Should you Keep your Finances In-House or Outsource Them?

Most business owners wrestle with finances, and for good reason! Financials are emotional, they can be confusing, and they can definitely be overwhelming! To put it frankly, managing finances internally can be a huge pain in the butt for business owners. If you’ve ever wondered about the pros and cons of keeping your finances in-house versus outsourced solutions like fractional CFOs or accounting professionals (like our amazing team), read on. We can shed some LIGHT on that!

First, let’s define what a fractional CFO is: A fractional CFO is an experienced CFO who provides services for organizations in a part-time, retainer, or contract arrangement. Now, let’s dive in.

In-House Finance Team

Benefits:

- Direct Control: You have complete oversight and can tailor processes to your specific needs.

- Company Culture and Core Value Integration: An in-house team becomes ingrained in your company culture, fostering strong communication and understanding.

- Long-Term Knowledge Accumulation: An internal team builds institutional knowledge, becoming well versed in your company's financial intricacies.

Drawbacks:

- Costs: Hiring qualified personnel (salaries, benefits, workspace, etc.) can become expensive.

- Scalability Challenges: Scaling an internal team up or down can be cumbersome and inflexible.

- Limited Expertise: Finding a well-rounded team with specialized skills you might need (e.g., M&A expertise) can be difficult.

Outsourced Finance/Fractional CFOs & Accountants

Benefits:

- Cost-Effectiveness: Fractional CFOs and accounting professionals offer tailored services at a fraction (get it? fractional CFO) of the cost of an in-house team.

- Access to Specialized Skills: You get the expertise you need, when you need it, without the burden of full-time salaries, benefits, bonuses, etcetera.

- Scalability: Easily adjust the level of service up or down as your needs evolve.

Drawbacks:

- Loss of Direct Control: You relinquish some control over daily operations and rely on communication for a clear financial picture.

- Integration Challenges: Building rapport and ensuring a smooth workflow with an external team requires effort from both parties.

- Institutional Knowledge Gap: At the beginning, they won't have the same level of ingrained company knowledge as an internal team.

So, which one is right for your business?

The answer depends on your specific needs. Here's a quick guide:

Go In-House If: Your business is large and complex, requiring a dedicated and highly specialized finance team.

Outsource If: Your business is growing but not yet large enough to justify a full-time finance team, you need specific expertise for short-term projects or lack the budget for a full-time hire.

Another option is a hybrid approach. Don't be afraid to get creative! Many businesses combine in-house bookkeepers with outsourced services like a fractional CFO for strategic guidance. This offers a cost-effective balance between daily tasks and strategic oversight.

Ultimately, the best approach aligns with your business's stage, budget, and financial complexity. By understanding the advantages and limitations of both in-house and outsourced finance solutions, you can make an informed decision that works best for you and your team.

At Light Consulting, we take numbers off our clients’ plates so they can focus on the other super important areas of their business that they actually enjoy. If you’re interested in learning all the ways our talented and skilled team can help make business light for you, let’s chat!

‍