An in-house accountant or outsourcing?
author: Kontu Birža | date: 2008-12-02
An in-house accountant or outsourcing?
Any company registered in the Commercial Register or Register of Enterprises, also branches of foreign companies and non-profit organizations, state-financed and municipal entities, organizations, associations and unions, foundations, religious organizations and trade unions, sole proprietors and private individuals engaged in economic activity are required by law to maintain proper accounting. Under the Republic of Latvia „Law on Accounting” the person responsible for proper accounting records in a company is that company’s chief executive. Consequently, chief executive is also the one who must make a choice: a full-time in-house accountant or external accounting services.
Until recently it was quite common in the business environment to think that buying external accounting services was not what one would call a viable alternative. Business people were cautious of relying on the judgment and actions of external providers of accounting services. This attitude was caused by unfortunate cases of unprofessional performance by some accounting companies. As a result of which the buyers of such services were let down. However, if one looks at the market now it becomes clear that the situation is not what it used to be. We, as end-users, would now have much higher requirements and expectations regarding the quality of services and goods we receive. Therefore, a manufacturer or a service provider has no other choice but to provide for continuous staff training and professional development to keep one’s place in the market.
If you look at the trends in the field you will find that a very large part of accounting service providers which sprouted like wild mushrooms a couple of years ago no longer exists. The ones that remain and that have managed successful development have grown along with the requirements of their customers and the law. The purpose of operation of an accounting company is similar to that of others, which is to make profit. If a company wants to be economically viable it must evolve. It must continuously monitor and be aware of all changes that take place in the business environment, especially laws and regulations, to be able to deliver truly professional service. The nature of accounting is such that accounting companies cannot do without regular, ongoing staff training if they want to ensure that any reply to a question or inquiry posed by a customer should be competent.
The vast majority of companies today would agree that success and efficiency of a company largely depend on how professionally that company’s accounting is organized and maintained. The crucial role of a good accountant today is widely acknowledged and the times when accountants were taken for some kind of idlers who receive their salaries for nothing are gone and forgotten.
In today’s job market a good accountant expects adequate remuneration for professional qualified performance. A company therefore is again required to choose between hiring a truly competent accountant at high costs or a less experienced one at reduced costs. Furthermore, it’s not a secret that accountants frequently work for several companies at once to be able to earn their living. It is therefore essential to realize that by choosing to employ a non-professional or a part-time accountant who works for several employers at the same time a company risks its future sustainability.
So why are companies often unwilling to entrust the proper management of their financial matters to external accounting service providers? Here several aspects are of importance, for example, one might dislike the fact that one will not be the only customer of an accounting company, or that in case of outsourcing a constant contact with a dedicated accountant will be lacking. Ironically, at the same time one is often prepared to rely on an overworked employee who labors 20 hours a day, no holiday or vacation…
Outsourcing is particularly effective for newly founded companies, because hiring an in-house accountant would involve buying professional software and providing a workspace with lots of furniture, equipment and stationary for the employee. Apart from that, a professional in-house employee would also want a good salary. Furthermore, the government ceaselessly introduces new accounting laws and regulations; in order to keep track of all such changes one would need to subscribe to professional literature and magazines and to visit training workshops and courses on regular basis. It all adds up to a substantial amount of money which will have to be spent on in-house accounting instead of investing it into the company’s development, unless one chooses external accounting services. For these very reasons the formulation of a company’s accounting policy and internal control system and their successful application can be safely entrusted to an external team of professionals. When a company has grown up to a certain size and if the management wishes to employ an in-house accountant at that point the company can shift from outsourcing to full-time in-house accounting department.
To sum it all up, both approaches – in-house accountants and external accounting services – have their respective benefits and drawbacks. Each company will undoubtedly choose what’s best for it. The main thing is to ensure that the contact and cooperation between the management of a company and its in-house accountant or external accounting service provider is efficient and successful, which will facilitate the company’s growth and development.
| In-house accountant
|| External accounting services
| Constant contact with a dedicated accountant
|| Higher costs (equipment, workspace, etc.)
|| Wider range of services
|| Constant contact with a dedicated accountant may be lacking
| An accountant who does not work for other companies
|| An accountant who only specializes in one field
|| Lower costs
|| Accounting records and documents are kept outside the company’s premises
| Accounting records and documents are kept at the company’s office
|| There will be situations when the company will have to buy advice from external specialists
|| Apart from maintaining accounting records other services are available: tax advice, etc.
It is crucial for a newly founded company to find and secure its place in the market. Will a project prove to be profitable? How to plan available financial resources? How to plan taxes? How to make a successful corporate budget? All these questions can be answered by a professional team of external accounting service providers. Accounting companies employ specialists in a variety of fields: accounting, taxes, finance, marketing, law. The services of an accounting company are not and cannot be limited to input of data into accounting software and preparation of reports for state institutions. An accounting company must maintain close contact with each customer and be able to promptly deliver the reports and statements the customer needs, so that the latter can recognize impending risks and available opportunities in good time. Cooperation between an accounting company and its customer can only be successful if the parties have confidence in each other and rely on each other’s judgment. By joining efforts with its external accounting service provider to evaluate risks and to find good solutions even in most complicated situations a company will be able to make informed decisions and secure the fulfillment of its business objectives.