In-house accounting refers to accounting activities of an organization that are performed by employees who work for that organization. If you own your own business or you are in charge of budgeting for operations, it is important that you know the difference between in-house and outsourced accounting functions. Not only do you need to learn about how much each option costs, you need to consider the pros and cons associated with each. Read this guide to understanding in-house operations within the accounting department and you will be prepared to do the work that is needed to make the right decision.
Understanding the Definition of In-house and Breaking it Down
In broad terms, in-house is defined as activities or operations that are performed or conducted within the company by its own employees instead of outside of the organization, according to Investopedia. Companies can in-house a long list of different activities or common business functions. Some of these business functions include: payroll processing, IT technical support, bookkeeping and even accounting.
Since all duties are performed within the appropriate department, time in the day and human resources are dedicated to getting the operations done. This means that there is greater flexibility in the operations and changes can easily be made when policies and processes change.
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What Are Some of the Benefits of In-housing Your Accounting Activities?
There are both pros and cons to in-housing, and there is not just one right decision to make when you are trying to decide on internal or external operations. Before you really can decide, you need to assess the needs of your company and how often you need accounting functions done. The size of your company and how many financial transactions are processed in a week or month will be important details in terms of cost efficiency. Here are some benefits to consider:
- You are in control of the accounting activities that a specific person controls, especially when it is a specialized task.
- You are in close proximity to the accountant in the office if you have questions or need to clarify information on a report
- Easily adapting your business to growth with the internal department
- Having a loyal employee who wants the business to succeed and who keeps sensitive information private and confidential
What Are Some of the Drawbacks of In-housing Accounting Activities?
Where there are pros there are also cons. Many companies focus on these cons when they are making the important decision. One of the biggest cons is cost. Not only do you have to pay for the accountant’s salary, you also have to offer benefits and pay the payroll taxes to the state. For your accountant to get work done, you need a dedicated work space. This space costs money that could have been used to house another employee. If a mistake is made, your company is liable and will have to pay the fines and the consequences for the error.
Related Resource: Become a Certified Financial Planner
If you decide that it is best for your organization to have an in-house accountant, you must do your due diligence to choose a trustworthy professional. You should check into credentials, conduct multiple interviews, and run background checks to look for suspicious criminal activity. Accountants are handling your very sensitive financial records and in-house accounting department filled with trustworthy finance professionals will give you peace of mind.
