Accounting firm Vs. Freelance bookkeeper Vs. In-house in Malaysia: Which is better?

Online e-commerce sellers, have you been managing your own bookkeeping, but has your business grown to a point when the accounting is getting more complicated and disorganised?

Has it become a huge pain whenever you have to get your accounts in order and when you file your taxes?

If you've answered yes to the above, chances are, you might be thinking of hiring an accountant. But would it make more sense for you to hire a full-time in-house accountant, a freelancer or outsource your accounting needs to an accounting firm? Which would be more suitable for you based on your business needs, especially in terms of cost?

Our friends and clients in different industries have had experiences working with these different kinds of accountants, so let's assess each of them from the perspective of what you as a small business owner might need to consider:

1. What are the freelance accounting charges compared to costs of outsourcing to an accounting firm or hiring in-house?

The number one concern that comes to mind for most of you is the cost – how much does it cost to hire someone to do your accounts?

Freelance bookkeeper

The most affordable option would be to hire a freelance bookkeeper. For most trades or services, freelancers are usually the least costly, especially when you discover the wonder of freelance platforms like Upwork, Fiverr or even on Facebook groups, you feel that building your business is so much cheaper.

But is it true that they are really more affordable?

First of all, most of the time, when you hire freelancers to do your accounts, they are usually bookkeepers – who are different from accountants.

Bookkeepers: Anyone who knows how to record and sort out your daily financial transactions such as sales, payroll, bills.
Accountant: In addition to the above, they also make sense of this data, analyse it and advise you on how you can save costs. Also, the Accountants Act 1967 stipulates that no person shall practice or declare themselves as either a Chartered Accountant or licensed accountant unless registered with the Malaysian Institute of Accountants (MIA).

Here's an overview of the main differences between a bookkeeper and an accountant:

If your business is a small side hustle with less than 50 monthly sales transactions, a freelance bookkeeper might be the most cost-effective option in this scenario.

But if your e-commerce business has more than 50 monthly transactions, you may want to rethink if it's really cheaper.

One business we know of faced a RM 5,000 penalty because the bookkeeper didn't advise the director to submit a CP204A* for the increase in sales in the last financial year.

* CP204A is the tax estimation form companies need to submit.

Attention bosses: This is a real risk of not hiring a professional accountant – which we will address more in our second point later.

In-house accountant/ accounting clerk

Most people think hiring an in-house accounting clerk gives them more flexibility since they can be your accountant and HR and admin, all with just RM 3,000 a month! But is this really true?

Let's do some math here:

So give and take, it might cost around RM 4,000 a month.

You might still need to guide and manage your in-house accounting clerk, just like any other employee. So there's a huge opportunity cost here:

For example, if you are spending 1 hour a day guiding your accounting clerk, in a month with 20 working days it would mean 20 hours per month, or 240 hours a year. This would mean 240 hours lost in getting more revenue for your business. If you are generating value of at least RM 100 an hour, that would translate to at least RM 24,000 lost a year!

Is this amount of investment in your in-house accountant worth it? You have to weigh your opportunity costs and decide if it makes financial sense for your business.

Besides that, again, hiring in-house doesn't mean error-free and the risk of receiving a penalty from LHDN is real too. We have personally seen many inexperienced accountants asking for help in Facebook communities. So unless you are a Chief Financial Officer (CFO) and can give accounting guidance and spot anomalies, you might want to rethink this.

Most e-commerce sellers would also find it unnecessary to hire an in-house accountant until they have reached a certain scale, so those with smaller-scale businesses either rely on freelancers or accounting firms.

Accounting firms

Most people tend to think that outsourcing to professional accounting firms is expensive. A common perception is that they have an office to run, might chalk up hidden costs, and might not be very responsive to your little things here and there because they have many other clients to manage.

That is not true. A good accounting firm would cost you RM 300 onwards a month, depending on the services you need, and considering the value they can provide, it's actually very affordable.

You also have more flexibility because you are just paying according to the work services you need, which would translate to more cost savings for you.

On top of these, more importantly, you can expect them to have more knowledge and experience to advise you on cost savings (which we will address in the third point), while being professional, efficient and giving you peace of mind without requiring regular communications. They know what you need as they would already be working with many other clients like you.

This means you can spend time focusing on growing your business.

Read more: 7 Manual accounting mistakes e-commerce sellers need to avoid

2. What are the business risks you can take?

One common tax penalty many business owners, especially e-commerce sellers, often get is due to wrong tax filing, missing tax deadlines or inaccurate bookkeeping.

If you are selling on marketplace platforms like Shopee or Lazada, very often, there might be price fluctuations on different platforms and it can be very tedious to keep track, which often leads to inaccuracies bookkeeping, and these inaccuracies will trickle down to your tax filing.

Risks of hiring a freelance bookkeeper

And if you are relying on a freelance bookkeeper to file your taxes, the taxes will be filed under your name (as the director of the company or even as a Sole Proprietor), which means that it is difficult to hold your freelancer responsible for these mistakes. This can actually happen often if they are not meticulous enough. And this also means that more often than not, you would be paying the penalties for their mistakes.

