When to outsource your accounting and when you should hire internally

Outsource your accounting when financial complexity outpaces your internal capacity—rapid growth, rising transaction volume, missed deadlines, or no real-time visibility. Hire in-house when you have high daily transaction volume and need someone embedded full-time. Many growing businesses use a hybrid of both.

When I first got into the outsourced accounting business almost 20 years ago, the concept of outsourcing for small businesses was relatively new. Entrepreneurs were often stuck in the mindset that they had to have someone on the payroll in order to get the results they wanted. Today, the business world has evolved and outsourcing is a common practice for small and mid-sized companies. The concept is relatively simple. You get the experience you need at a fraction of the cost of a full-time person. Whether it’s HR, IT, Marketing, or Accounting, business owners have embraced outsourcing as a progressive way to tap into subject matter experts that help them propel their business forward.

Despite the paradigm shift, I still see business owners that struggle with the question of when to outsource their accounting and when it makes sense to hire someone internally. Because of the turbulent economic times that we find ourselves in, the concept of outsourcing is often the right approach. Now more than ever, companies should be challenging the idea of paying the salary and benefits of a full-time person when an outsourced accounting solution can meet their needs and save them money.

When Does It Make Sense to Outsource Your Accounting?

It is no wonder that outsourced accounting has become so popular over the years. When you list all of the potential benefits, it just makes sense.

• Subject matter expertise – When you pick the right outsourced accounting partner, you get more than just bookkeeping. You get a trusted advisor that brings a wealth of experience that can help you set up your systems, define your processes and deliver timely financial statements that help you make smarter decisions. Having someone on your team who understands how to leverage the latest technology applications to improve efficiency and deliver better information is an important benefit of outsourcing.

• Flexibility – By its very nature, outsourcing allows you to scale up or down as the needs of the business dictate. Most outsourced accounting firms work on a month-to-month arrangement, so you aren’t locked into long term commitments and have the flexibility to adjust when necessary.

• Better information – When you get good information, you make smart decisions. Using the right outsourced accounting firm will help ensure that you get timely and accurate financial statements. They should also be able to help you define the right KPIs (key performance indicators) for your business.

• Credibility – When it comes to dealing with bankers and investors, experience matters. Having a resource on your team who can bring instant credibility to your organization and your financials can make the difference between getting your deal done or not.

• Cost-effective – In addition to the important considerations outlined above, outsourcing is often a more cost-effective solution for small and mid-sized companies. When you compare the monthly fee to the total cost of a full-time employee (salary + payroll taxes + insurance + other fringe benefits), the difference can be significant. Do the math to get a true apples-to-apples comparison. You will likely be surprised by the value you get and the money you save.

Signs It’s Time to Outsource Your Accounting

The decision usually isn’t abstract—it shows up in the day-to-day. If several of these signals sound familiar, it may be time to bring in outsourced accounting services:

• You’re spending more time on the books than the business. When closing the month, chasing receipts, or reconciling accounts is eating the hours you should be spending on customers and growth, the math has already tipped.
• You’ve missed or miscalculated tax or payroll. Late filings, penalty notices, or payroll errors are expensive and avoidable—professional tax preparation services (/tax-accounting-services) and payroll services (/payroll-services) exist for exactly this reason.
• You’re growing fast or your transaction volume is climbing. More invoices, more vendors, and more accounts mean more complexity than a part-time or founder-run process can absorb.
• You don’t have real-time financial visibility. If you can’t answer “how did we do last month?” until weeks later, you’re making decisions blind.
• Your bookkeeper just quit. A sudden gap is risky, but it’s also the perfect moment to switch to a resilient outsourced bookkeeping (/bookkeeping-services-for-small-business) team instead of scrambling to rehire.
• You’re preparing for financing, an audit, or a sale. These events demand clean books and credible financials—precisely when experienced outside help pays for itself.

