Should You Outsource Your Company’s Accounting?

Deciding whether to manage your company’s accounting in-house or to outsource is a critical decision for SMEs and startups in Switzerland. Founders may consider the option of handling accounting tasks themselves to save costs and maintain control. However, the complexity of Swiss accounting standards and the significant time investment required can make this challenging and inefficient. This article explores the practical aspects of doing your own accounting and its pros and cons, and provides insights into whether outsourcing might be the better option for your business.

Can you do your own accounting?

Many startup founders, sole proprietors and owners of SMEs in Switzerland are tempted to manage their own accounting and bookkeeping, either personally or by hiring a full-time accountant. This leads to the important question of whether it is feasible to do your own accounting in-house instead of hiring the services of a professional accounting firm or trustee. And furthermore, if it is indeed feasible, what are the practical aspects involved?

While there is nothing wrong or illegal about handling your own company’s accounts, it can be both challenging and costly for numerous reasons which we will explore in this article. Founders who want to go this route should have a clear idea of what it practically entails and the various pros and cons. It’s important to be realistic and not underestimate the technical requirements and difficulties of proper accounting.

Practical aspects of doing your own accounting

For small and medium-sized enterprises (SMEs) and sole proprietorships in Switzerland, managing accounting internally might seem feasible. However, it requires a solid understanding of Swiss accounting standards, meticulous attention to detail, and a significant time investment.

Swiss law stipulates that all businesses keep precise accounting records of their transactions, including income, expenses, assets, and liabilities. This includes adhering to the Swiss Code of Obligations (CO), which outlines specific requirements for bookkeeping and financial reporting. Sole proprietors with an annual revenue of less than CHF 500,000 are allowed simplified bookkeeping, but once this threshold is crossed, full double-entry bookkeeping is required.

Practically, doing your own accounting involves:

• Maintaining detailed records of all financial transactions
• Preparing regular financial statements
• Managing tax compliance and filing
• Ensuring payroll accuracy
• Monitoring cash flow
• Staying updated with changes in accounting regulations

Clearly, doing your own accounting in-house is no casual affair. You need to ensure you comply with all the requirements and have the expertise to do so without making serious errors or omissions. In this respect, using software tools and accounting solutions can be of great assistance.

Accounting software to the aid

The advent of sophisticated accounting software has made it significantly easier for small business owners and sole proprietors to manage their own accounting. These tools offer a range of features designed to simplify the process and ensure compliance with Swiss accounting standards.

Benefits of using accounting software:

1. Automation of routine tasks: Accounting software can automate many of the repetitive tasks involved in bookkeeping, such as invoicing, expense tracking, and payroll processing. This reduces the risk of human error and frees up time for focusing on growing your business.
2. Real-time financial insights: Many software solutions provide real-time dashboards and reports, giving you an up-to-date view of your financial health. This helps in making informed decisions and staying on top of your cash flow management.
3. Simplified tax compliance: Good accounting software is regularly updated to reflect changes in tax laws and regulations. This helps ensure that your business remains compliant, avoiding costly fines and penalties.
4. Scalability: As your business grows, your accounting needs will become more complex. Many software solutions are scalable, meaning they can grow with your business and handle increased transaction volumes without requiring a complete overhaul of your accounting processes.
5. Integration Capabilities: Modern accounting software can often integrate with other business tools, such as customer relationship management (CRM) systems, e-commerce platforms, and banking apps. This streamlines data flow across your operations and enhances efficiency.

Popular accounting software options in Switzerland include Abacus, Infoniqa (formerly Sage), and Bexio. SwissSalary provides a reliable and comprehensive payroll management system, while Microsoft Dynamics 365 Business Central is the ultimate all-in-one ERP and accounting solution for businesses. Each of these tools offer tailored solutions to meet the specific needs of Swiss SMEs, startups and sole proprietorships.

Despite the versatility and benefits of sophisticated accounting software, it’s crucial to understand the limitations of doing your own accounting with the use of such software. For complex accounting requirements, the expertise of a professional accounting provider is indispensable, and is often needed for proper use of the software and for correct interpretation and oversight.

Perhaps of even greater relevance is the fact that the cost of accounting software licenses can be exorbitant and therefore not worthwhile for an individual small business or sole proprietor. Professional outsourced accounting firms make use of similar software, but the licensing costs are spread across a large pool of clients which often means it works out cheaper to enlist their services than to cover the costs of your own accounting software as an individual company.

