The strategic importance of the small and medium-sized enterprises (SMEs) sector is reflected in the multitude of scientific works that have as their theme highlighting the characteristics of this sector in the formation of the wealth of a nation (Cahyaningtyas and Ningtyas, 2020; Katsinis et al, 2024). From the point of economic management, SMEs are required to organize an accounting information system that aims to develop a set of periodic financial statements intended for stakeholders (Jayabalan et al, 2009). Given the essential role of SMEs in economies and their potential to drive reforms and development into larger companies, it is vital for SMEs to access timely, accurate, reliable, and easily comprehensible management accounting information (Anton and Constantin, 2014).

Romania’s accounting system, a cornerstone of economic growth, ensures financial transparency and compliance with European Union (EU) standards. The system’s evolution, integrating international best practices and aligning with International Financial Reporting Standards (IFRS) and EU directives, underscores its vital role (European Commission, 2024; Istrate, 2024). Key aspects of Romania’s accounting system are: (i) the internationally relevant accounting law governs Romania’s accounting system no. 82/1991, which aligns with the EU Fourth and Seventh Directives and at the same time, SMEs may use national accounting standards (Păvăloaia, 2011); (ii) the fiscal system in Romania, a dynamic force in economic regulation, influencing business activity, investment decisions, and financial reporting standards, has recently undergone significant reforms and digitalization including introducing the Standard Audit File for Tax and the Debt Amnesty Policies, what it demonstrates the system’s adaptability and commitment to enhancing tax compliance and revenue collection (Botea, 2024).

The challenges posed by the socio-economic environment are critical factors influencing SME owners to outsource the accounting function (OAF). This decision is primarily driven by the need to reduce the burden of repetitive administrative tasks and to continuously adapt hardware and software in response to modernization requirements imposed by the national financial administration (Asatiani et al, 2019a). In this context, OAF refers to delegating one or more accounting tasks, traditionally managed in-house, to an external individual or firm under a service contract to enhance operational efficiency (Istrate, 2024). OAF has become a common practice that has evolved from an exclusive focus on reducing costs and obtaining strategic advantages to an activity that is now an integral part of modern business (Kamyabi and Devi, 2011a).

At the theoretical level, OAF is explained through a series of frameworks. The transaction cost economics framework elucidates the decision to outsource based on transaction costs associated with market interactions. Key factors influencing OAF include operation frequency, managerial risk aversion, asset specificity, and trust in service providers (Asatiani et al, 2019a; Hafeez and Andersen, 2014). The resource-based views framework explains OAF as a response to competitive pressures, with influencing factors such as managerial accounting knowledge, promotion strategies, access to distribution channels, company size, financial performance, and product characteristics (Cahyaningtyas and Ningtyas, 2020; Kamyabi and Devi, 2011b). A primary reason for outsourcing is the lack of in-house expertise, a strategy particularly beneficial for SMEs, enabling them to obtain credible financial statements, improve decision-making, secure financing, and focus on core competencies (Asatiani et al, 2019b; Hafeez and Andersen, 2014; Istrate, 2024; Kamyabi and Devi, 2011b).

The reasons underlying the analysis of the decision to outsource accounting services within Romanian SMEs are based on: (i) the significant share of the SME sector in the business environment, (ii) tax regulations are a priority and accounting information is rewritten to correspond to the state’s interest in determining the amount of taxes and duties, a fact that is in opposition to the basic principles of an accounting system in which professional judgment must have priority. These reasons are consistent with the gaps elements that have been discovered in the specialised literature: (i) most studies focus on large firms that aim to optimise operational costs, (ii) little research analyses the relationship between OAF and the complexity of regulations and/or access to quality and timely specialised expertise.

