In-House vs. Outsourced Financial Controllers: A Comprehensive Comparison

Are you grappling with the decision between hiring an in-house financial controller or outsourcing this critical function? You’ve come to the right place. This article is designed to help you navigate this choice by comparing both approaches.

Whether you’re a startup looking to establish robust financial processes or an established company reassessing its financial management structure, weighing up outsourcing vs. an in-house financial controller is the first step. 

This article compares the pros and cons of each approach. We’ll dig into aspects such as cost, expertise, control, scalability, and the suitability of each option for different business sizes. 

In-House vs. Outsourced Financial Controllers: A Summary

Before we get into all the details, if you want a quick run-down on the main differences between having an in-house financial controller or outsourcing this function, this table is for you:

Benefits of an In-House Financial Controller

For businesses that seek a tightly integrated role within their in-house teams, an in-house controller offers several benefits that can be crucial for maintaining financial stability and fostering growth.

Tailored expertise specific to the business

When you bring an in-house financial controller into your accounting team, you gain a professional dedicated to understanding your business’s intricacies. Over time, they develop a deep knowledge of your company’s finances, operations, and goals. 

Immediate availability for urgent financial matters

Financial emergencies can arise unexpectedly, requiring immediate attention and swift decision-making. An in-house financial controller is always on-site, ready to address urgent financial issues.

Direct control over financial processes and decisions

Being a part of the internal team allows in-house financial controllers to align closely with the company’s goals and culture. This means they can quickly implement changes, ensure compliance with policies, and maintain stringent quality control.

Drawbacks of Hiring an In-House Financial Controller

While employing an in-house financial controller can offer numerous advantages, there are also notable drawbacks you should consider before going down this route. 

Limited perspective on industry best practices

An in-house financial controller, though highly specialized and knowledgeable about your company, may have a narrower view of industry best practices. 

Since they are primarily focused on your business, they may lack exposure to the broader trends and innovations occurring within the industry.

Increased dependency on a single individual or team

Relying on an in-house financial controller can lead to increased dependency on a single person or a small financial team, which introduces operational risks. If your controller becomes unavailable due to illness, resignation, or personal reasons, your business could experience severe disruptions in financial reporting, compliance, and decision-making processes. 

The onboarding of a replacement can be time-consuming and costly, leading to potential gaps in financial oversight. And with employment in the field growing by 17% in the next decades, controllers may be hard to come by.

Advantages of Outsourcing Financial Controller Services

Outsourcing financial controller services offers advantages that can provide significant value, especially for companies looking to optimize their financial management without the constraints of maintaining an in-house finance team.

Access to a broader range of expertise

Outsourced financial controllers typically work with multiple clients, exposing them to different environments, challenges, and best practices. This broad experience enables them to bring innovative solutions and fresh perspectives to your business. 

Whether it’s advanced financial modeling or strategic cash flow management, outsourcing allows you to leverage specialized knowledge that may not be available internally (at least not without investing in ongoing training).

Flexibility in scaling financial services

As your business grows, your financial needs will evolve, requiring scalable services that can adapt to these changes. 

Outsourced financial controllers can adjust the level of service they provide based on your current and future requirements, whether scaling up during peak periods or scaling down during slower times. 

Cost-effectiveness in certain scenarios

Outsourcing financial controller services can be significantly more cost-effective, particularly for small to medium-sized businesses that don’t require a full-time financial controller.

With outsourcing, you pay only for the services you need, eliminating the need to cover a full-time salary, benefits, office space, and other overhead expenses that hiring an in-house controller would entail. This flexibility allows you to scale financial services up or down based on current needs, avoiding the long-term financial commitment of a salaried employee. 

Disadvantages of Outsourcing Financial Controller Services

While outsourcing financial controller services offers numerous benefits, it is not without its disadvantages. 

Potential communication challenges

Effective communication is crucial when managing complex financial operations. Outsourced controllers typically communicate by email, messaging app, phone, or video conferencing.

However, these remote methods of communication, which are often asynchronous, can sometimes lead to misunderstandings, delayed responses, or an overall slower workflow compared to face-to-face interactions.

Additionally, if you’re outsourcing internationally, time zone differences and language barriers may hinder seamless communication. This can result in missed deadlines or confusion about key financial processes, negatively impacting your business’s ability to act swiftly in critical moments.

