Small business owners often grapple with a critical question: should you hire an in-house accountant or outsource your accounting? Both approaches have merits, but the best choice depends on your company's needs, budget, and growth plans. In this guide, we'll define outsourced vs. in-house accounting, compare costs and expertise, and help you determine what's best for your small business. We'll also explore how outsourced accounting gives you CPA-level service at a fraction of the cost, a key benefit for many growing businesses.
🏢 In-House Accounting
In-House Accounting means you employ staff (a bookkeeper, accountant, or even a team including a controller/CFO) on your payroll to handle the company's finances. They work internally, providing immediate access and familiarity with your business.
🌐 Outsourced Accounting
Outsourced Accounting involves hiring an external firm or service provider to handle bookkeeping and financial reporting, often remotely. You pay a service fee or retainer, and a dedicated team (or individual) manages your books, usually leveraging cloud accounting software.
In-house teams offer control and direct oversight, while outsourced providers offer flexibility and broad expertise. Many companies today choose a hybrid approach (a small internal staff plus outsourced experts) as they grow, but for most small businesses, outsourcing key accounting functions can be highly cost-effective.
Cost is a major deciding factor. Let's compare the small business bookkeeping costs of each approach:
💰 Detailed Cost Breakdown
📊 In-House Costs
Hiring even one full-time accountant incurs a salary plus benefits, taxes, office space, and equipment:
- Full-charge bookkeeper: ~$40,000/year
- Staff accountant: ~$57,000/year
- Benefits and overhead: +20-30%
- Lean internal team (2-3 people): $200,000-$300,000/year
- Plus: Recruiting, training costs, and turnover risks
💵 Outsourced Costs
Outsourced accounting services usually charge a monthly fee tailored to your needs:
- Basic bookkeeping: $500-$2,500/month
- Comprehensive package: $3,000-$15,000/month
- Full-stack team (bookkeeper, accountant, controller): $30,000-$60,000/year
- Compared to in-house: $100K+ for equivalent roles
💡 Bottom Line: For cost-conscious small businesses, outsourcing offers predictable fees that are often 30-50% or more lower than the fully loaded cost of an employee or team. You pay only for the level of service you need, and you can scale up or down as your business grows without the hassle of hiring or layoffs.
Beyond cost, consider the quality of expertise and bandwidth:
👤 In-House Accountant
A single in-house bookkeeper might handle all transactions and basic reporting. They'll have intimate knowledge of your business day-to-day and be readily available for questions.
However:
- One person has limited expertise
- Complex issues (GAAP adjustments, forecasting, tax strategy) may exceed their knowledge
- Risk of errors or fraud with single-person control
- Can become overwhelmed as business grows
- Absence during leave creates problems
👥 Outsourced Accounting Team
When you outsource, you often get a team of professionals (bookkeeper, senior accountant, CPA or CFO-level reviewer) for the price of one.
Benefits:
- Multiple sets of eyes ensuring accuracy
- Built-in checks and balances against fraud
- Highly qualified staff (CPAs, experienced accountants)
- Exposure to many industries and best practices
- Advanced software and automation tools
- More efficient and accurate reporting
🎯 Key Benefit
With outsourcing, you're not limited to one person's skill set. You gain a breadth of experience for example, advice on complex accounting issues, tax planning, or financial strategy that an in-house junior bookkeeper might not provide. Quality control is often stronger with outsourced accounting due to structured review processes (e.g., one person enters transactions, another reviews/reconciles). On the other hand, an in-house accountant offers immediacy and deep internal familiarity. They "live" in your business daily, which can be an advantage for quick insight into minor operational details.
Let's highlight why so many small businesses outsource accounting. In recent years, outsourcing has grown popular – over 70% of SMBs outsource some accounting tasks – due to benefits like these:
🚀 Compelling Advantages
💰 Significant Cost Savings
Cost remains the #1 driver. 70% of businesses cite cost cutting as the primary reason to outsource. By avoiding full-time salaries and paying a flexible fee, businesses can save money and invest it elsewhere. Many find they can get equal or better accounting service for 30-50% less cost than hiring in-house.
