Local CA vs. Accounting Firm Services: 6 Major Differences

The decision of whether to use the services of a local CA or an accounting firm has been a source of confusion for thousands of new and young businesses in India. As entrepreneurs strive to establish and grow their companies, they often find themselves in need of expert assistance in managing financial, non-financial, and legal affairs.

Both local chartered accountants and accounting firms have their share of benefits but it is important for Indian startups and entrepreneurs to understand the distinctions between them in order to make an informed decision. 

In this blog, Finsmart – trusted for accounting outsourcing in India – will talk about the differences between local CAs and accounting firms, hereby assisting you in determining the best option for your business. 

Before delving into the key distinctions, let’s first establish what sets them apart from each other! 

Local CA vs Accounting Firm: Introduction

A local chartered accountant (CA) is a tax professional who possesses an in-depth understanding of tax laws & regulations and helps in minimizing liabilities. CAs in India are typically responsible for preparing and filing for a wide range of clients including businesses, individuals, and government employees. 

They also act as their clients’ representatives before the Indian Revenue Service (IRS) – the government agency responsible for enforcing tax laws and collecting taxes – during audits or disputes related to taxes. 

Accounting firms, on the other hand, offer a wide range of services that aid businesses and enterprises in not only staying compliant with tax regulations but also in achieving financial organization and planning for business expansion. Hiring an accounting firm is often seen as a strategic step to gain access to extensive accounting support.

Local CA vs, Accounting Firm: Accounting 

Most business owners in India don’t possess the accounting expertise required to manage the financial aspects of running a business. Some consult local CAs for assistance without realizing that these professionals are more about tax filing and may not be able to provide comprehensive accounting services. Accounting firms on the other hand fit the bill perfectly. 

Tasks such as tax filing, handling payroll, verifying receipts, maintaining books, and legal business setup are managed by most accounting firms in India.  

Local CA vs. Accounting Service Providers: AR/AP Services 

One of the crucial aspects to consider when comparing local CAs and accounting firms is the ability to manage accounts payable and receivable. For those who don’t know, accounts payable (AP) refers to all outstanding bills owed for products and services purchased. These expenses are not paid directly and are considered liabilities in accounting records.

On the contrary, accounts receivable (AR) refers to payments that customers or vendors owe to your business. These are recorded as current assets in the financial records. Local chartered accountants can’t handle these cash flow indicators. 

Accounting firms in India, however, possess the capability to scrutinize the payments flow for and by the business. They can easily assist in creating accurate financial forecasts, determining current cash flow, and modifying or optimizing management practices.

Learn about the best accounts payable and receivable services provider in India

Local CA vs Accounting Firm: Business and Company Compliances

Be it a small business or a large organization, there are legal and regulatory requirements that every entity must adhere to in order to operate legally and ethically in India. These could include tax compliance, labor laws, environmental regulations, and financial reporting requirements. Most local CAs are not well-versed in business and company compliance. That however is not the problem with accounting firms. 

Accounting service providers have a special compliance management team that ensures their clients’ compliance with business obligations and regulations. Working with accounting firms helps better safeguard your business from penalties such as fines and legal actions. 

Watch what Pradeep Unkule, Finance Manager of Relatient, has to say about our payroll and accounting services:

Local CA vs Accounting Firm: MIS Business Reports

Another important aspect that businesses should consider while choosing between a local CA and an accounting firm in 2023. A company needs accurate and timely MIS reports to make strategic decisions and monitor its financial health and performance regularly. Local chartered accountants generally do not produce regular MIS business reports. 

Since they don’t generate and analyze MIS reports, their expertise in performing audits and assessing the financial performance of a business is also limited. You don’t have to worry about all of these while hiring or outsourcing to an accounting firm. 

From generating balance sheets and cash flow statements to performing budget-to-actual comparisons and performance analyses of different departments, accounting firms can cover all aspects for creating accurate monthly MIS business reports. 

Local CA vs Accounting Firm: Technical Expertise 

In today’s digital age, the ability to use technology to streamline accounting and financial management is a critical factor to consider when choosing between a local CA and an accounting firm. Sadly, not all accounting professionals have the knowledge and expertise to effectively use the latest accounting software. 

Reputed accounting firms are well-versed in the latest accounting technologies such as Sage, Tally, Salesforce, and SAP. Their proficiency in these tools allows them to confirm data accuracy, minimize financial errors, and ensure overall positive financial health, making them valuable assets for Indian businesses.

Complete list of best payroll management software in India

Local CA vs Accounting Firm: Payroll Management 

Payroll management, despite seeming to be a simple task, can be a challenging administrative function for both SMBs and corporations in India. Many business leaders encounter difficulties in managing payrolls for their employees and use additional time and effort to correct errors. No wonder, they are always seeking experts who can assist them in handling, managing, and creating accurate payrolls. 

While local CAs do not handle payroll management, a lot of accounting firms in India can simplify payroll procedures and offer efficient payment services to their clients. By keeping track of employee hours, wages and taxes, they can assist business owners in avoiding over or underpaying employees and maintaining compliance with labor and government regulations. 

Here’s a quick comparison table of local CAs vs accounting firms for Indian businesses: 

AspectsLocal CAsAccounting firms
BookkeepingMore about tax filing and may not be able to provide bookkeeping services.Helps with bookkeeping. 
AP/AR servicesCan’t handle AP and AR cash flow indicators. Can easily handle AP and AR cash flow indicators. 
Business and company compliancesNot well-versed in business and company compliances.Well-versed in business and company compliances.
MIS business reports Don’t generate and analyze MIS reports. Expertise in performing audits and assessing the financial performance of a business is also limited. Are experts in creating accurate monthly MIS business reports. 
Technical expertise Have less knowledge and expertise to effectively use the latest accounting software. Have proficiency in the latest accounting and financial technologies.
Payroll management Don’t handle payroll management. Simplify payroll procedures and offer efficient and trustworthy payment services to their clients.

Local CA vs Accounting Firm: Final Words

There’s no better or worse option between local CAs and accounting firms. It all depends on the specific needs of your business. If you require someone to file taxes on your behalf, a local CA may be a suitable option. However, if you require someone who can manage bookkeeping, payroll, AP/AR, and more, an accounting firm may be a better fit. 

That’s it. We have settled the local CA vs. accounting firm debate once and for all. We hope that now you will be able to choose the best option for your business. 

Got any queries to ask? Send them to info@finsmartaccounting.com and have them answered by our accounting experts. 

Also read:  

Here’s how to reduce the attrition rate in 2023

Learn about India entry services from Finsmart

Managing payroll for small and mid-sized businesses

Learn about outsourced bookkeeping services in India

Useful tips for hiring a certified tax preparer 

Maanoj Shah

Maanoj Shah

Director Growth Strategy & Alliance at Finsmart Accounting

1. Thriving in the Future of Accounting: Strategies for CPA Firms to Stay Ahead 2. The Art of Managing Client Expectations in CPA & Accounting Industry 3. Adapting Emerging Technologies in Your CPA Firm: 2023 Guide 4. Navigating Accounting Regulatory Landscape: A Challenge for CPA firms

Maanoj Shah is a finance and outsourcing expert with strong Business Strategy and Scaling-up experience. Over the last 20 years, he has incubated multiple businesses and helped build global enterprises in verticals as diversified as hospitality, technology, and healthcare.

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