Pros and Cons of doing your own accounting

Pros

• Save costs: The main apparent benefit of doing your own accounting is cost savings. In theory, by handling your own accounting internally, you can avoid the fees of hiring an external accountant or trustee, and thereby reduce your overall costs. However, in practice, it can often work out more expensive to do your own accounting due to software costs and other factors, which we will explore in more detail later.
• Skill building: For founders who would like to gain experience in all aspects of running a business, learning how to manage your own accounting processes can be a great skill-building experience, giving you a better understanding of your financial situation and the Swiss accounting system.
• Control and privacy: Managing your own books gives you full control over your financial data and processes, ensuring that sensitive information remains confidential. This is why, if you do go the route of hiring an external accounting provider, it’s crucial to find someone you can trust with your private information.
• Greater insight: Handling your own accounting can provide a deeper understanding over your business’s financial situation. The greater level of insight you gain can help you make more informed and timely decisions.

Cons

• Time-consuming: Bookkeeping is notoriously time-consuming, especially if you lack experience and are not familiar with all the accounting laws and procedures. As a startup founder, this is time that could be much better spent on managing and developing your core business. Time is the most precious resource you have, so delegating and outsourcing your accounting processes can greatly aid your growth and operational efficiency.
• Increased risk of errors: Swiss accounting standards and tax laws are complex. Without proper accounting expertise, you run a much greater risk of making errors. Not only can this potentially lead to costly penalties and legal issues, but internal accounting errors can result in misinformed decisions and critical operational mistakes.
• Lack of expertise: Most business owners are not necessarily trained accountants. This lack of professional expertise can lead to missed opportunities for tax saving,  financial planning and overall optimization.
• Additional stress and worry: Managing the responsibility of doing your own company’s accounting can be a high-stress task. Aside from the additional time-burden involved, you may worry about making errors and the potential consequences which could arise from them. Handing over the task to an external professional can give you greater peace of mind and confidence knowing that your accounts are handled correctly.

Given the risks and drawbacks of taking your accounting into your own hands, it makes sense to turn towards outsourcing as a solution:

What does outsourcing your accounting entail?

Outsourcing your accounting means entrusting an external accounting firm or trustee, such as Nexova AG, with your financial record-keeping and compliance tasks. The scope of services can range from basic bookkeeping to comprehensive accounting solutions, including tax planning, payroll management, financial reporting, and strategic financial advice.

Typical services and tasks performed by an outsourced accounting firm include:

• Recording and categorizing your financial transactions
• Preparing and submitting financial statements on your behalf
• Ensuring compliance with Swiss accounting standards and tax laws
• Managing your payroll and distribution of employee benefits
• Providing financial analysis, forecasting and strategic advice
• Supporting with audits if necessary

Benefits of outsourcing

There are many good reasons to consider outsourcing your accounting tasks:

1. Greater expertise and accuracy: Professional accounting firms have the knowledge, experience and resources to manage your accounting needs accurately and efficiently, reducing the risk of errors and ensuring regulatory compliance.
2. Save costs: While cost-savings is often the reason founders turn away from hiring an external accounting trustee, in most cases, outsourcing can actually be more cost-effective than hiring a full-time in-house accountant or even managing your accounting personally. This is especially true for SMEs and sole proprietorships who can leverage the operational efficiency of accounting firms instead of going through the cost of setting up their own in-house accounting department.
3. Save time: Outsourcing frees up your and your employees’ time, allowing you to focus on growing and optimizing your business rather than getting bogged down in mundane administrative tasks.
4. Access to latest technology: Accounting firms like Nexova typically use advanced software and tools, providing you with accurate and real-time financial data and insights. The licensing costs of these software tools for individual use by a small business can be prohibitive.
5. Scalability: As your business grows, your accounting needs will also evolve. An external accounting provider can easily scale its services to suit your growing requirements, whereas adapting internal accounting processes to keep pace can be cumbersome and costly.
6. Adaptability: Accounting firms are experts in their field, and it is their responsibility to keep pace with changing standards and regulations. This enables them to quickly adapt their approach in accordance with the latest best practices and ensure that you are not left behind the curve.
7. Unbiased perspective: An external trustee is not personally or emotionally invested in your business and is therefore more able to maintain an unbiased perspective of your financial situation, without any conflicts of interest getting in the way.

