Small Business News
Survey: 62% of Small Businesses Retain In-House Accounting
For many entrepreneurs, one of the most daunting tasks of running a business is maintaining financial records and other accounting needs. Because of this, it’s common for business owners to outsource these needs. However, a new survey shows that a somewhat surprising number of smaller businesses utilize an in-house accounting team.
According to a survey from Clutch (conducted between 2018 and 2021), 62% of small businesses rely on in-house accounting employees for their bookkeeping. Interestingly, this figure shifts depending on the amount of time a business has been under the same management. While 73% of businesses with one year or less under the same management have an in-house accounting department, only 49% of businesses with five or more years of sustained management said the same.
In addition to having an accounting team, many small businesses also utilize various accounting tools and programs. Among businesses that relied on bookkeeping software, Quickbooks was the most popular choice. Intuit’s flagship program was used by 43% of those surveyed. That was followed by Paychex, which was used by 32% of respondents. Other options cited were all neck and neck, including FreshBooks (18%), Xero (17%), Plooto (17%), and Sage Business Cloud Accounting (16%).
When comparing the pros and cons of in-house accounting versus outsourcing, a noted benefit of the former is an increased level of confidentiality and personalization. As ISBX president Arthur Linuma told Clutch, “With our own accountant, we are able to be very specific about the tasks that need to be done and the process we prefer. We handle lots of sensitive information, so we’d rather rely on an accountant within our organization.” On the other hand, outsourcing accounting can often be more cost-effective and help with compliance. That’s something Painting Kits founder and CEO Yvonne Chavez spoke to, noting, “Outsourcing offers a unique opportunity to obtain accounting assistance from skilled professionals without incurring the additional costs of hiring in-house personnel.”
Some other surprising findings from Clutch’s study include the revelation that 27% of small business owners don’t currently have a separate bank account for their company. As you might expect, younger businesses (those that had operated for less than two years) were more likely to not have a separate business account than those that had been in business for more than five years. Elsewhere, it was revealed that two-thirds of businesses surveyed utilized the accrual basis method to track their finances compared to 31% who opted for the cash basis method. Another 2% of respondents were unsure which method they used.
As Clutch’s report notes, there are advantages to both in-house accounting and outsourcing. For that reason, small business owners should consider the upsides and downsides to each when deciding what makes the most sense for their operations. In either case, the most important thing is that businesses rely on someone they trust and someone who understands their business to help manage their finances.