Internal and External Accounting: Keys to the Success of Small Businesses

• January 16, 2025
• Alejandro Postigo
• no comments

Accounting is the foundation of efficient business management. For small businesses, maintaining precise financial control and complying with accounting regulations can be a challenge, especially with limited resources. That’s why having an accounting service, whether internal or external, is essential to ensure the success and growth of the business.

In this article, MJ Consulting explains the differences between internal and external accounting, the benefits of each model, and how to choose the service that best suits your business. Additionally, we’ll cover an upcoming regulation that will affect electronic invoicing for businesses and self-employed professionals.

What is internal and external accounting?

Internal accounting:

Internal accounting is managed within the business, usually by a department or team dedicated exclusively to this task. This includes recording daily transactions, preparing financial statements, and fulfilling tax obligations.

Key characteristics:

• Control remains directly in the hands of the business.
• Requires hiring specialised personnel, such as accountants or financial managers.
• Involves an investment in accounting software and continuous training for the team.

External accounting:

External accounting, on the other hand, involves outsourcing these tasks to a third-party specialist, such as a consultancy or an accounting firm. This service ranges from managing books and financial records to ensuring compliance with tax obligations and providing financial advice.

Key characteristics:

• Managed by an external team with expertise and up-to-date knowledge of regulations.
• Reduces the administrative burden and allows the business to focus on its core activities.
• Offers flexibility, adapting to the size and needs of the company.

Advantages of internal accounting for small businesses

Having an internal accounting team can be beneficial in certain situations. Some key advantages include:

• Direct access: Having in-house accountants allows for quick access to financial information.
• Greater customisation: Internal employees are more familiar with the processes and specific needs of the business.
• Full control: The business can monitor and adjust accounting processes in real-time.

However, maintaining internal accounting can be costly, as it involves salaries, training, and acquiring specialised tools.

Advantages of external accounting for small businesses

For many small businesses, outsourcing accounting is the ideal solution, offering significant benefits:

• Cost reduction: Hiring an external service eliminates the need to maintain an internal team, saving on salaries, training, and tools.
• Guaranteed compliance: External experts are always up-to-date with the latest tax and accounting regulations, avoiding errors and penalties.
• Time-saving: Delegating accounting tasks allows owners and employees to focus on strategic business activities.
• Access to advanced technology: Accounting firms often use state-of-the-art software to ensure accuracy and efficiency.
• Expert advice: External services often include recommendations for optimising the business’s financial resources.

New regulation: Electronic invoicing and QR codes

A significant change is coming for businesses and self-employed professionals with the implementation of new regulations regarding electronic invoicing. This new rule, expected to come into force shortly, will require all invoices to include a QR code to enhance transparency and simplify the verification of tax obligations.

What does this mean for small businesses and self-employed individuals?

• Mandatory use of electronic invoices: Traditional paper invoices will no longer be accepted for businesses falling under this regulation.
• Incorporation of QR codes: Each electronic invoice must feature a QR code that allows tax authorities, clients, and suppliers to quickly access key invoice details, ensuring accuracy and compliance.
• Technological adaptation: Companies and freelancers will need to update their invoicing systems to comply with the new requirements.

How can MJ Consulting help?

At MJ Consulting, we understand the challenges that adapting to new regulations can bring, especially for small businesses and freelancers. Our team can assist you in:

• Implementing and configuring compliant electronic invoicing systems.
• Training your team to manage the new processes effectively.
• Ensuring your accounting remains in line with the latest legal requirements.

This regulation underscores the growing importance of leveraging technology in accounting and financial management, making it essential to stay ahead with the right tools and expertise.

Which option is best for your small business?

The choice between internal and external accounting will depend on several factors:

• Size of the business: Small businesses with limited resources often benefit more from external accounting.
• Complexity of operations: If financial transactions are numerous or complex, an external solution may be more efficient.
• Available budget: Outsourcing is typically more cost-effective than maintaining an internal team.
• Need for advice: If you want to optimise financial processes and receive strategic guidance, external services are the best option.

In many cases, a combination of both services can also be effective. For example, a business can handle basic accounting tasks in-house while delegating more complex functions to an external team.

How can MJ Consulting help you?

At MJ Consulting, we offer both internal and external accounting services, tailored to meet the specific needs of small businesses. Our team of experts will support you at every step to ensure:

• Efficient and compliant accounting management.
• Optimisation of your financial resources.
• Adherence to the latest regulations, including the electronic invoicing requirements.

Our services include:

• Management of books and preparation of financial statements.
• Submission of tax returns and compliance with tax obligations.
• Financial analysis and strategic planning.
• Implementation of technological tools for accounting management, including electronic invoicing solutions.

Both internal and external accounting are crucial pillars for the growth and sustainability of any small business. With the support of an expert team like MJ Consulting, you can choose the solution that best suits your needs and ensure your business operates successfully while meeting all legal obligations, including adapting to the new electronic invoicing regulation.

If you would like more information or have any questions, please don’t hesitate to contact us. We invite you to follow us on our social media.