Advisory Firm

Hire an accountant or engage an accounting firm?

Many business owners aren’t sure who to choose: hire an accountant employed in a different company and doing some extra work on the side or a part-time accountant? Engage an accounting firm? Which is the better and more cost-effective solution, which model will be the best for your business? Below is a summary of the basic advantages and disadvantages of each of these solutions.

Accountant - disadvantages:
  • In order to hire someone that is professional, a recruitment process is required. It’s difficult to assess the level of professionalism of another person if you yourself are unsure as to the degree of knowledge skills needed from a candidate to fill this particular position. The hiring process must therefore be carried out by a professional, which is costly and may not be immediately successful.
  • Engaging a person doing ‘after hours’ work, without an official contract, will be cheap but risky – such a person will not be financially accountable for their actions, and the business owner will also be liable for engaging a person to do work without reporting it to the authorities.
  • Hiring an accountant as a regular employee means that the business owner will have to comply with a number of duties and restrictions as an employer, by ensuring medical tests, OH&S training, paid time off, paid medical leave, as well as with conditions related to dismissing the employee.
  • Replacing the person employed as an accountant is another problem for the employer, who must ensure that the new employee will be familiarised with the specifics of work for the business and the accounting system used by the entity (an employee quitting their job can often be a surprise for the employer), as well as the continuity of their work.
  • Having to replace an employee may not be a frequent occurrence, but an employee taking time off or going on medical leave are typical events that will definitely (time off) or almost definitely (medical leave) happen – and the employer is responsible for ensuring the continuity of operations and timely performance of all of the business’ obligations, including those related to taxes or social security contributions.
  • Employees are as a rule liable for any damage caused to their employers, but in most cases this liability is limited to the equivalent of three monthly salaries, which means that the business, as the employer, is in practice fully financially liable for the correctness of accounting settlements.
  • An employer who hires an accountant is not a professional in the field and is unable to ensure supervision and control of the employee (he would need two accountants for this!). This is particularly important, as everyone makes mistakes, no one is infallible and sometimes even the best in their field can overlook an obvious error, while a second pair of eyes will notice it at once.
  • A solitary accountant is unable to consult a tax-related issue with colleagues, discuss it and exchange experiences; such a brainstorming session can often lead to looking at an issue from a new angle.
  • The business must provide the accountant with the required work tools, including such basic amenities as a workstation or office supplies, but also software and updates, access to specialised journals or regular training courses.
  • A tax inspection carried out in the customer’s offices may disorganise work or even prevent it in practice; the customer may also not always be able to provide the tax inspectors with space where they can carry out their work without interfering with the work of the business.
Accountant - benefits:
  • In a business that employs an accountant, accounting operations are carried out on an ongoing, day-to-day basis, the accountant is therefore able to constantly monitor what is going on in the business and quickly react to any errors.
  • The accountant is a salaried employee, which means that the employer buys the accountant’s time for a fixed price. No matter how much work the accountant does during business hours, they will receive the same amount of money. If accountant has any ‘operating capacity’ available, they can be asked to perform additional work as well.
  • The accountant does work solely for the customer’s business, is well acquainted with its operations and can at any time set aside any current matters that the employer determines to be of lower priority in order to focus and what’s important at a given moment; their reaction time is therefore much faster.
  • The employer has full control over the person it employs – meaning that the person handling its accounting operations cannot be replaced without the employer’s consent.
Benefits of engaging an accounting firm:
  • The firm is financially liable for any damage with its assets or the assets of its owner.
  • Accounting firms are required to take out a third party liability insurance policy, which means that even of the firm lacks the necessary funds in its accounts or the firm’s owner has insufficient assets, any damage caused by the firm will be compensated.
  • The firm is responsible for ensuring the continuity of its work – leave, paid time off, medical leave, maternity leave and other events affecting the continuity of work are the responsibility of the firm, and not the customer.
  • The firm will provide the necessary workspace, ensure that its software is up to date and that its employees have access to specialised knowledge and training.
  • The fees paid to the firm are directly dependent on the amount of services provided to the Customer – reducing the scope of services will (in the case of most accounting forms) automatically result in lower fees.
  • Working in a firm that employs a number of experienced professionals or a tax adviser – as is the case in our Firm – makes it possible to work on solving any encountered tax problems as a team, which is an invaluable benefit in any sector.
  • The firm must ensure constant supervision of the work done by its employees – as stated above, it is financially liable for any errors.
Disadvantages of engaging an accounting firm:
  • The firm collects fees for specific actions stipulated in the contract, in the agreed amounts – the amount paid in fees is therefore dependent on the volume of work required to duly settle the customer’s accounts and may be different every month.
  • The scope of accounting services does not include all matters related to broadly-defined administrative issues of the business.
  • Any services outside of the scope agreed upon in the contract are subject to additional fees.
  • Time required to perform additional services depends on a number of factors, as the firm works with more than one customer and during peak times must prioritise its activities accordingly (obviously with the good of its customers in mind).