Organizations looking to outsource their financial needs often wonder who is best qualified to handle the intricacies of their business operations.
With the multitude of options available the landscape of potential financial solutions is vast. Factor in the solutions catered specifically towards SMBs, local businesses, privately-held businesses, and businesses in designated industries and the result is an overwhelming sea of possibilities. Within these choices are two distinctly different options – freelancers and firms.
Business owners tend to struggle with determining which type of provider will best suit their needs. Will a solopreneur or freelance CPA-CFO be sufficient? Or is a larger firm a better option?
The answer can vary depending on individual business considerations, financial needs, duration of the relationship, and budget.
Freelance Provider
Pros:
The most common reason that businesses choose to hire a solopreneur is because an individual has less overhead to consider when setting rates compared to a firm. The result is typically a lower rate for services rendered. Additionally, they are often willing to customize services to stay within a certain budget for cash-strapped startups and small businesses.
Additionally, freelancers do not typically require contracts or ongoing commitments to utilize their services, which makes them an attractive choice for ad hoc projects. Small businesses that are still learning to manage cash flow and companies with irregular cash flow models (such as seasonal businesses) appreciate the flexibility of only needed to pay for financial services as needed.
Cons:
Unfortunately, self-proclaimed experts without the skillset to support that assertion are a problem in every professional field. The result is a skepticism about freelancers in general. While many solopreneurs are qualified, knowing which ones can be trusted is a concern that many business owners have. Without personal recommendations to rely on, it can be difficult to determine exactly what kind of qualifications or experience level a freelancer will bring to the job.
Furthermore, even among well-qualified freelancers, their lower volume of clients results in a smaller portfolio, which can make it difficult to determine which areas they specialize in for providing financial services and advice. While this may not be of utmost importance for some businesses, it can deter niche businesses or those with special circumstances to consider.
Lastly, the value of the arrangement is highly contingent upon being able to work with the specific individual hired. Unlike a larger firm, which has many financial professionals, a freelancer is a one-person endeavor, so a disagreement or difference in methods or goals can end the relationship. This is one reason why solopreneurs tend to experience more client turnover than financial firms.
A Larger Firm
Pros:
A financial consulting firm is typically better at handling more sophisticated financial needs, like those for non-profit organizations and businesses with government contracts. Their in-depth understanding of accounting systems, tax considerations, and cash flow challenges make them the best choice for any organization with complicated finances.
Additionally, a firm can help with more than just reporting, payroll, taxes, and other financial necessities for established companies, they can also aid in new business formation. An experienced firm can advise on business structure options as well as implement a financial management software.
This wider breadth of offerings is possible due to the increased cumulative experience from having many financial professionals working together. As a result, firms are typically able to offer more specialized services with greater industry focus. With many CFOs, controllers, accountants and bookkeepers working for the same company, business owners are also more likely to find someone who is a good match for their specific needs.
With more employees, a larger firm has greater oversight over their operations. The result is work that is better governed and more likely to adhere to the most recent financial standards and best practices. Increased oversight is an especially salient point for less experienced business owners who are relying on a financial service to cover gaps in their own financial knowledge.
Generally, firms are more stable than solo operations, which provides better continuity for businesses utilizing their services as well.
Cons:
The biggest reason that business owners cite for not wanting to work with a larger firm is cost. It is true that a firm may be more expensive than working with a freelancer on an as-needed basis. However, this is typically due to the nature of the work being performed. While some individuals can provide basic financial services like payroll and reporting, larger firms that include CFOs do those same functions and more, such as implementing internal controls, projecting and managing cash flow, creating budgets, and providing vital information to owners and CEOs.
While a larger firm is more likely to hope for an ongoing service relationship, they can still work with businesses that only have occasional or ad hoc needs. For financial consulting firms that truly offer customized services, these offerings will be priced accordingly, and the cost will still be substantially less than hiring in-house for the same functions.
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