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Why Opt For Outsourced Accounting Over Accounting Firms?

by Jon Repka, on May 7, 2019

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Accounting is a great leveler. Whether you’re a publicly traded company that’s admired as an industry leader, or you’re a scrappy startup that’s just barely beyond the launch, all businesses have the same basic goals when it comes to analyzing costs, weighing major financial moves, and ensuring best tax practices. But the process to reach those objectives can look very different depending on the needs of a particular business. One of the key questions a business must ask is: should I enlist an accounting firm or outsource to a freelance financial professional?

There is a multitude of factors to consider when making the call. Technology, availability, and—of course—cost all come into play. Let’s break down the benefits and drawbacks of both and see which option is better suited for a given business environment.

The Cost of Freelance Versus Firms

In business, we’re constantly running cost-benefit analyses, and that includes one’s own accounting practices, too. Even well established corporations can’t afford to waste money on overly costly services, and that’s doubly true for small outfits. A simple comparison between salaries of freelance Certified Public Accountants and those at firms is illustrative. The average annual salary for a freelance CPA in the United States is $76,791 per year, according to employment site ZipRecruiter, while senior-level CPAs at large accounting firms can command up to $110,000, according to the Accounting Institute for Success—a cost differential that is surely passed on to clients.

At times, part of that salary variance is experience—a senior, firm-employed CPA will have at least four years under his or her belt—but it’s wrong to assume that a firm-employed CPA has more experience than a freelancer. To be sure, a successful freelancer will have already built up expertise and a reliable roster of clients before plunging into the world of outsourcing.

Another factor to remember is that major firms also have higher overheads unrelated to staff, such as cybersecurity expenses. A good freelance accountant will of course handle client security with the utmost seriousness, too, but he or she will always be a much smaller target for phishers and scammers than high-powered accounting firms.

A Question of Technology

Speaking of technology, much ink has been spilled over the tech revolution that is currently taking place in accounting, ranging from blockchain integrations to machine learning. But disruption is hardly new to accounting, and when it comes to direct client services, technological advances remain largely democratized.

That means that breakthroughs in teleconferencing, cloud services, accounting software, and even IT risk management are available to freelance financial experts. Whether enabling e-signatures via tools like HelloSign or automating tailor-made reports with software such as QuickBooks, a self-employed financial professional enjoys similar access to important technological aides as firms.

That said, some popular file-sharing services, which offer an added level of security over standard email, come with a relatively high price tag—which may not be cost effective for a CPA who applies the outsourcing model. And major and regional firms often work with clients that run ERP solutions (think Workday, Oracle, NetSuite), whereas freelancers’ clients “often look to entry-level solutions for small businesses,” according to Keri James, a full-time freelance accountant and data analyst based in Georgia, told Paro. So it’s always best to assess your own needs and talk to providers about what they can offer.

You Need Access

We mentioned teleconferencing and other ways that digital tools can help close geographic gaps between businesses and accounting professionals. But the larger question of availability remains paramount when considering the firm-versus-freelance question.

Put simply, businesses need to weigh whether or not they would prefer to have direct, on-site contact with their CPA. Either a firm or an outsourced option can accommodate these demands to varying degrees, so it’s important for the client to be up front about expectations. Much of it depends on the nature of the work, notes James. “A lot of regional firms are more audit- or tax-centric, and a lot audits are done virtually now, whereas they used to be onsite,” said James, who also notes that, as a freelancer, she logs more office time with clients than her counterparts at local accounting firms.

Direct contact can be particularly important in the early stages of a business’ life, or if a client needs customized reports that go beyond the traditional monthly statements. “As a freelancer, I am often projecting cash balances weekly for my clients,” said James. “Minor changes to accounts receivable terms or scaling up for a new product offering can dramatically change the liquidity for a small business. Therefore, it's critical for many of my clients to know specifically what bills can be paid in the current week and if they can make payroll.”

Bringing Expertise… and Passion

One thing that qualified freelancers can undoubtedly offer is expertise, particularly those culled from a highly selective pool. It’s important to remember that freelance professionals are just that: professionals. These aren’t unreliable lone wolves who have found themselves self-employed due to some lack of hirability. Freelancers are routinely authorities in their fields and leading lights in their chosen areas of focus. They’re experts who also happen to place a top premium on professional independence, and they are passionate in their belief that the outsourcing model allows for the best, most direct level of client service.

By some estimates, the majority of the American workforce will be freelance in less than 10 years. At the same time, the labor market has seen a dramatic shift toward the independent-contractor/gig-economy model across myriad industries. In fact, since 2014, the freelance workforce has grown at triple the rate of the American workforce overall. Simply put, it’s no fad, and any managers still beholden to the canard that “freelance” equals “nonprofessional” need to disabuse themselves of that myth immediately—or suffer for lack of truly competitive labor gain. More than 70 percent of Millennials want to be their own boss, according to some figures. It’s time to start viewing that perspective as laudably ambitious, rather than selfishly mercenary.

Given what they offer in terms of mobility, education, experience at top-level outfits, technological expertise, industry knowhow, and—never forget this one—passion, freelancers aren’t just the future of financial services, they’re the now.

Making the Switch to Freelance

Needs always vary on a case-by-case basis, but given that freelancers routinely hit the requisites in terms of accessibility, technology, and cost-effectiveness, outsourcing appears to be a viable solution over firm accounting. It’s not always the best call. For instance, large outfits that require specialized services in terms of international taxes and compliance with the SEC’s stricter accounting rules for public companies may want to consider accounting firms. And you never know when the next major financial regulation could be approaching around the corner, meaning a major business with complex transactions may find added solace with a deep-bench specialty firm.

But for many businesses, finance and accounting outsourcing not only remains a practical option, but often the best. For instance, it’s not uncommon for a large business to outsource for project-based work, such as financial model-building or system conversion. And freelancers routinely represent a more cost-effective option for small business accounting. “The accounting firms definitely have depth and a diverse skill set that they can bring to the table,” notes James. “However, most small businesses don't need to pay a premium for that level of service. I find that I build great referral relationships by outsourcing those specific areas that I cannot service, such as a tax and audit, to specialty firms.”

For businesses in search of outsourced accounting, Paro offers a range of expertise across industries, from technology to healthcare to media and entertainment and more. Paro is highly selective in vetting its roster—only two percent of applicants make the final cut—and freelance experts are available to help with all facets of accounting, including invoicing, account reconciliation, payroll, and more.
Topics:Accounting