Consequently, this paper aims to analyse the specifics of Romanian accounting as a decision factor in outsourcing the accounting function within SMEs. The research is grounded in the premise that, in the case of SMEs, where entrepreneurs are directly involved in the entity’s management, there is a tendency to adopt accounting solutions that closely adhere to tax regulations. The novel elements that differentiate this study from the specialised literature aim to focus attention on the following specific elements: (i) OAF has a “relaxing” effect on the relationship with tax authorities in terms of calculating, reporting and settling the amounts due; (ii) OAF reduces the risks of erroneous application of tax legislation, which in Romania is frequently modified during a calendar year and results in drastic sanctions for the economic agent.

This study examines the impact of tax legislation on accounting practices in Romania and its influence on managerial decision-making within SMEs. By analysing data from 484 managers and entrepreneurs of Romanian SMEs, the research aims to identify potential patterns in the OAF decision. It contributes to a broader understanding of organisational behaviour and strategic management in the Romanian business environments.

The manuscript is structured as follows: literature review and hypothesis development (covering accounting function in SMEs, factors driving the outsourcing of accounting function and formulating hypotheses); research design (covering questionnaire design and data collection, methods); results, where the use of logit and normit techniques demonstrates the rigor of the research methodology; and discussion and conclusions (i.e., theoretical and practical implications, limitations, and further research directions).

The identification of the factors that lead to the decision to outsource the accounting function results from reviewing the specific literature. The outsourcing of various operations can imply significant changes in accounting systems (Groff et al, 2014; Lamminmaki, 2008) further, the lack of expertise, and the savings in costs, otherwise necessary to organize the financial accounting function as an internal structure (Asatiani et al, 2019b) represent essential factors; besides, the demarche is justified by the focus on the organization of core activities and improving flexibility, determined by or determining organizational changes (Botea, 2024).

The relationship between the use of an external accountant, who also acts as a business consultant, and the chances of survival and development of a small firm represent topical issues examined in the literature. In such situations, the manager must have the necessary knowledge to evaluate the quality of the accounting providers in terms of their experience, knowledge, and skills; interestingly, in most situations, entrepreneurs select service providers based on recommendations or online advertisements (Barbera and Hasso, 2013). Usually, in cooperation between the SME owner-manager and the external accountant, a mutual understanding relationship is developed, which increases the owner-manager’s receptiveness to the business advice from the accountant and the former’s willingness to purchase additional consulting services (Păvăloaia, 2011). With respect to the decision of a small firm to purchase business advice from its accountant, the latter must be perceived as a high-quality, credible provider of business consulting services; in this framework, the company’s receptiveness to the consultancy services underly its potential for growth and development (Asatiani et al, 2019b). Using intensive business advice from an accountant is expected to improve the firm’s financial health (De Bruyckere et al, 2020; Lepistö et al, 2020; Potryvaieva and Palieiev, 2023).

Especially in the case of small firms, accountants, as service providers to various clients, develop activities adjacent to traditional accounting services (financial and management consulting and legal services). The expansion in the range of specialized services appears due to the managers’ need for relevant information, as they look for supplementary facilities besides the standard ones induced by the regulatory requirements (Lăzăroiu et al, 2023; Rezazade et al, 2023). Interestingly, small companies are reluctant to change their accountant, even when dissatisfied. This situation results from the information asymmetry between the two parts, implying difficulties for the manager in evaluating a new accountant’s professional skills and future performance (Andronie et al, 2023). In addition, even if the entrepreneur is not satisfied with the actual accountant, the former may decide to continue the cooperation, especially when he considers that the responsibilities relating to the regulated financial statements are fulfilled (Panigrahi and Joshi, 2020). This is consistent with other studies, which outline that renewal of contracts for accounting outsourcing does not necessarily mean that the partners are delighted with each other. However, due to the high costs of change, SMEs can remain prisoners of professionals who do not necessarily offer them the best satisfaction, potentially leading to suboptimal business decisions and financial outcomes (Faituša et al, 2020; Jayabalan et al, 2009).

