Is your business growing? That’s a positive outcome. But as your business grows, managing finances can become challenging. Therefore, having a strong accounting function becomes increasingly important for maintaining financial control and meeting your legal obligations. One of the biggest decisions businesses face is In-House vs outsourced accounting.
Should a business hire a full-time accountant or should it partner with an external accounting firm? Well, the right choice depends on your budget, business size, and accounting needs.
This blog compares in-house vs outsourced accounting, explains the pros and cons of each option, and helps you decide which solution is best for your business.
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What Is In-House Accounting and How Does It Work?
In-house accounting means hiring one or more accountants who work for your business. The employed accountants handle daily financial tasks, manage bookkeeping, process payroll, prepare reports, and help ensure compliance with HM Revenue and Customs (HMRC) requirements.
In-house accounting gives you direct control over your finance department. However, it also comes with ongoing employment costs.
What Is Outsourced Accounting and How Does It Work?
Outsourced accounting refers to engaging an external accounting firm to manage some or all of a business’s financial tasks. Many UK businesses use outsourced accounting services to handle bookkeeping, VAT, payroll, management accounts, Corporation Tax, annual accounts, and Self Assessment.
What Is the Difference Between Outsourcing and In House Billing?
The main difference between in-house vs outsourced accounting is who manages your billing process. As mentioned above, in-house billing involves employing your own staff to handle invoicing, credit control, payment collection, and billing records.
In contrast, outsourced billing involves hiring an external provider to manage some or all of your business billing activities. This provider uses its own team and systems to issue invoices, chase overdue accounts, reconcile payments, and produce reports. Moreover, billing is only one part of a wider accounting function.
What Are the Pros and Cons of Internal Accountants?
When discussing in-house vs outsourced accounting, it is vital to understand their pros and cons as well. So, if you are thinking of shifting your entire finance department to an external agency, you need to balance the advantages and disadvantages of internal accountants. This is to see how they impact daily operations.
What Are the Pros of In-House Accounting?
Here are some of the key benefits of in-house accounting:
Greater Control Over Financial Processes
With an in-house accounting team, you can have direct supervision of your accounting procedures, reporting, and internal controls.
Better Accessibility
An internal accountant works directly within your business. This makes it easier to discuss financial matters, answer questions, and collaborate with other departments.
Deeper Understanding of Your Business
An in-house accountant develops detailed knowledge of your industry, operations, and financial goals over time. This can help them provide more tailored financial insights.
What Are the Cons of In-House Accounting?
When comparing pros and cons of in-house vs outsourced accounting, don’t forget to consider the following disadvantages of internal accounting:
Higher Costs
Hiring an internal accountant often costs more than outsourcing. You will typically pay salary, National Insurance contributions (NICs), pension contributions, and software costs.
Recruitment Challenges
Finding and retaining qualified accountants can be costly and time-consuming.
Sickness and Holiday Cover
If your accountant is on sick leave or annual leave, tasks may get delayed unless you have additional staff to cover them.
Greater Fraud Risk Without Internal Controls
If one person handles all financial tasks without proper segregation of duties and internal controls, the risk of errors and fraud can increase.
Software and Compliance Responsibilities
Your business is responsible for choosing, maintaining, and implementing accounting software while ensuring compliance with HMRC and UK accounting requirements.
What Are The Pros of Outsourcing Accounting Services?
Before deciding on in-house vs outsourced accounting, understand the advantages and disadvantages of accounting services. Benefits of outsourced accounting include:
- Greater access to specialist accounting and tax expertise.
- Outsourced accounting costs can be lower than in-house accounting.
- If an employee leaves, outsourced firms continue providing the service without disruption.
- It frees up management time and resources so you can focus on core business functions.
- Outsourced accountants often use advanced accounting software and stay up to date with industry trends. This reduces the need for companies to invest in costly tech upgrades and training.
- You can receive ongoing support throughout the year.
- Reduced administrative burden.
What Are the Cons of Outsourcing Accounting?
Considering the disadvantages of outsourced accounting is important when you are discussing in-house vs outsourced accounting.
