Outsourcing Accounting Services: Considerations For Small And Medium Enterprises

By Loran Armstrong, COO at Rockwell Capital Group, Forbes Council Member

Originally written for Forbes Finance Council

Originally posted on Forbes.

After years spent working side by side with small and mid-sized companies, one lesson continues to ring true: Many successful business leaders don’t do everything in-house. They know the value of strategic partnerships.

When it comes to outsourcing accounting and financial operations, I've found it's often seen through the lens of cost-cutting. But in reality, for some businesses, it can be a growth lever that helps them in competitive markets.

As someone who has led numerous transitions from internal accounting teams to outsourced solutions, I’ve seen that the shift to outsourcing can be impactful. However, it isn't a fit for everyone, so businesses must consider a few things to determine if it's the right choice for them.

Potential Benefits Of Outsourcing

1. Affordability: For some business owners, building an in-house finance team may be more cost-effective than outsourcing. But for others, covering an employee's base compensation, benefits like healthcare or paid leave, software subscriptions and training to keep up with evolving financial standards are costs that may exceed the fixed cost of outsourcing, so they choose to outsource to a team of specialists.

2. Expertise on demand: Instead of hiring a single accountant and expecting them to wear multiple hats, outsourcing can give companies access to a diversified team of tax professionals, controllers, strategic advisors and fractional CFOs. For some businesses, an in-house hire also might not be feasible right away. For example, we worked with a Software-as-a-Service company whose growth outpaced its systems, and they needed investor-ready financials to secure funding. They couldn't bring on a full-time CFO, so they opted for fractional CFO services to help them build financial models and prepare for diligence.

3. Flexibility: Business rarely grows in a straight line. One month, you’re adding clients like clockwork. Next, you might be trimming expenses to weather a downturn. Outsourcing can help companies adapt to these changes, as leaders can scale services up or down without the need to hire, fire or retrain. I saw this adaptability come into play during the early days of the pandemic. Many of our clients pivoted overnight, launching new products, moving operations online or restructuring teams, so they had to re-budget, forecast new cash runways and manage emergency funding, sometimes within 48 hours.

4. Staying ahead of risk and regulation: The regulatory landscape is increasingly complex, especially for businesses operating across multiple states or internationally. Missteps, like late filings, payroll misclassifications or misunderstanding tax obligations, can lead to penalties. Outsourcing providers can help companies monitor the ever-shifting compliance landscape to reduce guesswork and liability.

5. Proactive financial management: Accounting isn’t just about recording what’s already happened. Done right, it becomes a tool for strategic foresight. A forward-thinking accounting partner can offer technology and real-time insights that help inform business decisions.

When Outsourcing Isn't A Fit

While outsourcing accounting can offer efficiency, leaders should be aware of potential drawbacks and understand that outsourcing isn’t the right move for every company. If you're a startup bringing in less than half a million dollars annually, for example, accounting software might suffice. Even companies earning well above half a million may find an in-house accounting team the better fit when financial operations are complex or tightly connected to daily decision-making.

Businesses with multi-entity structures, intricate revenue models or strict regulatory requirements often need constant, context-rich oversight that outsourced teams may struggle to match. Some businesses could find that outsourced partners struggle to fully grasp industry nuances or internal processes, which can affect accuracy and insight.

An internal team also offers faster access to insights, tighter collaboration with leadership and the ability to develop institutional knowledge. Moreover, for organizations prioritizing strategic financial planning, real-time analysis or strong data governance, in-house talent can deliver integration and agility that outsourced models may not replicate.

Finally, communication gaps, slower response times and limited day-to-day context can hinder decision-making when issues arise. Relying on a third party also introduces risks around data security, staff turnover within the provider and uneven service quality.

Final Thoughts

If you've decided that outsourcing is right for your company, I've seen that if these transformations are approached thoughtfully, handing over your accounting to a partner doesn’t have to simply mean giving up control. Look for a partner that can help you gain clarity, agility and room to grow. When you aren't responsible for managing day-to-day reconciliations and compliance tracking, business owners and managers can focus on scaling operations, building customer relationships and innovating.

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