In the analysed relationship, quality matters more than longevity, as quality indicates the firm’s confidence in the advice of the external accountant (De Bruyckere et al, 2020). This is consistent with the results of other research, which proved the association between the accountants’ professional qualifications and the quality of their services, evaluated through specific metrics of the accounting industry (Botea, 2024). Authors (Groff et al, 2014; Rezazade et al, 2023) consider competence, responsiveness, reliability, assurance, and empathy to represent the quality dimensions of accounting services. From the provider’s perspective, are relevant two associations: (i) first, between the professional qualification of the accountant and the skills in providing specific services, and (ii) the second, between retention of customers, on the one side, and safety, responsiveness, reliability, and empathy of the accountant (Mazumder and Garg, 2021).

The OAF decision is fundamental for the implied business; therefore, analysing the implied costs and risks aims to evaluate its determinants (Hamzah et al, 2010). The assessment of determinants implies, among others: (i) the extent of outsourcing; (ii) the selection process deployment of accounting service providers; and (iii) the importance of the entrepreneurs’ accounting knowledge in the selection process of an accounting service provider (Agburu et al, 2017).

Another determinant is the necessity for adaptation to new technological developments in information and computer technology. Determinants of the accounting services amid business digitization can also be considered concerning artificial intelligence algorithms, cloud computing technologies (Nandan, 2010), and big data management algorithms in artificial Internet of things-based fintech (Andronie et al, 2023). As highlighted by some authors, the attraction of new customers, differentiation, pressure to reduce duties, and the challenge of updating to the latest regulations and standards represent the business digitization determinants in highly digitized countries (Faituša et al, 2020; Mazumder and Garg, 2021; Panigrahi and Joshi, 2020).

In a broader approach, the relationship between the firm’s motivations and the extent of outsourcing, the following determinants are considered: cost diminution; focus on core competence; access to expertise; process improvements; scalability; delivery speed; easiness of use; fear of losing control; security concern (Botea, 2024; Istrate, 2024). The mentioned studies underline that companies make strategic decisions when they outsource a limited number of processes within a business function, aiming to acquire expertise from external providers. This strategic decision-making process acknowledges the audience’s knowledge and respects their role in the business. Besides, the dynamic nature of the elements that lead to outsourcing is noticeable, i.e., as companies outsource a greater degree of their business processes, some aspects of motivation become more pronounced, whilst the others’ importance decreases (Agburu et al, 2017).

With respect to the determinants of the OAF, the literature considers the following: costs, resources, competencies, operations management, outsourcing risks, company size and type of industry (Nandan, 2010). Other studies indicate that costs, resources, skills, firm size and type of industry do not represent valid determinants for the OAF decision (Asatiani et al, 2019b; Kamyabi and Devi, 2011c). This contradicts the findings of other studies, which indicate costs, resources, competencies, and the firm’s size as determinant factors in the OAF decision (Krell, 2018).

Some studies outline why some SMEs resort to outsourcing, while others prefer the internal performance of the same accounting tasks (Dorasamy et al, 2010; Everaert et al, 2010; Petrişor and Cozmiuc, 2016; Stanescu et al, 2021). In assessing the outsourcing of the accounting function, the author (Lepistö et al, 2020) considers the following determinants: asset specificity, environmental uncertainty, behavioural uncertainty and frequency, and trust in the external accountant.

Besides the factors that influence the OAF decision, the literature emphasizes the effect of outsourcing on the company performance, highlighting the following determinants positively correlated with the outsourcing of accounting: (i) the accounting knowledge of managers; and (ii) the perceived professional competence of the external accountant (appropriate qualifications and experience, essential specialized skills, specialization in industry and technological expertise), especially compared to those of the internal ones; however, the decision for outsourcing of accounting function is negatively correlated to the company size (Gooderham et al, 2004; Kamyabi and Devi, 2011c). Concerning the company performances, the decision to outsource accounting functions decision implies lower costs compared to the situation when these functions are performed internally, as the smaller companies usually lack the specific skills and experience; further on, the performance of an SME seems to be directly correlated to the extent of the OAF decision usage, as the outsourcing mediates the relationship between: (i) the manager’s knowledge and the company performance (Everaert et al, 2010; Sarens et al, 2015); (ii) the professional competencies of the accountant and the company performance, and (iii) the company size and its performance, respectively (Kamyabi and Devi, 2011c; Smith et al, 2005). From the author’s point of view, the decision to outsource the accounting function mediates the impact of the owner/manager’s knowledge on the performance of SMEs through the professional competencies of the external accountant.