- Less control over the company’s finances and financial processes.
- External accountants may require time to develop a detailed understanding of your business and its culture.
- You may not always receive immediate assistance.
When to Outsource Accounting?
You should know when to outsource accounting as it can help your business save time, reduce costs, and improve financial management. You should go for outsourcing if you are spending too much time on bookkeeping or struggling to keep up with HMRC deadlines.
Additionally, if you need expert financial advice without hiring a full-time employee, it is best to outsource accounting.
When to Choose In-House Accounting?
An internal accounting team may be suitable if your business has hundreds of employees, processes a high volume of daily transactions, and requires full-time financial analysis.
Furthermore, you should choose in-house accounting when you are operating multiple departments with complex reporting needs and need continuous on-site financial support.
What Is the Difference Between an In-house Accountant vs an Outsourced Accountant?
When comparing an in-house vs outsourced accounting, the differences usually come down to cost, expertise, scalability, and flexibility.
The table below compares features of both in-house and outsourced accountants:
| Features | In-House accountant | Outsourced accountant |
| Recruitment Required | Yes | No |
| Employment Cost | High | Lower monthly fee |
| Scalability | Difficult | Easy to scale |
| Software Costs | Usually paid separately by employer | Often included within the service package |
| Often included | Limited to employee experience | Access to specialist accountants |
| Compliance Support | Depends on staff | Dedicated professionals |
What Are In-House and Outsourced Accounting Costs?
When comparing an in-house accountant salary vs outsourcing, many businesses find that outsourcing offers predictable monthly costs without the overheads of employment.
Outsourcing accounting costs are often lower than employing a full-time accountant. Hiring an in-house accountant involves annual salary, employer NICs, pension contributions, holiday pay, training, accounting software, and office equipment.
Look at the table below for a quick comparison of in-house vs outsourced accounting costs:
| Cost category | In-house accounting | Outsourced accounting |
| Employer costs | Employer NI, pension contributions, holiday pay and other employee benefits. | Included within agreed service fee |
| Staff costs | Normally £30k to £60k+ per year per accountant, depending on location and experience. | Normally £150 to £1,200+ per month, depending on the services required and the size of the business. |
| Accounting software | Business usually pays for software. | Often included in packages or available at discounted rates. |
| Equipment & office space | Business provides laptops, office space, and other required equipment | Not required because provider has its own |
| Recruitment & staff turnover | Business recruits its team, and it can be costly and time-consuming. | The provider manages staffing. |
Disclaimer: The costs are not definitive and may vary based on business size, services required, and the provider you choose. Yes, the prices may change depending on the scope of work.
Is Outsourced Accounting Cheaper Than In-House Accounting?
In many cases, yes, particularly for most small and growing businesses in the UK, outsourced accounting is generally the more cost-effective choice. Larger organisations with extensive accounting needs may benefit from an in-house accounting team.
However, you need to understand that in-house vs outsourced accounting cost depends on the complexity of your business transactions.
Which Option Is Better for Small Business Accounting?
For most small businesses in the UK, outsourced accounting can be the better option because it provides access to professional expertise at a lower cost than hiring a full-time accountant.
However, if your business has complex finances or requires daily on-site support, it may be best to choose an in-house accounting team.
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To Sum Up
Choosing between in-house vs outsourced accounting can be challenging, especially if your business is growing. The right choice depends on your business’s size, budget, and financial requirements.
If you are a small business, outsourced accounting services can provide greater flexibility, specialist expertise, and better value for money. However, if you are a larger organisation with many employees, you may benefit from maintaining an internal finance department.
Whether you choose external accounting support or an internal finance team, professional accountants can help your business by preparing accurate financial statements. Need professional accounting services? We are here to support your business.
At CheapAccountantsInLondon, we manage bookkeeping, handle payroll, prepare and submit VAT returns, and ensure compliance with HMRC. We also offer tax planning advice to improve efficiency. So what are you waiting for? Get a quote today and let us support your business growth!
Disclaimer: This article is for general information purposes and does not constitute financial or legal advice. For guidance specific to your situation, consult a qualified accountant or contact us.