When You Should Hire an In-House Accountant Instead

While outsourcing is often the best answer, there are certain circumstances where it makes sense to hire an in-house resource. Here are some of the more common reasons:

• Workload– As the workload approaches full time, the economics of outsourcing may not make sense anymore. A reputable outsourced accounting firm should spot this trend and proactively work with you to plan for a transition to a full time, in-house resource.

• Unique needs – There are times when the requirements of the job or the industry are so unique that it is difficult to find a firm that has the experience. In that case, it probably makes sense to invest in a full time resource who you can train.

• Multi-tasking opportunity – In certain circumstances it may make sense to hire someone that can fill two roles. For example, you may be able to hire someone that has bookkeeping experience to cover the simple accounting transactions while also serving as an administrative assistant. In this particular case, it may still make sense to have an outsource accounting firm close the month and prepare your financial statements.

Outsourced vs. In-House Accounting: Side by Side

Note: outsourcing typically saves ~30% vs. a fully loaded in-house hire.

The Hybrid Model: Outsource Some Functions, Keep Others

Outsourcing and hiring in-house aren’t mutually exclusive. Many growing businesses land on a hybrid model—keeping one person close to the day-to-day while handing specialized or time-consuming work to an outside team. A common setup is to outsource outsourced bookkeeping and the monthly close while an internal office manager handles invoicing and expense coding. Another is to keep a controller on staff and bring in virtual CFO services only for board meetings, fundraising, and forecasting. The right mix depends on your transaction volume, your compliance load, and where your team’s time is best spent.

What to Outsource First (Bookkeeping, Tax, CFO)

If you’re moving toward outsourcing, start where the workload is heaviest and the risk of error is highest. For most businesses the order looks like this:

1. Bookkeeping first. It’s the foundation everything else sits on, and outsourced bookkeeping delivers the fastest relief and the cleanest data.

2. Tax next. Once the books are reliable, tax preparation services keep you compliant and capture savings you’d otherwise miss.

3. Payroll alongside. As headcount grows, payroll services remove a recurring source of penalties and administrative drag.

4. CFO and advisory last. When strategy, cash flow, and fundraising become the priority, layer in virtual CFO services.

Early-stage companies can lean on partners who specialize in accounting for startups to stand all of these up at once. Whatever you outsource, look for a partner who follows the professional standards set by the AICPA.

How to Decide What’s Right for Your Business

Start by mapping where your financial complexity is today and where it’s headed—transaction volume, compliance needs, and the visibility you need to make decisions. The U.S. Small Business Administration’s guidance on managing your finances is a useful baseline for what a healthy financial operation should cover. Then weigh it against cost: a fully loaded in-house hire runs well past salary alone, and with the median wage tracked by the U.S. Bureau of Labor Statistics, benefits, payroll taxes, software, and office space typically push a single accountant to $100K–$150K a year.

Whatever your circumstance, it is important to know that there are good options available and that nothing is set in stone. If you’ve never considered outsourcing your accounting, now might be the right time to look at it. In good times or bad, outsourcing is a proven, cost-effective model that might just be a great solution for your company.

At Milestone, we are experts at outsourced accounting and would welcome the opportunity to learn more about your business and conduct a free assessment to help determine the right path for you.

Give us a call at 317-810-0165 or email us at info@milestone.inc.

Frequently Asked Questions

When should I outsource my accounting?

When growth, transaction volume, or compliance complexity outpaces your internal capacity, or you lack financial visibility.

Is it cheaper to outsource accounting than hire in-house?

Usually—outsourcing typically saves about 30% versus a fully loaded in-house hire ($100K–$150K/yr).

What accounting should I keep in-house?

High-volume daily transactions or highly specialized work that needs a full-time, embedded person.

Can I combine in-house and outsourced accounting?

Yes—a hybrid model (e.g., outsource bookkeeping/tax, keep a controller) is common.

What should I outsource first?

Usually bookkeeping, then tax prep, then CFO/advisory as you scale.