Also, the literature reveals a positive association between outsourcing accounting functions in SMEs and the quality/accuracy of their financial reporting compared to firms that perform accounting tasks internally (Bulkot et al, 2022; Carey and Tanewski, 2016; Cullinan and Zheng, 2015). This can be explained by the external accountant’s role as an independent external monitor for the firm’s financial reporting process, reducing opportunistic behaviour. In addition, an external accountant likely has a better knowledge of the professional principles and legislation than internal staff, who perform the firm’s accounting tasks. The results of the above studies also suggest that higher reporting quality is associated with longer outsourcing mandates; instead, the relationships under six years of outsourcing do not result in significantly higher quality (Ali et al, 2023; Dyer and Ross, 2008; Flinkman et al, 2024; Hamzah et al, 2010; Zekić et al, 2018).

The lack of correlation between the OAF decision and the company size can be explained as the business consultancy provided by the external accountants is not related to the firm size; besides, the latter is not associated with the degree of internal audit outsourcing (Christ et al, 2015; Faituša, 2019; Hailu and Chebo, 2024; Isip, 2023; Nicholson and Aman, 2012).

Considering the decision to outsource the accounting function, besides the research mentioned above, the study’s main objective is to examine the main factors of the outsourcing decision. Based on the mentioned literature, the determinants of the OAF decision are presented in Table 1.

Based on the research reviewed above, the following research hypotheses have been considered:

Hypothesis 1: Internal organisational determinants influence the OAF decision.

Hypothesis 2: The professionalism of accounting service providers affects the OAF decision in relation to shared values with those of the entrepreneur.

Hypothesis 3: The business profile is linked to the OAF decision.

In this study, the authors used descriptive and exploratory research methods to examine the current state of accounting outsourcing in Romania, aiming to address the research objectives effectively. The descriptive statistics (Table 5) indicate a general concentration of responses towards higher values, with moderate dispersion across variables. While most distributions exhibit negative skewness, some variables (EXP, CAT, SALES, YEAR) are right-skewed, suggesting response asymmetry. High kurtosis in certain variables implies peaked distributions with extreme values. According to the values of the Jarque-Bera statistic, the data series respect the standard distribution hypothesis, and consequently, they are suitable for further processing. These findings have significant implications for the field of accounting and finance in Romania.

Cronbach’s alpha tests validated the study concepts’ dimensions and reliability. A survey was sent to 484 entrepreneurs, and the value of Cronbach’s Alpha test for items characterizing relevant drivers is as follows: (i) $\alpha$ = 0.714 for internal organizational determinants; (ii) $\alpha$ = 0.786 for the professionalism attributes; (iii) $\alpha$ = 0.732 for business profile. According to (Oosthuizen et al, 2020), the $\alpha$ value exceeding 0.7 is accepted by the scientific community, proving strong internal reliability and the possibility of further analytical procedures.

Before applying the Logit and Normit tests, it is necessary to satisfy the lack of collinearity between the dependent variables. The analysis in Table 6 indicates that there is no collinearity relationship between the independent variables since the variance inflation factor (VIF) values ​​are more significant than one and less than five, ranging between 1.25 and 2.31.

The variables listed in Table 7 were considered to evaluate the decision to outsource the accounting function in the SMEs sample. The estimations use ordered logit and normit techniques and are performed using the EViews software package, version 10.

