As small businesses grow, one of the first areas where the need for help becomes obvious is accounting. It is possible to ‘go it alone’ for a while, but inevitably accounting-related tasks crop up and simply keeping up takes away evenings and weekends from the small business owner. And I’m pretty sure that’s not why you started your business!
Additionally, small business owners don’t want or need just any warm body to perform accounting tasks. They need someone who can tell a story with the data – about the direction of the business, potential blind spots, and whether the current business trajectory is leading towards the realization of goals. In short, a good accountant (or accounting team) is absolute gold for the small business owner.
Most business owners recognize the need for solid accounting help – but how should you decide whether to hire an internal employee or work with a contractor?
Our Perspective: Internal Staff Versus Outside Expert
Before we even get into our analysis, it’s important to note that whether you are deciding on an internal employee or a contractor, the range of services and skills, ability to handle the complexities of your business, and overall cost will vary greatly. This underscores the fact that it’s critical to have a talent evaluation system in place, because the worst thing a small business can do is make a bad hire, period. (In fact, I think that will be our next blog!)
Note that this analysis is also focused on small businesses that are just crossing the threshold of needing accounting help. The decision of whether to build an internal team or rely on an outside expert can certainly change as a business gets larger.
Also, please note that the pros for the contractor perspective below is heavily influenced by our own model at Joy Accounting Services. We utilize video technology and we operate remotely, but that is not true of every contractor. Therefore, our comparison is focused on an on-site employee versus a remote contractor.
First, I’ve listed the pros/cons of an on-site employee from our perspective.
There is something nice about having face-to-face time with people and getting to know them in person. This is easier with an onsite employee who is physically present.
With a set schedule you know exactly when and where you can find this person.
Small businesses may not require a full-time employee (or they may require 1.5 employees, which would lead to the same issues). If you hire a full-time person, then it’s your responsibility to keep them busy with interesting tasks for 40 hours per week. If you instead opt for a part-time employee, you are eliminating a large part of the job-seeking population and less likely to find the right fit that has the skills you are looking for.
If you hire one person you are limited to the expertise and knowledge that individual brings to the table. This means that when (inevitably) things come up outside of the individual’s skillset, you’ll need to hire a contractor anyway in addition to the employee.
Hiring an employee carries responsibilities that hiring a contractor simply does not. This includes specific laws and requirements that vary by state. But this also includes more informal responsibilities related to training, managing and covering for vacation time, and general people management which can all be very time consuming for a small business owner.
The second pro listed above can also be a con; the lack of flexibility with an on-site person means that if you need them outside of working hours, you’ll have to wait until they are physically back in the office.
Turnover is a huge issue for companies. Individuals invariably move on, sometimes due to things beyond their control.
Next, I’ve listed the pros and cons of the remote contractor
model (specifically focused on the Joy Accounting model).
Good contractors are able to design a team for you that will meet your needs. At Joy Accounting, we typically provide high-level (Controller-level) guidance along with completing day-to-day accounting tasks. Allowing a contractor to build a team means you don’t have to staff in the rigid way that on-site employees often require. In our model, you get two (or more) skillsets rolled into one overall offering.
A word that sums up our model is ‘flexible’. As a contractor, we can design offerings that make sense for exactly what you need, so that the scope matches the value that you are looking for. The difficult thing about the traditional employee model is that changing the scope is very difficult – if you bring someone on for 15 hours of work and you find that you actually need 30, then you’ll likely have to find someone else.
As a contractor, we work with many other clients, which means we are always problem-solving. And because we see a wide spectrum of client needs and design solutions for them, this means that we can often take lessons from another situation and apply it to your company.
The nature of our model means that we are continuously learning and adjusting. This continuous learning enables us to bring thought leadership as a team to our clients in ways that they wouldn’t expect.
Contractors are more able to operate within the flow of the business, so that when you need them they are there, and when you don’t need them you are not paying for a warm body sitting in a seat.
As a small business owner, you don’t need to worry as much about ‘people management’ with a contractor as you do with your own employee. If a contractor’s employee is not meeting the mark, it is up to the contractor to make it right. And, if they ultimately can’t meet your needs, it is easier to part ways.
Contractors are not physically there with you, which means it can be more difficult to build rapport and a relationship. And if it’s truly important to you that everyone is physically present, then you’ll likely want to go with the traditional model.
In the digital age that we live in, working with an outside
expert is increasingly becoming a more attractive option. If done well, it can
provide the small business owner with expertise, flexibility, and direction
that is difficult to realize via the more tradition staffing model.