In-House or Outsourced Accounting: What’s Better for Interior Design Businesses?

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Whether you recently launched an interior design startup or have owned your firm for many years, you might need help with bookkeeping. But does in-house or outsourced accounting make more sense for design firms? Should you work with a bookkeeper or a CPA? What’s the difference? The right choice for you might not be the right choice for another firm owner.

Smaller interior design businesses with straightforward financial transactions, predictable cash flow, and limited complexity may find in-house accounting to be a cost-effective and manageable solution. This approach allows for direct oversight, immediate responses to financial issues, and tailored support.

However, as firms grow or encounter complex financial scenarios, outsourcing to a professional accounting firm can provide numerous advantages. Contracted accountants often bring specialized expertise, access to advanced software, and a broader range of financial services – including tax planning and compliance. Additionally, an outsourced accounting team can offer scalability and flexibility to adapt to changing business needs.

Ultimately, the decision should be based on the firm’s size, financial complexity, long-term objectives, and the key performance indicators it wants to track. Some firms will even opt for a combination of both in-house and outsourced accounting services to strike a balance that suits their unique needs. Don’t worry; we’ll consider all the pros and cons in this post. Read on to learn more!

What’s the Difference Between a Bookkeeper and an Accountant?

Before we determine whether it makes more sense to build out an internal accounting department or outsource accounting, let’s nail down the differences between bookkeepers and CPAs.

What Does a Bookkeeper Do?

A bookkeeper is responsible primarily for day-to-day financial tasks – such as recording transactions, maintaining financial records, reconciling accounts, managing invoices and expenses, and ensuring that your financial data is accurate and up to date. As Donna Fuscaldo writes in an article for Business News Daily, bookkeeping is more of an “administrative role.” Accounting is more investigative and interpretive. If your interior design business is relatively small, with straightforward financial transactions and minimal complexity, you might start with a bookkeeper to handle routine financial tasks efficiently.

What Does an Accountant Do?

An accountant has a broader and more strategic role when it comes to your firm’s finance and accounting. They can provide financial analysis, tax planning, financial reporting, budgeting, and long-term financial planning. Accountants can offer valuable insights into your business’s financial health and financial challenges.

As your interior design firm grows and becomes more complex – or if you need expertise in areas like tax planning, financial strategy, or compliance with industry-specific regulations – you might choose to either hire an accountant or work with an outsourced accounting firm. Accountants can help you with strategic financial decisions and ensure that you comply with tax laws and regulations.

What’s the Difference Between an Accountant and a CPA?

While both accountants and CPAs work with financial data and provide valuable services, CPAs have more rigorous qualifications, a broader scope of practice, and the legal authority to perform certain financial tasks – i.e. auditing and representing clients before tax authorities. As with bookkeepers vs. accountants, the choice between hiring an accountant or a CPA depends on the specific needs and complexity of the financial services required.

Here’s What Accountants Do

An accountant can have various levels of education and experience in accounting, ranging from a bachelor’s degree in accounting or a related field to simply having experience in bookkeeping or financial analysis. There are no specific licensure requirements to be called an “accountant.”

Accountants can perform various financial tasks, including bookkeeping, financial analysis, tax preparation, and auditing (though not necessarily auditing public companies). They may work in various industries and roles, including private accounting, corporate finance, or government agencies.

And Here’s What CPAs Do

To become a CPA, an individual must meet specific educational and experience requirements, pass a rigorous CPA exam, and, in most cases, obtain a state license. CPAs are regulated by state boards of accountancy and must adhere to professional standards and ethical guidelines. They have a higher level of education and expertise compared to general accountants.

CPAs have a broader scope of practice. They can provide a wider range of financial services, including auditing, tax planning and preparation, forensic accounting, consulting, and more. CPAs are often sought for their expertise in complex financial matters and are typically involved in ensuring financial compliance and accuracy for businesses and individuals. Accountants do not have legal authority to represent clients before the IRS or provide attestation services, but CPAs do have that authority.

Do Accounting or Bookkeeping Services Make More Sense for Design Firms?

In many cases, it’s beneficial to have a bookkeeper to handle day-to-day financial tasks and an accountant to provide strategic financial guidance. Additionally, you may choose to work with a full-service accounting firm that offers a range of services – including bookkeeping and accounting, to cover all your financial needs.