After applying the logit and normit statistical tests on the two accounting function outsourcing models, the following factors result: (i) Mean dependent variable suggests a relative balance between firms that outsource (53.72%) and those that do not (46.28%); (ii) Log-Likelihood indicates a better fit between the observed data and the model predictions in the case of the two logit (–251.556), normit (–250.779) statistical tests applied to model 2 that takes into account the MIT_RISK variable compared to model 1 that takes into account the (AUTH) variable; (iii) Omnibus test (based on chi-square) indicates a higher explanatory capacity for model 2, logit $\chi$²(11) = 41.318, p 0.001, normit $\chi$²(11) = 41.735, p 0.001 compared to model 1, logit $\chi$²(11) = 38.642, p 0.001, normit $\chi$²(11) = 38.783, p 0.001; (iv) Nagelkerke R-Squared indicates that model 2 can explain approximately 39% of the variance in the outsourcing decision, a value higher than the predictive power of model 1 (37%); (v) both models have a good fit, according to the Hosmer-Lemeshow test (p $>$ 0.05). Based on these elements, it can be stated that model 2 has a superior ability to explain the dependent variable compared to model 1, which recommends it in predicting the behaviour of entrepreneurs outsourcing the accounting function within SMEs.

The results using the probit and logit estimations are very likely, proving the assertion that, generally, using the two techniques gives similar predictions (Greene, 2017). Variables that reported statistically significant influence (at 1% level of significance) upon the outsourcing decision are the following:

$\bullet$ The optimisation of costs associated with the accounting function and time savings (variable COST) reported a positive influence on both models and equations, consistent with the findings of other studies (Anton and Constantin, 2014; Asatiani et al, 2019a; Botea, 2024; Groff et al, 2014; Istrate, 2024; Păvăloaia, 2011). However, other research tries to outline a joint approach to the outsourcing costs and risks (Hamzah et al, 2010);

$\bullet$ The results indicate a positive influence of the values shared by both the manager and the accounting professional (variable VALUES), in both models and equations, expressing the involvement of psychological and social factors in the OAF decision (i.e., trust), as indicated in other several analyses (Botea, 2024; Everaert et al, 2010; Kamyabi and Devi, 2011c; Lamminmaki, 2008; Potryvaieva and Palieiev, 2023; Smith et al, 2005);

$\bullet$ CAT (the SME category). Considering the values assigned in the model, from 1 to 3, the negative coefficient, in both models and equations, expresses that the outsourcing decision is less likely with the company size. This result is consistent with the findings of other studies presented in the literature (Blackburn et al, 2018; Gooderham et al, 2004);

$\bullet$ YEAR (year of company establishment). The values assigned in the model for this variable, from 1 to 5, are ordered ascending with the increasing number of years from the establishment. In both models and equations, the significance of the negative coefficient is that the closer the year of the company establishment is, the greater the likelihood of an OAF decision. Although the literature in the field of accounting outsourcing does not contain references concerning this variable, the result can be considered in connection with the variable regarding the category of SME, i.e., following the natural trend of company growth with time (Faituša et al, 2020).

Interestingly, the variable TIME reported significant influence at only 1% for models in Eqn. 1, compared to 5% for Eqn. 2. In connection with the control variable, it can be interpreted that the entrepreneurs who considered in a higher degree the quality of their financial statements (MIT_RISK), following other studies (Groff et al, 2014; Istrate, 2024) rather than savings in time or the avoidance the interaction with the authorities (variable AUTH). However, the time savings related to outsourcing have to be considered in connection with the accounting digitization and the increasing trend of resorting to cloud information systems, which aligns with the results of other studies (Botea, 2024).