🎓 Access to High-Level Expertise
Outsourcing gives a small company access to experienced accountants and even CFO-level guidance on-demand. It's like having a part-time CFO who can advise on financial strategy, without paying a six-figure salary. Providers often have industry experts (e.g., specialists in your business sector) who can offer insights and best practices you wouldn't otherwise get. This means CPA-level and controller-level expertise looking at your books regularly.
⚡ Advanced Technology & Efficiency
Outsourced firms use cloud accounting software, automation, and real-time reporting tools that a small business might not implement on its own. They handle software setup, maintenance, and upgrades as part of their service. Faster closes and real-time dashboards are common. Accuracy also improves with multiple reviewers and automated processes.
📈 Scalability and Flexibility
As your business grows or faces seasonality, an outsourced service can adjust easily. Need to process double the transactions during holiday season? They can scale up. Experiencing a slow quarter? Scale down services. You're not stuck paying idle staff. This flexibility is a huge benefit for small businesses with variable workloads.
🛡️ Reduced Risk and Stronger Controls
With teams and established processes, outsourcing often means better internal controls. Separation of duties reduces fraud risk (no single employee has control over all financial facets). It's sad to say, but small businesses are most vulnerable to fraud when one person handles everything unchecked. Outsourced accounting introduces oversight. Additionally, firms ensure compliance with laws and accounting standards, reducing the risk of errors or penalties.
⏰ Time Savings for You
By delegating bookkeeping, you free up your time (or your staff's time) to focus on core business tasks. Owners often find they regain hours each week, reduce stress, and get peace of mind that finances are handled by pros. As one source noted, delegating your bookkeeping might be the most profitable decision you make, since it prevents missed deadlines and panic at tax time.
It's important to note a few possible drawbacks of outsourcing and how to mitigate them:
⚠️ Less On-Site Availability
With an outsourced team, you won't see them in the office. Communication is usually via email, calls, or virtual meetings. Some business owners used to walking down the hall to ask the bookkeeper a question may feel a loss of immediate access.
Mitigation: Set up regular check-in calls and ensure the provider is responsive. Many outsourced CFOs will happily join meetings via Zoom and provide timely reports to keep you informed.
🔄 Onboarding and Knowledge Transfer
An outsourced accountant will need to learn your business processes initially. This onboarding takes some effort on both sides. Additionally, if your business has very niche processes or complex internal systems, an internal team member might grasp them more quickly.
Mitigation: Good firms have defined onboarding procedures. Be prepared to share documentation and answer questions in the first month or two. After that, they should operate smoothly.
🔒 Data Security and Trust
You are sharing sensitive financial data with a third party. That requires trust and proper data security measures.
Mitigation: Choose a reputable outsourced accounting provider. Check their security protocols, ensure they use encrypted software, and maybe start with a trial project. Signing an NDA or confidentiality agreement is standard.
For most small businesses, these downsides are minor compared to the upsides. The trade-off often favors outsourcing, especially if cost savings and access to better expertise are priorities. Later, as a company grows very large or has highly specialized needs, it might consider bringing more finance functions in-house. But even many mid-sized firms maintain an outsourced relationship for certain functions due to efficiency.
How do you know if outsourcing accounting is right for you? Here are some tell-tale signs and scenarios:
✅ Your business is small or just growing
If you're a startup or under, say, $5 million in revenue, outsourcing is often the default choice. A common rule of thumb: companies under a certain size benefit from outsourcing, whereas only larger companies ($20M+ revenue) truly need full in-house teams. Outsourcing can cover your needs until you reach a scale where daily on-site support is necessary.
💰 Cost is a major concern
You can't afford a full-time experienced accountant, but you also know you need more than DIY bookkeeping. Outsourcing gives you professional accounting at a lower price point. If hiring an in-house accountant (or a second one) is out of budget, compare that salary to an outsourced package – the latter will likely win on cost.
🎓 You need higher expertise occasionally
Perhaps you can handle day-to-day bookkeeping but struggle with complex accounting tasks, financial planning, or preparing for tax season. An outsourced service can fill those gaps by providing controller or CFO guidance as needed. This is especially useful when making big decisions (buying equipment, getting a loan, etc.) and ensuring your books are investor- or loan-ready.
📋 Your bookkeeping is falling behind
If you find yourself months behind on reconciling accounts or scrambling during tax time, it's a red flag. Outsourced bookkeepers will keep you on schedule and compliant, preventing the "panic mode" at year-end. Consistent, up-to-date books lead to better decisions and less stress.
