When Ryan first decided to set up his little 4-table café, he was quite sure he could handle most business tasks himself while also indulging his lifelong passion for cooking. For the first year or so, things were pretty easy, as the café attracted very little footfall. But a great online review catapulted the café into the limelight, and Ryan began struggling to keep pace with his business’s growth. It was then that he outsourced his bookkeeping and accounting to a professional accounting firm. That took the burden off his back for some months, but it returned when his café really took off, and he bought a bigger place with more tables and a larger team to help run it.

Realizing he couldn’t handle it all himself, he also requested the accounting firm to help with payroll management for the cooks, waiting staff, delivery partners, and other employees. Then came tax filing, funding requirements, compiling financial reports for interested investors, and much more work than Ryan had thought.

And it would have been a real problem if Ryan hadn’t done the right thing at the very beginning – engaging a professional accounting firm to handle the financial side. Over time, the same relationship evolved, and the outsourcing team became an integral part of Ryan’s business.

Why did Ryan opt to outsource his accounting needs rather than hire a full-time accountant? Was it a wise decision, or would an in-house accountant have made more sense?

In-house Vs. Outsourcing Accounting: What’s Better?

Ryan’s decision to outsource was based on several rational, business-centric considerations. A full-time employee and an outsourced accounting firm differ in many ways, and which one works better for a business depends on its size, current financial position, and future business goals. Here are all the factors Ryan considered:

Human Resource Cost

Placing an advertisement for a new position at the company, interviewing candidates, and conducting background checks on promising ones is a lengthy process that could have been quite expensive for Ryan’s small business. Once hired, those employees would have to be trained and paid salaries, and receive other benefits such as health insurance, vacation pay, and any additional benefits.

Accounting firm, on the other hand, offered to charge Ryan a flat fee and asked for no additional employee benefits, which helped him save a significant amount of money, which he channelled towards business growth activities. In fact, with their experience and knowledge, the qualified outsourced accountant provided better insights and greater financial accuracy at a much more affordable price than any in-house full-time employee.

Dependency on One Accountant

Ryan realized early on that as his business grew, his daily transaction volumes would become difficult to handle, leading to confusion, chaos, and serious errors. The slightest mistake in recording a figure or forgetting to record even a single transaction could snowball into expensive accounting mistakes for his business and even a potential run-in with the CRA. And had his in-house accountant gone on leave or suddenly quit his job during peak seasons, hiring and delegating the work to someone else would have been a nightmare.

However, outsourcing accounting to specialists does not come with these risks. If one accountant is unable to finish the task at hand, the firm automatically assigns the job to another, equally capable person. Thus, you save on time, effort, and training costs by outsourcing your accounting needs to a professional firm, which is exactly what happened for Ryan.

Access to Trained and Updated Professional Accountants

While Ryan juggled many responsibilities at the beginning, his multitasking soon led to accounting errors. Moreover, he was unable to understand and incorporate the various tax regulations and accounting standards that are regularly reviewed and updated. Had he continued to manage accounting himself, any errors or oversights in adhering to tax regulations could have led to penalties and even legal action by the CRA.

Professional accounting firms, on the other hand, keep themselves constantly updated with the latest regulatory changes. They handle the compliance part. So, when Ryan’s sales crossed $30,000 in a quarter, it was his accounting firm that informed him that he would now have to pay GST, and he did the needful to ensure his tax obligations were duly met.

Access Latest Technology at Low Cost

Ryan, a millennial, is savvy with technology. He knew that updating in-house accounting software and automation systems could prove very expensive indeed. But a professional accounting firm is already equipped with the latest technology and software. So when he outsourced his bookkeeping and accounting needs to the accounting firm, he automatically got access to the latest tech without emptying his business coffers. On top of that, the accountants regularly reviewed the software-generated records, and Ryan reaped the benefits of real-time financial data.

Reduced Possibility of Internal Fraud

As the business flourished, Ryan started relying more on his staff to punch in the right numbers, handle billing, and manage daily accounts. Small errors went unchecked for years. However, such lapses could have posed a greater threat if the in-house accountant had also been involved. Since the accountant is well acquainted with all the employees, suppliers, and vendors of the business, it becomes easier to orchestrate such fraud.

Ryan knew beforehand that accounting needs an unbiased pair of eyes, which was possible with an outsourced accounting firm. In fact, the accounting firm helped Ryan keep his data secure with encryption and firewalls, limiting access to confidential financial information and thus discouraging fraud.

Work Flexibility – Scaling or Downsizing

Ryan’s business was bustling with customers, but the pandemic lockdown forced him to downsize. A year earlier, his outsourced accounting firm was handling payroll, tax planning, financial statements, and investor financing, and suddenly he had to pause it all. Thankfully, the sudden downsizing did not affect his overhead costs, as the firm charged only for the services used. Nor did the additional accounting work during the business’s growth affect the quality. Had it been a single in-house accountant running the show, the expansion would have been overwhelming and would have led to errors or missed deadlines. And a downsizing could have left Ryan with a fixed salary expense even when his business had no revenue.

Although Ryan started with a tiny café with customers trickling in, his long-term vision and honest assessment of his own skill set and limitations helped him make a cost-effective choice. Once considered just a cost-saving strategy, outsourcing accounting and bookkeeping is now being recognized as a great way for small businesses to enhance efficiency and drive growth.

Contact Ford Keast LLP in London to Help You with Accounting Needs

Talk to a professional accountant to help you with setting up a bookkeeping system, accounting software, payroll, and other accounting services, depending on your business needs. To learn more about how Ford Keast LLP can provide you with the best accounting and bookkeeping services, contact us online or call us at 519-679-9330.