Scaling a small to mid-sized business (SMB) is a complex process. In addition to upgrading systems, standardizing processes and maintaining company culture, many leaders will be hit with increasing complexity in financial management and the need for specialized finance expertise.
At a certain point in the growth journey, decision makers will be faced with an important decision. Do you outsource your accounting department or build an in-house team for this crucial function? While the right choice depends on each business’s unique situation, understanding these differences can help guide your decision.
Understand Your Business Needs
Most finance teams are lean and overextended due to tight budgets, increased competition and rapidly changing market dynamics. Lean accounting teams mean more risk of costly errors and missed opportunities, especially around accounts receivable, strategic initiatives and scaling resources. To navigate these challenges, consider your current growth stage and align finance and accounting roles accordingly.
Not every finance issue requires a CFO. However, every company does need strategic and dedicated financial leadership during critical stages. The collapse of Silicon Valley Bank in March 2023 highlighted the importance of having a leader who can monitor and manage finance risks. But the question is—what kind, and from whom?
Assessing the Right Financial Support for Your Growth
The answer depends on the growth stage of your business and the specific challenges you are facing. Many businesses are still too small to fill (and pay for) a position permanently. In early stages, an outsourced accountant or bookkeeper can handle routine account reconciliation, AP/AR tasks and essential reporting.
As your company expands, a part-time controller may help establish more sophisticated processes and provide oversight, ensuring accuracy and compliance. You’ll want to engage a fractional CFO when preparing for major growth milestones, like securing funding or expanding into new markets.
Each role can serve different purposes at different times. When choosing between outsourcing a finance role or bringing it in-house, keep a few things in mind:
- Business needs: Are you focused on growing or improving core competencies?
- Accounting requirements: What tasks need to be done and how often? What level of expertise is really needed?
- Growth trajectory: Are you approaching a funding round or aggressively scaling?
- Culture: How will an outsourced accounting team integrate within your company? Will your in-house team be willing to work with outsourced talent?
- Cost: Do you need to reduce costs? Do you have the revenue to sustain full-time in-house accounting hires?
- Control: How often are you using finance to help inform strategic business decisions?
In-House vs. Outsourced Accounting Department: Pros and Cons
As an SMB grows, executives might be torn between hiring full-time accounting resources or outsourcing your accounting department. There are advantages and disadvantages to both.
Outsourced finance and accounting services provide access to quality expertise at a fraction of the cost. They also can help navigate transitions and set up scalable financial processes. On the flip side, as a business grows beyond an SMB, an in-house accounting team may be necessary to provide immediate analysis or attract investors.
Advantages
| Outsourced Accounting Services | In-House Accounting Team |
|---|---|
| Specialized expertise: Access niche skills, experience and requirements specific to your business | Dedicated support: Can provide real-time feedback and analysis as needed |
| Scalability: Scale up or down as needed; perfect for companies without consistent workload for a full-time team | Direct control: Clear and immediate oversight and access to financial data |
| Cost-effective: Part-time or project-based pricing avoids full-time costs | Consistency: Creates stability that’s often valued by potential investors |
Disadvantages
| Outsourced Accounting Services | In-House Accounting Team |
|---|---|
| Less direct control: May have less immediate access to financial data and processes | Higher costs: Full-time employees incur costs beyond salaries, including recruitment, benefits and PTO |
| Potential communication gaps: Delayed updates can lead to misunderstandings or delays | Limited scalability: Often lacks bandwidth to provide strategic insights for growth |
| Dependency on external partners: Opens the door to risks, especially related to availability and consistency | Underutilization risk: May not be fully utilized during slower periods, leading to inefficiencies |
How Talent Management Differs Between Options
Talent management differs relatively significantly between in-house and outsourced accounting departments. When a company outsources for a specific accounting skill, a remote accountant will have years of experience, niche knowledge and established processes to get the assignment done. Limited oversight should be required beyond standard check-ins and ongoing communication updates. This allows in-house teams to focus on strategy.
On the other hand, in-house teams require extensive talent management efforts. These include recruitment, hiring, engagement, professional development, performance management, recognition and attrition planning. While the effort of building and managing an in-house team can yield highly engaged and committed employees, it does demand a considerable time, resource and financial investment.
The Best of Both Worlds
For many SMBs, a hybrid approach—where in-house and outsourced accountants work together—may be the most beneficial as you grow. You might have a full-time bookkeeper but bring in an outsourced accounting controller to help establish robust financial processes or oversee month-end close. A hybrid model provides flexibility while ensuring you have access to specialized expertise during critical growth moments without the need for a full-time hire.
When to Transition to an In-House Accounting Team
There are several signs that signal it may be time to build an in-house accounting team. Consider these questions:
- Have you secured recent funding?
- Do you have increasing finance needs and responsibilities?
- Are you expanding steadily?
- Are you considering an eventual IPO?
- Do you need more control over financial decision-making?
- Do you want to prioritize high-level strategic initiatives?
- Is your business prone to supply chain issues?
If you answered “yes” to any of the questions above, it may be the right time to invest in an in-house accounting team. To ensure a smooth transition, it’s crucial to:
- Create a phased plan where key outsourced roles overlap with new in-house hires. Leverage your outsourced accounting resources for interim support as you hire and ramp up your in-house team.
- Maintain continuity by transferring as much historical knowledge as possible to your in-house team to maintain operational continuity.
- Set up formal processes including standard operating procedures (SOPs) and controls to set your new in-house team up for success.
- Ensure formal processes and guardrails are in place to set future team members up for success.
Paro’s collaboration with a consumer packaged goods (CPG) startup illustrates how outsourcing accounting roles can provide critical support during transitions. The startup desperately needed interim leadership until a full-time controller could be hired. Paro matched the startup with an outsourced controller with CPG expertise. She developed internal controls, documented SOPs and implemented a new cloud-based ERP system. Ultimately, she hired several full-time employees, doubling the team’s capacity and ensuring efficient transitions.
Even after growing into a full-time finance team, companies can continue to derive value from outsourcing certain accounting roles during growth phases or periods of change.
How Paro Can Help
Many SMBs would benefit from accounting support but may lack the resources to hire full-time staff. Paro’s outsourced, U.S.-based experts provide access to a flexible range of finance skills, allowing your business to tap into accounting expertise as needed—whether for specific projects or as a member of your team—without the costs of full-time hires. This approach enables you to scale your financial operations in line with your business growth.
Unlike traditional accounting firms or tech-only solutions, Paro offers a balanced, tailored solution that grows with your business. We combine AI-driven talent matching with deep financial expertise to ensure you get the exact support you need—be it part-time, interim or a fully outsourced accounting department.
