Which one is Better? Inhouse Accounting vs. Outsourcing Accounting

Having accountants inside your organization is one way to make sure that your company has attentive and dedicated support for its financial needs. But there are also upsides to employing the services of an outside party.

Accounting benefits

The in house accountants can make sure your bills are paid (accounts payable) that your collections are in hand (accounts receivable) and can help project the returns that your company will see in the near and long term (general accounting). Strategic planning, budgeting and financing are also areas in which an in house accounting team can help your business gain success.


However, an in house accounting team can be expensive. There is the need for even the smallest company to have at least two accountants in order to operate with controls. Controls is a term for separation of duties that helps limit dangerous activities which can lead to theft and fraud.

In a situation where only one person does all of the accounting activities, for instance, they could create a vendor with their own name, enter a payable for that vendor, cut the check and sign the check without any oversight.

A controls oriented process would have the vendor creation done by another person, even someone not in the accounting team, and would potentially require a second signature on the check by a third person. In this way, there would have to be at least three people involved in order to get collusion for fraud.

Should you really outsource?

Here’s a good video discussing whether or not small businesses should outsource their accounting:

Another way to approach accounting is to outsource the job. Hiring a local financial firm might be the better option depending on your business’ situation. This is something that’s been popular from time to time, but has not had a steady adoption. The outsourcing of low value chain activities like data entry is never a bad idea, and can help develop controls for smaller firms.

However, outsourcing mid-level accounting services like controller activities, can be very nerve-wracking for a small to mid-sized firm. The best arrangement that companies have discovered so far is to outsource low and high chain activities, leaving the mid-level in house for peace of mind and rapid response.

About the Author: Leon Phillips

Leon Phillips is the owner and CEO of Running Hourse Music, an accounting firm that serves the music and entretainment industry around the world. Leon was a former musician and has now decided to pursue his professional career as an accountant and business owner.

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