Accounting is invaluable to businesses and comprises a fundamental part of their processes. Large companies and small startups alike must analyze cost, weigh their financial moves, and compute their taxes. These are essential to any company's function. But fulfilling these objectives can entail very different processes depending on the requirements of a particular business. So a key question must be asked: does your organization require an accounting firm, or should it outsource to a freelance financial professional?
Factors to consider when making this decision include technology, availability and cost. So in this article, we'll discuss the benefits and downsides of both to determine which option works better for a business's circumstances.
The Cost Factor
Businesses constantly run cost-benefit analyses, and this includes their accounting practices as well. Even the department that runs the cost-benefit analyses must have a cost-benefit analysis of its own operations. Established corporations can't afford to squander funds on costly services, and this goes doubly so for smaller and leaner operations.
Let's compare the salaries of freelance Certified Public Accountants and firm-based CPAs. According to the employment site ZipRecruiter, a freelance CPA in the USA has an average annual salary of $78,800 a year. Whereas according to the Accounting Institute for Success, senior-level CPAs in large firms can go for $110,000.
Part of this difference is experienced, as a senior CPA in a firm will have a few years under his or her belt. But this doesn't mean that a firm-based CPA is automatically more experienced than freelancers. Successful freelancers have built up their expertise, amassed reliable client bases, before venturing into outsourcing.
Firms also have other overheads such as infrastructure and cybersecurity expenses. Good freelancers will handle client security with utmost scrutiny, of course. Likewise, they will be smaller targets for bad actors than high profile accounting firms.
The Tech Factor
So much has been written about the tech revolution changing the face of accounting. Blockchain, machine learning, The Cloud, and so on. Innovation isn't new to accounting, and when it comes to direct client services these developments have made outsourcing to freelancers all the more convenient.
Breakthroughs in teleconferencing, cloud computing, accounting software and IT security are now available and can be leveraged by, freelance financial experts. Automating client-specific reports with software like QuickBooks, project management software such as Salesforce, and more can give self-employed financial experts the same array of tools and capabilities as their counterparts in big firms.
Still, prominent file-sharing services that come with built-in cybersecurity features also have a hefty price tag. This might not be accessible or cost-effective for CPAs in the outsourcing market. Whereas big firms often handle clients using the best (and priciest) tools. So to determine which is best for business, an organization must assess its own needs and ask providers about what they can bring to the table.
Accessibility and Availability
As we mentioned, technology such as teleconferencing and other digital tools can help bring businesses and accounting professionals closer. Availability is a major consideration when choosing between firms and freelancers.
Would it be better for the business to have direct, on-site contact with their CPA? Firms and outsourced financial professionals can meet these requirements to varying degrees, so the client must raise these expectations early on. Regional firms are doing audits virtually more often these days. On the other hand, freelancers can have more office time available for their clients compared to their counterparts in accounting firms.
For businesses in their early stages, direct contact can be very crucial. Especially if a client needs tailor-made reports that go in detail beyond the usual monthly statements. Some clients may need weekly cash balances. Small businesses need a keen eye for detail monitoring how well their products are doing. In these cases, clients need to know what expenses can be paid on a weekly basis, if they can make payroll, etc.
Skill and Drive
Qualified freelancers definitely bring expertise to the table. They're professionals who have been battle-tested because the hardships of the field will weed out those who aren't up to the task. These freelance CPAs are often authorities in their fields who value their professional independence. They are also driven, believing that their outsourcing approach lets them have the best, most direct level of service.
Estimates show that a large portion of the US workforce will be freelance within the decade. Moreover, the labor market is showing a paradigm shift towards the independent contractor and gig economy model across a variety of industries. At this point, the old mindset that freelance equates to non-professional should be retired. Considering what they bring in terms of mobility, flexibility, skill and expertise - as well as the drive and passion that allows them to work on their own terms - freelancers should be regarded as the cutting edge of their fields. They are potential assets that businesses would do well to leverage.
Businesses have varying needs, so they must be careful in selecting the option that best suits their requirements. As freelancers regularly meet the criteria in terms of accessibility, technology and cost-effectiveness, outsourcing is definitely a viable solution with advantages over firm-based accounting. In particular, startups that run lean operations and need CPAs who are flexible can make good use of freelancers.
Still, it's not always the best, such as for large operations that require really specialized services such as international taxes. Firms can also scale up and meet workloads that would overwhelm individual freelancers.
But for many businesses, outsourcing finance and accounting is a practical option, often the best for their requirements. Large businesses can outsource project-based work, and small business accounting is very much the freelancer's forte. These small businesses don't need to pay a premium for the level of service they require.
MJ Financial offers a range of expertise across a variety of industries for businesses looking for outsourced accounting. MJ Financial has high standards for its staff, to provide our clients with the quality service they deserve. Contact us for more information!