Lack of on-site presence and immediate oversight

Outsourced financial controllers work remotely, so your business may lack real-time oversight of daily activities. Unlike an in-house controller who is present and fully integrated into your company’s daily operations, outsourced professionals may not have the same level of direct involvement. This can be especially concerning for businesses that require constant supervision and immediate decision-making on financial matters. 

Security and confidentiality risks

Outsourcing involves sharing sensitive financial information with an external party, which can increase the risk of data breaches, confidentiality issues, or misuse of critical financial data.

Even with strong contracts and nondisclosure agreements, the lack of direct control over data management and security protocols can be a significant concern for businesses handling proprietary or sensitive financial information.

While reputable outsourcing firms will have robust security measures, the potential risk remains a consideration, especially in industries with strict regulatory requirements.

Key Factors To Consider When Deciding Whether To Outsource a Controller or Hire In-House

Whether to hire in-house or outsource to an external financial controller depends on evaluating the key factors below.

Size and structure of your business

Small to medium-sized businesses (SMBs), which may not need full-time financial oversight, can greatly benefit from the flexibility and cost-effectiveness of outsourced services. 

Larger enterprises with more complex financial needs and higher transaction volumes might find that an in-house controller offers the dedicated attention and on-site presence needed to manage intricate financial tasks effectively.

Budget considerations and cost implications

In-house financial controllers typically come with higher upfront and ongoing costs for salaries, benefits, office space, equipment, and so on. These expenses can be significant, especially for smaller businesses. 

Outsourcing can provide a more cost-effective solution by allowing you to pay for services as needed, avoiding the long-term financial commitments of hiring a full-time employee.

Required expertise for specific financial tasks

If your business requires specialized skills, such as advanced financial modeling, international tax compliance, or industry-specific regulations, outsourced financial controllers may offer access to a broader range of expertise. 

Conversely, if you need a financial controller deeply integrated into your company’s daily operations, with a strong understanding of your internal processes and culture, an in-house controller might be the better choice.

Outsourcing a Financial Controller Is Usually the Best Choice

While there are undeniable advantages to having an in-house controller, the benefits of outsourcing frequently outweigh these for small and medium-sized businesses or companies experiencing rapid growth.

The few challenges that outsourcing presents, such as potential communication challenges and lack of on-site presence, can easily be overcome by employing a few smart strategies. 

Consider nearshore outsourcing

Nearshore outsourcing is an excellent option that combines the benefits of outsourcing with fewer communication barriers. 

For US companies, nearshoring means working with providers in Latin America (LatAm) or Canada. This has the benefit of working with professionals within US working hours. This proximity can lead to better relationship building and more consistent communication.

And working with a financial controller in LatAm offers substantial cost savings over hiring in-house. The average salary of a LatAm-based controller is between $18,000 and $42,000. That’s over 60% lower than the average salary of a US-based financial controller. Allowing you to benefit from full-time controller expertise at a part-time cost. 

Set clear performance goals

Setting clear performance goals and metrics is another way to ensure the effectiveness of outsourced financial controllers. Define specific, measurable objectives and hold your outsourced controller accountable to these standards. 

Regular performance reviews and open channels of communication can help in aligning their output with your expectations and business needs. 

Make use of all the remote working tools available

Software and other tools that facilitate remote working, like project management software or communication tools like Slack, can significantly bridge the communication gap and ensure that outsourced services align with your strategic goals.

With strategies like nearshore outsourcing and clear performance metrics, the potential drawbacks of outsourcing can be mitigated, making outsourcing a viable and often superior alternative to hiring an in-house financial controller.

Final Thoughts

Deciding between an in-house financial controller and outsourcing the role is a pivotal choice that can significantly impact your business’s financial health and operational efficiency. 

Each option has its unique benefits and challenges. Your choice should align with your business needs, size, and budget. For many businesses, especially SMBs, outsourcing financial controller services can be a strategic choice. 

By leveraging nearshore outsourcing and setting clear performance goals, you can mitigate many potential drawbacks and reap the benefits of specialized expertise and operational flexibility.

At Near, we understand the complexities involved in making this critical decision. Our goal is to help you find the right financial talent tailored to your needs from our pre-vetted pool of remote professionals based in Latin America.

Ready to explore the next step in the outsourcing process for your business? Check out our detailed guide on How To Successfully Hire an Outsourced Controller.