Although the variable ASSIST (expert assistance and competent support in business development) reported positive significance at 5% in the case of normit techniques and 10% in the case of logit techniques, results clearly show that this variable represents a determinant for the OAF decision, particularly in situations cases when the mitigation of risks of erroneous application of taxation legislation (variable MIT_RISK) represents the trigger of the decision, consistent to other findings (Asatiani et al, 2019a; Istrate, 2024; Lepistö et al, 2020). This result proves that the companies’ appeal to outsourcing is aimed at avoiding errors in tax statements (Eqn. 2) rather than creating a comfortable situation in relations with the authorities (Eqn. 1). Not least, the intention to access business expertise and consultancy stands among the underlying matters of the OAF decision, consistent with other studies (Barbera and Hasso, 2013; De Bruyckere et al, 2020; Gooderham et al, 2004). Some studies discovered that up to 85% of small businesses also use their external accountant as a business advisor (Carey and Tanewski, 2016).

The results reported in the case of variable HR, as a determinant in the OAF decision, are significant at 10% for Eqn. 1 in both models and at a maximum 5% for Eqn. 2. Consistent with results of several other analyses, the shortage in accounting professional staff represents a key determinant in companies’ decision to resort to outsource of accounting function, especially in the start-up stage (Asatiani et al, 2019b; Christ et al, 2015; Everaert et al, 2010; Gooderham et al, 2004; Kamyabi and Devi, 2011c; Sarens et al, 2015). Approximately 72% of the companies that participated in the survey belong to the micro enterprises category; and, considering the mean value of 1.3, results from an average of three employees per company; in these conditions, organizing a specialized accounting department becomes a difficult task for the entrepreneur, who tries to focus the staff activity towards the firm’s core competence. The role of accounting professionals as the leading advisory providers concerning the companies’ legal obligations is also highlighted in the literature (Blackburn et al, 2018; Höglund and Sundvik, 2016; Tomasevic et al, 2023). Besides the above-described findings, particularly in the case of variables ASSIST, COST, and TIME, the results confirm that the main drivers of the OAF demarche on the companies are not relaxing in the relationship with the tax authorities (as the corresponding variable did not reported significant results), but the willing to increase the quality of their financial statements and, not least, focus on core competence of the company, diminishing the time and staff associated costs (Flinkman et al, 2024; Nguyen et al, 2024).

The preference for the OAF results as a response to the shortage of specialized staff and represents a convenient option to improve the efficiency for both the employer/contracting firm and the accounting professional (either as a person or a specialized company). Through the scale-savings effect, the latter proposes to benefit lower tariffs than internal organizing of the accounting. Currently, this development is enormously accelerated due to the increased scalability via the usage of cloud information systems and the increasing trends for applying artificial intelligence and machine learning. Therefore, an accounting professional company can hire and ensure an adequate workload for the best professionals who are prepared to apply their knowledge not only in the field of bookkeeping. It’s crucial to recognize the role of these professionals in the outsourcing process, as they bring their expertise to the table, ensuring high-quality services. Accounting providers must consider facilitating their customers’ business performance among their top long-term priorities as the basis for providing them with additional services (i.e., business advisory) rather than customer loyalty.

Based on the above results, the considered hypotheses are partially validated. Romanian entrepreneurs resort to accounting outsourcing due to the specifics of the Romanian business environment, particularly in the start-up stage, the SME category, and the year of company establishment. This decision aims to optimize the accounting function costs, save time, and, importantly, provide access to business advisory, empowering the business owners with strategic insights.

Data will be made available on request.

DMC, MM and VS: Conceptualization. CMV, LCT and VS: Data curation. AIN, DMC and MM: Formal analysis. CMV, LCT and VS: Investigation. DMC and MM: Methodology. DMC, MM and VS: Project administration. AIN, CMV and LCT: Resources. DMC and MM: Software. DMC, MM and VS: Supervision. AIN, DMC and MM: Validation. AIN, CMV and LCT: Visualization. DMC and MM: Writing — original draft. AIN, DMC and MM: Writing — review & editing. All authors contributed to editorial changes in the manuscript. All authors read and approved the final manuscript. All authors have participated sufficiently in the work and agreed to be accountable for all aspects of the work.

This research received no external funding.

The authors declare no conflict of interest.