It would take time to find one whom you can trust, who is responsible and capable of managing your accounts with a high level of accuracy. This takes a lot of trial and error, and a lot of our clients have wasted a lot of time and money on irresponsible accountants and bookkeepers. Business owners have chalked up 5-6 figures' worth of penalties just because of wrong tax filing!

To avoid these potential penalties, you can hire a tax consultant to file your taxes for you. A tax consultant who is licensed under the Ministry of Finance will be able to help you file your taxes under their name and profession. As their reputation is very important to them, you can usually trust them to provide high-quality work.

Their services usually cost from RM 600, but this investment can potentially save you 5-6 figures' of penalties and give you peace of mind when doing your tax filing!

You can usually find tax consultants in an accounting firm too.

Accounting firms have more at stake

An in-house accountant or accounting firm would be more responsible because there's more at stake. In-house accountants run the risk of losing their full-time job, bonuses and pay raises; for accounting firms, they have a reputation to uphold, so credibility is of utmost importance for them.

Also, while it's tough to ensure the security of data when working with a freelancer, an accounting firm would take greater care of data security since they work with many clients. If there's a data leak, it would affect their reputation which might cost them future clients.

Accounting firms will also be able to give you more comprehensive advice (which we will illustrate more in the next point below).

3. How much do you value financial, tax and cost-saving advice?

Most of you know that cost savings (and tax savings) can make a huge difference for you.

Freelance bookkeepers usually aren't able to give you much financial advice

Although freelance bookkeepers also work with many clients, as they are usually a one-person show, there are limits to the number of clients they work with, so they might not be able to advise you on a level that accounting firms can (read more below).

Not to mention that because they are a one-person team, time spent on giving you advice might potentially cost them another client, so they would be less inclined to do so unless you are paying them a lot for them to prioritise you.

Accounting firms can provide comprehensive cost-saving and growth advice

Accounting firms usually have more knowledge and experience on how best to save costs for you at every single point in time as they manage a number of clients (many other business owners and e-commerce sellers like you) at the same time, so they would already have their latest best practices on cost savings that you can utilise.

On the other hand, it would take time for an in-house accountant to understand your company and develop these best practices. They might also not have that same level of experience and knowledge to advise you, as they usually would spend a few years working with one company as compared to an accounting firm that works with various companies at the same time.

Accounting firms are also made up of a team with different expertise, so they will be able to advise you on different aspects of your finances and accounts, such as tax planning, business structures that would be most suitable for your company based on your profits and business needs, etc. This is something that your in-house accountant or freelancer would usually not be able to provide you with.

Many of our e-commerce clients greatly value all this advice, because it can mean savings of 5-6 figures. You would have already earned back the 3-4 figures you spent hiring your accounting firm for the job, and even more.

Read more: 7 Insider tax-saving tips for online e-commerce sellers in Malaysia

4. Do you need your accountant to be always on hand?

We know it can be really frustrating when you realise there's an error in your accounts or an urgent mistake with your tax filing, but your in-house accountant is on leave and you have to sort out the numbers yourself.

Similarly, your freelance bookkeeper might not be able to respond to you in a timely manner if they are managing a lot of other projects, unless you are a high-priority (in other words, high-paying) client.

However, if you work with an accounting firm, you are working with a team, so there will always be someone on hand to attend to you no matter what, and you don't have to be stressed about whether tax deadlines will be missed.

This is almost like having an accountant who will always be there for you when you need help and will most likely be able to work with the timeline you have in mind.

5. How much control do you want over accounting processes?

If you hire an in-house accountant, you can have more control over the accounting processes, especially if you are someone who prefers to have more oversight over what's going on, all the nitty gritties, and you want to be more hands-on.

However, if you work with an accounting firm, you will have less control over accounting processes, as most accounting firms would already have developed their best practices to help you do your accounting, bookkeeping, tax savings, etc.

So this also means you are leaving your accounting work in the trusted hands of experts (especially when you are working with Chartered Accountants) and you can focus on growing your business instead. This saves you a lot of time, which you can invest in your business.

BONUS: Pay for an accounting firm, get a CFO in return to grow your business

Many of our e-commerce clients often struggle to achieve a breakthrough in their business growth after they have reached a certain consistent number of monthly sales. They don't know how to further scale their business.

This is something that you would never expect your in-house or freelance accountant to be able to help you with.

However, did you know that accounting firms have advisory arms that can help you to grow your business to the next stage by planning with you a business model with your financial information, and improve your profits by removing unhealthy business practices you might have?

They can even help you with fundraising (such as providing crowdfunding process advisory, preparing pitch deck for investors, etc). And as they work with many other clients, they might even be able to provide you with merger and acquisition opportunities with other businesses, or provide you with a valuable business network based on their clientele.

In short, your accounting firm is actually your outsourced CFO who can do regular performance reviews to understand your business' financial health well and can propel your business to the next level – yes, even for small e-commerce business owners like you!

You don't need a full-time CFO who can cost RM 10,000-15,000 a month, but you only need to fork out a fraction of this price with an accounting firm like us.

Work with us for professional advice and affordable accounting services.

Leave the tedious work to us so you can focus on growing your business.

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