Downsides of outsourcing

It is worth noting that there are also some potential drawbacks to outsourcing your accounting, including:

1. Loss of control: Outsourcing your accounting means relinquishing some level of control over your financial processes. This is not an issue if you have a trusting relationship with your accounting provider but may be a concern if you prefer to maintain direct oversight over your own books.
2. Unexpected surprises: If you end up with the wrong trustee, they may surprise you with hidden fees and costs, or fail to deliver timeously and competently.  
3. Dependency: Handing over your accounting to an external provider makes you entirely dependant on them continuing to deliver. This leaves you in a vulnerable position if they experience issues, downtime, or fail to meet your expectations.
4. Lack of communication: Open and transparent communication is key to an effective trustee relationship. Miscommunications or delays can result in operational mistakes and misunderstandings about your financial situation.
5. No innovation: A lazy trustee may try to get away with just doing the bare minimum. They will not be interested in process improvements or innovations which could optimize your financial management. This is why it’s vital to choose a trustee who is willing to do all they can to improve and transform their clients’ financial processes and is able to adapt to the constantly evolving accounting landscape in Switzerland.

Most of these drawbacks can be mitigated by ensuring you find the right trustee. To learn more about when it’s time to change your trustee and how to find one that better aligns with your business, read our article: Ten Reasons to Change Trustees.

Do-it-yourself or outsource: which is best?

The decision whether to handle your own accounting in-house or turn to outsourcing depends on various factors, including the size of your business, the complexity of your financial transactions, your budget, and your personal competence with accounting tasks.

We have collated the differences between in-house and outsourcing into three main areas of comparison: Cost, quality and efficiency.

Cost

A major argument for managing your accounting internally is to save on the costs associated with hiring external accounting providers. But is this actually the case? It’s crucial to consider all the various costs involved in handling your own accounting. Aside from the direct costs of accounting software and hiring an in-house accountant, both of which can be exorbitant, there are also hidden costs to consider. These include opportunity costs due to the time spent on accounting tasks, potential errors which could lead to penalties and missed opportunities for tax and financial optimization.

While there is an upfront cost associated with outsourcing, for most SMEs and sole proprietors, it is usually more cost-effective in the long run. Outsourcing eliminates the need for a full-time in-house accountant and the associated overhead costs. Additionally, professional accountants can often identify tax savings and financial optimizations that an untrained individual might miss.

Quality

The quality of in-house accounting depends heavily on the individual’s expertise and attention to detail. Hiring your own full-time accountant is attractive in the sense that you have direct control over how they manage your accounting and can meet with them at any time to discuss your finances and assess the quality of their work. However, dependence on the expertise of a single individual and potential limitations in your own in-house accounting resources can lead to deficiencies in quality. Taking your accounting entirely into your own hands comes with even greater risks, as without proper training, there’s a higher chance of errors.

On the other hand, outsourcing your accounting to a professional accounting firm gives you access to an entire team of experts along with the wealth of resources and software at their disposal. They are well-versed in the latest regulations and best practices, providing a level of quality that is often difficult to achieve in-house.

Efficiency

Handling your own accounting internally can be time-consuming, diverting your energy away from your core business activities and thereby reducing operational efficiency. Even with the use of accounting software, managing your own finances can be a significant distraction. Hiring an in-house accountant doesn’t necessarily solve the problem either. Without proper supervision, they make mistakes which go unnoticed. Additionally, the recruitment and training process can be arduous, and so if your accountant decides to resign, you’ll be forced to divert energy and resources in finding and training up a new one.

In contrast, outsourcing your accounting allows you to focus on your core activities, improving overall efficiency. Accounting firms have a team of qualified supervisors, meaning that your accounting work will always be checked for quality and consistency. There is also greater continuity in that you are not dependant on a single accountant remaining with your business. If the specific accountant handling your books leaves the accounting firm, they can simply assign someone else to your company, and have the systems in place to ensure consistency and continuity through the changeover.

The verdict

Deciding whether to handle your own accounting or to outsource depends on your specific circumstances and personal preference. If your business is small with straightforward transactions and you have the time and inclination to learn and manage your own accounting, doing it yourself can save money and give you complete control. However, be prepared for the time commitment and the need for continual learning to stay compliant with Swiss regulations.

If your business is growing, your transactions are complex, or you prefer to focus on core business activities, outsourcing is likely the better option. The expertise, time savings, and potential for more strategic financial management often outweigh the upfront costs and perceived loss of control. For most startups, SMEs and sole proprietorships in Switzerland, outsourcing is the way forward, saving you time, money, and boosting overall quality and performance. Most importantly, outsourcing can provide peace of mind, knowing that your accounting is handled by professionals who ensure accuracy, compliance, and efficiency.