📈 You want to focus on growth
Many entrepreneurs realize that doing accounting in-house (or by themselves) is eating up time better spent on sales, operations, or product development. By outsourcing, you refocus internal energy on growth initiatives instead of number-crunching. The financial clarity you get from professionals can even drive growth by informing strategy, rather than being a back-office chore.
When might in-house be preferable?
If your business has extremely specialized processes or requires someone on-site daily to handle constant transactions, an internal accountant could be justified. Also, large companies often desire complete control and full-time availability. However, for most small to mid-sized companies, outsourcing provides more value, especially in the modern age of cloud accounting.
It ultimately depends on your situation, but outsourcing is usually best for small businesses that want to save costs and get expert support without the HR headaches. Hiring in-house makes sense once your volume of work truly requires a full-time person on staff, or if you need someone physically present for operational reasons. Many businesses start with outsourcing, then add an in-house bookkeeper later for daily billing or admin, while still outsourcing higher-level accounting oversight (a hybrid model).
Consider this: If you hire in-house, you're investing significantly in one individual (or a few). If that person leaves, all their institutional knowledge walks out the door. With an outsourced firm, the knowledge is documented and spread among a team – if one accountant leaves the firm, another steps in with minimal disruption. Plus, outsourced providers are incentivized to continuously provide value to keep your business, whereas an in-house hire might become comfortable over time.
One compelling point worth emphasizing is the "CPA-level service for a fraction of the cost" that outsourcing offers.
💎 The Value Proposition
Small businesses typically cannot afford a full-time CPA or CFO on staff. But when you outsource, you often get access to a CPA's expertise baked into your monthly fee. For example, an outsourced accounting package might include review by a CPA or experienced controller who ensures your financial statements are correct and offers insights during monthly review meetings – all included.
📊 The Cost Comparison
Contrast this with in-house: hiring a CPA with years of experience as a full-time employee could cost $80K, $100K, $150K+ per year in salary. By outsourcing, you share that cost with other clients of the accounting firm. It's similar to hiring a fractional CFO: you get high-level financial guidance on a part-time basis. The result is you enjoy strong financial acumen guiding your books without breaking the bank.
For instance, a virtual accounting team (with bookkeeper + accountant + controller oversight) might run $3-5K per month. That's perhaps ~$50K a year – which is less than the salary of a single mid-level accountant, yet you're getting a team including a controller/CFO. It's a powerful value proposition. You get advice on tax strategy, budgeting, cash flow improvements and more, which can lead to better business decisions and cost savings that easily justify the fees.
Moreover, outsourced firms often employ certified professionals (CPAs, CMAs, etc.) who must maintain education and stay current on accounting rules. Your small business benefits from up-to-date expertise without having to train anyone in-house. This is especially valuable when tax laws or accounting standards change; your provider proactively adjusts your processes, whereas an in-house generalist might miss updates.
Choosing between an in-house accountant and outsourced accounting comes down to weighing control vs. cost vs. expertise. If you need day-to-day on-site support and have the budget, an in-house staff provides control and immediate availability. However, if cost savings, superior expertise, and flexibility are important (and for most small businesses, they are), outsourcing is likely the better choice. You'll get peace of mind from professional oversight, accurate books, and more time to concentrate on running your business.
Many small companies find that outsourcing their bookkeeping and accounting pays for itself – through saved salary costs, more tax deductions found, fewer mistakes, and better financial decisions that boost profitability. It's no surprise that over 80% of small businesses are open to outsourcing in some form as of recent surveys, with accounting being one of the top functions outsourced.
If you're on the fence, consider trying outsourcing for a quarter or two and comparing the results. You might find your financials get tighter and more insightful than ever before. And remember, it's not an all-or-nothing choice: you can maintain some in-house role for daily tasks and outsource the heavy lifting. The ultimate goal is to set up your accounting function in a way that best supports your business's growth and success.
Ready to Make the Right Choice?
Ready to explore outsourced accounting for your small business? Contact our team for a free consultation and see how CPA-level expertise can elevate your finances without the hefty price tag. Let us provide the financial clarity and savings you deserve, so you can focus on what you do best – growing your business.
