Indeed accounting is the backbone of any business. We also agree to the fact that accounting must be among the last operations being outsourced. However, every business is destined to scale up. Let’s compare in-house accounting vs outsourcing for UK based businesses. Hopefully, this will ease your dilemma on which one to choose based on specific state and requirements.
Unlike other general comparisons, we will try to understand the difference between in-house accounting and accounts outsourcing at various levels. This is necessary as the business needs differ and for few of you, switching to outsourcing may not be necessary. So we will be doing the comparison in seven levels,
- Cost factor
- Scalability
- Expert support
- Risk factor
- Data security
- Technology factor
- Business focus
This will be an unbiased comparison so as to empower you to make the best decision for your business. Let’s take them one by one.
Cost Factor
In peripheral thinking, hiring an external team is something that adds up the expenses. So naturally, some of you may straight away give the cost factor advantage to in-house accounting. In a few cases it’s true also. But there is more to it.
In-house accounting require hiring, training and maintaining accounting staff. For a small business with limited operations, in-house accounting may be a more viable option. But, according to the scale of your business you may even need multiple subsections of staff under the accounting wing. As the scale increases overhead costs also increase for the accounting team.
Outsourcing is cost-effective in most of the cases when you consider the increasing overhead expenses. Unless you are running a small business and without any scaling up plan in the near future, account outsourcing is financially beneficial because you pay just for the services rendered. As there is no need to maintain a full-time accounting team, you can reduce the overhead costs as well.
Scalability
Of course scaling up happens when many factors come together. But, as mentioned in the introduction, irrespective of the present state, every business is destined to scale up. So, which mode of accounting supports you better while you scale up? In-house accounting or outsourced accounting, let’s check.
When it comes to scalability, in-house accounting straightaway shows some limitations. Without advance and foolproof planning, scaling up with an in-house accounting team is hard since it require a higher level of expertise. Not just when expanding, during downsizing the team also, managing your accounts in-house can be challenging. Unless there is a team dedicated for the accounting section, a company that is big enough cannot scale up further. That’s basically how outsourcing can help a business.
Outsourcing accounts also have some limitations when it comes to scalability. But when compared to in-house accounting, outsourced accounting is easily scalable. An efficient accounting agency in the UK is supposed to adapt to your business needs, whether it’s just seasonal fluctuations or actual business scaling up. Unlike what mentioned in the previous passage, in an outsourced accounting set up, expansion of the accounting team as required will never cause you headache.
In scalability factor, outsourced accounting is the clear winner.
Expertise Support
Outsourcing comes with expertise. We discussed this part in our previous blog. But, we need to compare in-house accounting with outsourced accounting in terms of availability of export support. There may be some scenarios where in-house accounting scores in this aspect.
In terms of ensuring expert support, in-house accounting has limitations compared to outsourced accounting. Accounting is a vast category which may require multiple experts according to the type and size of your business. If your business is simple, small, non-scalable and the demand for expertise is minimal, hiring an expert accounting professional may be more viable than outsourcing.
When your accounting is outsourced to a team of good accounting agents in the UK, you are getting access to experts in specific areas within accounting. This includes tax, audit, legal compliance etc. Every business needs better compliance and strategic advice in each stage. And for a big business or a business that has capabilities of scaling up, expert support in accounting is inevitable. Considering the UK scenario, to deal with the complexities of various legal, tax and audit regulations, it’s better to have a team of experts rather than hiring one or two.
An expert accounting agency can also ease out regulatory compliance and complexities. You don’t need to spend your valuable manpower or man hours for this.
Risk Factor
In terms of risk factor, we think both in-house and outsourced accounting can be considered equal. However, on a given set of conditions and according to the type and size of your business, you can decide which one wins here.
Your internal teams will manage risk directly in in-house accounting. Considering the risk factor of involving an external agency in accounting, you may give points to in-house accounting. However, when your own team is handling accounts and the business keeps growing, it can develop blind spots and in some non-ideal cases conflicts of interests may also arise.
When accounting outsourcing is taken up by one of the licensed accounting firms in the UK, you can ensure the risk management protocols are in place. The risk factor of involving an external agency for accounting can be reduced with proper risk management protocols and non disclosure agreements or NDAs. They are independent and immune to internal interests of your business. So, they will ensure that there are no blind spots and provide an objective perspective without internal biases.
Choose between in-house accounting and giving the accounting to an external agency according to your risk consideration. But, let us help you to make a decision if you are considering outsourcing but hesitant only due to the risk factor. The UK regulations are one among the best. So, with a well defined risk management protocol and NDA in place, you can ensure outsourcing accounts is as safe as doing your accounts internally.
Data Security
Businesses are supposed to protect data generated internally as well as customer data. This factor is a continuation of the previous one. Here also the decision making is influenced by conditions similar to that of the risk factor.
Indeed, data is safer when handled internally. However, when the database gets bigger, companies handling data security on their own may face breaches due to human error or inadequate systems.
Outsource accounting to a reliable agency. Generally, accounting firms invest in advanced security measures. Also, confidentiality agreements and NDAs can protect sensitive information.
Technology Factor
When it comes to use of technology, only the companies with in-house teams use advanced accounting software can do accurate and efficient financial management. Softwares like Xero, QuickBooks and Sage will help you in this. But these softwares have their own limitations.
While with expert firms as your associates, you can leverage on more than just softwares. They will employ the most advanced technology to deliver high-quality services. This comes with no significant capital investment from your side.
Choose according to your business needs. If the mentioned software can meet your task and most of the other factors are aligned, you may choose to go with in-house accounting.
Business Focus
We hope this factor need no much explanation. No matter how peripheral you look into, outsourcing always helps you to focus more on your core business. In-house accounting forces internal teams to split focus between accounting and core business functions. While outsourcing accounts allows businesses to concentrate on growth, innovation and customer satisfaction.
The Verdict: In-House Accounting vs Outsourcing for UK
Outsourcing lets you focus on growing your business. However, there are several other factors to be considered. Risk management and data security are the two major factors that come against outsourcing accounts. But with a licensed accounting firm in the UK as your associates and a well defined risk management protocol, confidentiality agreement and NDA, you can choose outsourcing without any hesitation.
