Hiring or outsourcing: What’s the best solution for your SME’s finance needs?

As a small or medium-sized business (SME) owner, managing your finances effectively is vital to success. But when it comes to building your finance team, is it better to hire in-house or outsource to a virtual finance function? The answer depends on your business goals, resources, and the specific financial expertise you need.

Let’s explore the options to decide what’s right for your business.

The problem: Meeting growing finance needs

As your SME grows, your finance needs become more complex. While you may have started with basic bookkeeping or a part-time accountant, you might now require strategic guidance, regular management accounts, or even financial forecasting.

At this stage, many SME owners face a choice:

1. Recruiting in-house: Hiring roles such as finance managers, bookkeepers, or fractional CFOs to bring expertise directly into the business.
2. Outsourcing: Using a virtual finance team to access a broader range of skills on a flexible basis.

Both have benefits, but making the wrong choice can lead to higher costs, inefficiencies, or missed opportunities to improve your financial position.

 Weighing up the options

Here’s a closer look at each approach to help you decide:

 1. Hiring in-house

Bringing a finance professional into your team can work well if:

• You need someone physically present to oversee day-to-day operations, like payroll or supplier payments.
• Your business has unique processes that require a deep understanding of internal systems.
• You value having a dedicated team member to embed within the company culture.

Costs and challenges
One of the downsides is that hiring an in-house finance team can be costly. For example:

• A part-time finance manager’s average salary ranges from £35,000 to £50,000 per year, depending on location and experience. Source: Reed UK Salary Guide, 2024/25.
• Remember to also add employer costs such as National Insurance, pensions, and recruitment fees on top of the salary.
• There’s also the time investment in onboarding and ensuring staff are up to speed with the latest regulations and technology.

 2. Outsourcing to a virtual finance function

A virtual finance team offers flexible access to experienced professionals. This option suits businesses that:

• Need expertise beyond basic bookkeeping, such as cashflow forecasting or strategic planning.
• Want to reduce overheads without compromising on the quality of financial insights.
• Require scalable solutions that grow with the business.

 Benefits of outsourcing

• Cost-effectiveness: With outsourcing, you only pay for the specific services your business needs, whether it’s bookkeeping, financial forecasting, or strategic advice. This flexibility helps you avoid the significant costs associated with hiring full-time staff, such as salaries, National Insurance, pension contributions, and other overheads. It’s a particularly valuable option for SMEs looking to manage budgets effectively while still accessing high-quality financial support.
• Expertise on demand: Outsourcing gives you access to a team of experienced professionals, including CFOs, accountants, and tax advisers, without the need to hire each role individually. This means you can benefit from their specialised knowledge and skills as and when you need them, whether you’re tackling complex tax issues, planning for growth, or managing cashflow. It’s an efficient way to ensure your business gets expert advice without committing to permanent hires.
• Integrated systems: Many virtual finance teams leverage advanced software and technology to streamline processes and improve the accuracy of your financial reporting. These integrated systems allow for real-time data sharing and analysis, giving you a clear view of your business’s financial health at any time. With the proper setup, this approach can enhance efficiency, reduce manual errors, and provide actionable insights to support decision-making.

 How to decide: Five key questions to ask

1. What expertise do I need?
   Identify your business’s current gaps. For example, a virtual CFO could provide strategic insights if you’re preparing for rapid growth.
2. What’s my budget?
   Compare the total cost of hiring in-house versus outsourcing. Remember to factor in additional overheads for in-house roles.
3. How complex are my needs?
   If you only need help with bookkeeping, hiring a part-time assistant may suffice. For more advanced support, outsourcing can be more efficient.
4. Do I have the right systems in place?
   Fully integrated systems can make outsourcing seamless, as remote teams often use cloud-based tools to access real-time data.
5. What’s my long-term plan?
   Consider whether your business is scaling and whether your needs might evolve over time.

Final thoughts

The choice between hiring in-house and outsourcing ultimately depends on your SME’s specific needs, available resources, and long-term business goals. Hiring in-house might be the right path if your business requires hands-on support for day-to-day operations or you value having a dedicated team member immersed in your company’s culture. However, it’s important to consider the significant costs involved, including salaries, employer contributions, and recruitment overheads.

On the other hand, outsourcing can offer a flexible and cost-effective solution, especially if your needs extend beyond basic bookkeeping to include strategic financial planning or regular management accounts. By leveraging a virtual finance function, you gain access to experienced professionals and advanced technology without the commitments and expenses of permanent staff. This option is particularly beneficial for SMEs looking for scalability and specialised expertise.

Both approaches have their merits, and the right choice will depend on the stage of your business, the complexity of your financial needs, and your goals for the future.

If you’re unsure what’s right for your business, we’re here to help. At Team SAS, we provide tailored advice to ensure your finance function supports your growth ambitions effectively. Contact us today.

We are UK-based accountants who offer a range of financial outsourcing services and virtual CFO services. For a free no obligation consultation email info@teamsas.co.uk  or call 0118 911 3777.

Use of this information is for reference only. Specialist Accounting Solutions Ltd accepts no liability for any errors therein or any losses or damages arising from it.