knowledge, skills and expertise, this could prove difficult and the company could be at risk both legally, and financially.

Reducing the many costs associated with in-house hiring (some of which are obvious and some of which aren’t so obvious) is easy with outsourced accounting, tax preparation and bookkeeping. If your accounting team is struggling to keep costs down while providing clients with a quality service, outsourcing could be a convenient and highly viable solution.