I am frequently asked whether hiring an accounting firm as opposed to hiring an in-house bookkeeper is a good decision. Having worked as an in-house accountant (finance manager, to be precise), freelance accountant, and now as the owner of an accounting firm, I strongly believe that the accounting firm route is not for every small or medium-sized business (we will leave big companies aside, the ones that need not just one accountant but rather a whole department). However, if you are a small or medium-sized company where one accountant is enough, please read on.
In this post, I will address the pros and cons of each decision that are relevant to the UAE market, including UAE culture, hiring costs, etc. If your business is not registered in the UAE, this article might not be for you.
Now, let us delve into the advantages and disadvantages of each option:
Option 1: In-House Accountant
Pros:
Dedicated Attention:
An in-house accountant is solely focused on your business’s financial affairs, offering dedicated attention to detail and personalized service. Your accountant is yours from 9 AM to 6 PM, five days a week (and for some companies in the UAE, even six days a week!). They can sometimes stay overtime or respond to messages after working hours if needed.
An accounting firm will not always give that amount of attention. For example, in our firm, it is not allowed to send emails/messages outside of working hours, and the same goes for responding to client messages (unless a matter involves a possibility of missing a deadline where a fine might be imposed if we don’t attend to the issue).
Immediate Availability:
With an in-house accountant, you have someone readily available during business hours to address urgent financial matters or provide real-time insights.
An accounting firm usually has a policy on how quickly a matter should be dealt with. For example, in our firm, our policy is to reply within one business day unless a client is on a Plus package where we act like an in-house accountant.
Cultural Fit:
Being part of your team, an in-house accountant can better understand your company culture, goals, and processes, aligning their work accordingly. This is particularly important for companies with business owners and management teams from countries where English is not the primary language. We currently see many newly established companies that moved from Russia and prefer an accountant who can speak their language (Russian) and use their accounting software (First Bit), which is widely used in their country.
Cons:
Cost: Hiring an in-house accountant involves significant costs beyond salary, including benefits, office space, training, and ongoing professional development. Let’s look at these costs in more detail:
Visa costs: Around AED 6,000-8,000 for 2 years.
When a company hires a full-time employee (part-time employment, even though advertised by the UAE government, is practically not available), that employee needs to be sponsored with a company visa (unless the person is already sponsored by another person/company and that other person/company does not object to another employment, which is rare). That cost alone can be up to AED 6,000-8,000 for 2 years depending on the company’s details (free-zone or mainland).
Medical insurance: Starts from AED 3,000 per year.
There is now mandatory medical insurance, which for a decent one, starts from AED 3,000 per year.
End of service benefits or gratuity payout: Around one monthly salary per year of service.
And of course, there is end-of-service payout or gratuity, which is applicable to workers that have been with the company for more than a year. There is a formula on how to calculate it, but strictly speaking, it is around one monthly salary (based on the basic salary part) for each year of service.
Limited Expertise:
In-house accountants may have expertise limited to the scope of their role, potentially lacking specialized knowledge in areas such as tax optimization or complex financial regulations.
A lot of accounting firms provide in-house training for their accountants as they can leverage the cost of such professional development. Bespoke Accounting provides regular corporate tax and VAT training for their employees, as well as regular software updates, and tax workshops if there is a significant change in the tax or regulatory landscape. For accounting firms, it is crucial that their accountants have all the relevant certifications, like ACCA or CPA, as it significantly impacts their reputation. Accounting firms can also leverage the expertise they gain from serving a variety of clients and handling a variety of accounting and tax issues daily.
Dependency Risk:
Relying on a single individual for critical financial functions poses a risk, especially if they leave unexpectedly or are unable to fulfill their duties due to illness or other reasons. If a person goes on an annual leave, which in the UAE people prefer to take in one go as one full month, it puts significant pressure on the accounting and tax requirements.
Option 2: Outsourced Accounting Firm
Pros:
Cost-Effectiveness:
Outsourcing accounting services can often be more cost-effective than maintaining an in-house team, as you pay only for the services you need, without overhead expenses. When hiring an accounting firm in the UAE, you don’t require any entry fees like visa or medical insurance. Packages are usually structured in such a way that when the number of transactions and/or the workload increases, the fee goes up as well and vice versa, which gives more flexibility.
Expertise On Demand:
Outsourced firms typically employ a team of specialists with diverse expertise, providing access to a broader range of skills and knowledge. Through dealing with a diverse clientele base and various tax and regulatory issues, accounting firm teams have such a wide expertise that they can deal with almost any matter successfully.
Scalability:
As your business grows or experiences fluctuations, outsourced accounting firms can easily adjust their services to accommodate your changing needs. For example, at Bespoke Accounting, we employ contractors on an ongoing basis who can take on additional workload if there is an audit or migration requirement from one accounting software to another, so we can undertake such projects without adding additional pressure onto the team that does monthly bookkeeping for our recurring clients.
Cons:
Lack of Immediate Availability:
Unlike an in-house accountant, an outsourced firm may not be immediately accessible for urgent matters outside of agreed-upon schedules. As explained above, most accounting firms have a policy in place where no communication is allowed outside of working hours unless there is an emergency (where an FTA inquiry or the possibility of a fine is involved). This is done to protect and respect the team’s (and client’s) time outside of working hours. When you work with multiple clients, if you allow communication in the evenings or on weekends, you will see no end to your work!
Potential Communication Challenges:
Working with an external entity may introduce communication barriers or delays, particularly if the firm is located in a different time zone or has a high volume of clients. Many new accounting firms in the UAE employ teams of accountants located in other countries to minimize staff costs. When hiring an accounting firm, make sure to inquire where the accountant working on your books will be based. If it is important to you that your bookkeeper is based in the UAE, let your accounting firm know! Look through LinkedIn profiles of the team you are about to sign an agreement with to be aware of the staff’s experience and professional certifications if any.
Less Personalized Service:
While outsourced firms strive to understand their clients’ businesses, they may not have the same level of intimacy with your operations as an in-house accountant. Often, you are never in touch with your accountant, and your relationship ends with the provision of the bank statements and answering questions through email. Make sure to ask for regular catch-up meetings, which might not necessarily be in person. Online meetings are very easily organized and are very cost and time-effective! For very busy business owners, we at Bespoke Accounting provide recorded video messages where we talk them through the revised budgets or financial statements. Look out for accounting firms that go above and beyond to maintain great relationships with their clients, understand their needs, and add value regardless of their place of work.
In the end, it all comes down to what works best for your business. Think about your budget, the kind of financial expertise you need, and how much personal touch you are looking for. Whether you want an in-house money maestro or prefer to outsource the number crunching, just make sure you’re happy with your decision. Scrutinize those numbers, weigh your options, and choose the one that feels like the best win for your budget and workflow! Happy accounting!
Why not take a quiz to understand whether an outsourced accounting firm is the best option for your business needs?