It’s important to recognize that while the interior design industry is not subject to regulatory requirements or oversight in the way that other industries are, the tax obligations of a design firm can be incredibly complex. Between sales tax, use tax, payroll, and self-employment tax, ensuring you have met those obligations can be exhausting and quite stressful. An in-house accountant or outsourced accounting service can help ensure your business complies.

Ultimately, your choice should align with your business’s size, growth trajectory, and financial complexity.

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In-House or Outsourced Accounting: What’s Better for Interior Design Businesses?

Now that you know the difference between bookkeepers, accountants, and CPAs, let’s weigh the pros and cons of hiring in-house versus outsourcing. Ask yourself these questions before making your decision!

How Large and Complicated is Your Firm?

The first factor to consider when choosing between in-house and outsourced accounting is your firm’s size and financial complexity. If your business is relatively small with straightforward financial transactions, handling accounting in-house may be more cost-effective and efficient. You can hire a part-time accountant, hire a full-time accountant, or use accounting software to assemble financial statements, track KPIs, and otherwise manage your firm’s finances. If your firm often has complex cash inflows and outflows (accounts receivable, accounts payable, etc.), it might also benefit from an in-house accountant who is dedicated solely to your company.

For larger firms with complex financial structures – i.e. those with international clients, retail stores, or multiple studios – outsourced accountants might make more sense. Similarly, if your firm is currently in or approaching a period of rapid growth, outsourcing to a contract accounting firm can provide access to specialized expertise and resources to handle that increased workload.

Are You Planning to Scale Your Firm?

If the answer is yes, you might be better served by a larger outsourced accounting team. Scaling up an in-house accounting team can be challenging when your business grows. You need to recruit and train new staff and invest in additional resources.

Contract accounting services can be more easily scaled up or down to accommodate your business’s changing needs. Depending on the accounting firm, you might also be able to add advisory services and financial consulting. This flexibility can be a significant advantage as your interior design business evolves.

If your firm is growing and evolving, its tax obligation might also change. This is especially common when opening a studio in a different state, switching business structures, or working with international clients. Staying updated with tax laws and accounting regulations can be challenging, and in-house accountants may struggle to keep up with changing compliance requirements.

Contract accounting firms typically have a better understanding of current regulations and compliance requirements. They can help ensure that your business remains in compliance, reducing the risk of financial penalties.

Do You Want to Manage Another Employee?

It might be the right time to expand your team, or it might be the absolute worst time. If your firm does not have a COO or other director to manage personnel, you will be responsible for the bookkeeper or accountant who joins your team. Managing accounting in-house can take time away from your core business activities — such as design, client relationships, and business development. Outsourcing accounting allows you to focus on your core competencies while experts manage your finances.

Which Costs More?

Last but not least, let’s talk about money. When deciding between hiring in-house or outsourcing your firm’s accounting processes, cost is absolutely a factor. While it may seem cost-effective initially, hiring and training in-house accountants and maintaining accounting software can be expensive in the long run. You also need to consider benefits and overhead costs.

Alternatively, outsourcing accounting services may seem more costly upfront, but it can be a cost-effective solution in the long term. Contract accountants are often highly skilled and can improve financial efficiency, potentially reducing costs in the long run.

Bear in mind that hiring an in-house accounting team or accountant who understands the design industry and its unique tax-related challenges might cost more initially. However, they could save you or an accountant who is less familiar with this type of business from making costly mistakes. As such, it’s important to weigh the cost of accounting services against the accountant’s expertise.

Final Thoughts

Accounting firms provide expertise for a wide variety of businesses, often have access to advanced software, track regulatory changes, and can adapt to your business’s changing needs. They also typically offer a team of professionals who can provide a broader range of financial services. Your firm’s financial statements might pass across the desks of several accountants — reducing the risk of errors and improving financial compliance.

However, hiring an in-house accountant provides personalized attention and quick turnaround. If your accountant has experience in the interior design industry, she might also offer better insight into the tax and financial reporting obligations of firms operating in that industry. Ultimately, the decision should align with your business’s specific needs, size, and long-term goals. Remember, you can always transition from one option to the other as your business evolves.