Deciding between building an in-house team or outsourced accounting is an important consideration for a wide range of businesses. Understanding the costs associated with both outsourced accounting and the traditional, in-house approach is a vital component of making an informed decision as an executive. Keep these important differences in mind as you weight your organization’s options.
Outsourcing combines effective, experienced professional support for an organization’s finance and accounting needs with an easily understood fixed cost and a variety of tools to improve insight, transparency and decision-making.
The costs of outsourced accounting
Outsourced accounting with a Finance as a Service model, based on company headcount and specific needs, carries an average cost of $5,000-$20,000 per month for a medium-sized business.
Outsourcing with Finance as a Service includes:
- Cleaner expenses
- More predictable ongoing costs
- Scalable pricing that is variable and predictable
- Firmer month-to-month price
- Consistent cost that remains level over time, instead of spiking when a new hire is needed or a major software update approaches
- Financial software stack included
- Strategic financial expertise & support
With all the people, process and systems you need to have an effective finance function, this approach is is designed to reduce costs between 20-50% compared to the in-house model.
Outsourced accounting’s direct costs may appear more significant at first, because businesses are presented with a single price tag that includes all available services and functionality. However, this upfront approach means your company can quickly understand the price of outsourced accounting and, after completing the math, compare it to the in-house approach.
Although every organization’s situation is different, the combined cost of all the large and small expenses that come along with a traditional approach to finance and accounting can easily lead to six-figure expenditures. Outsource accounting, on the other hand, is a fixed, predictable and manageable expense.
The costs of traditional accounting
There’s no doubt in-house accounting has some benefits that executives should consider on their path to making a decision. Personally selecting individual staff members, having immediate control over their work and offering specialized training are among the potential advantages. However, those positives come with some significant drawbacks.
Salary and benefits
The money required to hire an accounting and finance staff, even a small one, can be significant. The Bureau of Labor Statistics reported the median salary in the accounting and auditing fields is $69,350. Even if you plan to only have one senior staff member and hire entry-level workers to fill junior positions, lower-quartile salary for such workers is $54,250. A four-person accounting team could cost a company more than $230,000 in annual salary alone.
Beyond direct pay, businesses also have to provide health care to full-time employees, a variable although costly expense with an average of roughly $4,000 per staff member, according to the Henry J. Kaiser Family Foundation. Employers must also handle a number of other expenses, such as payroll tax. Finally, companies have to supply their accounting and finance staff with necessary space, physical equipment and software, as well as optional benefits to maintain a competitive recruitment edge. Those costs, while highly flexible, can quickly add up.
Hiring, training and re-hiring
The Society for Human Resource Management said the average cost to hire a new employee is $4,129. That’s another expense organizations have to manage with when they hire in-house accounting teams. That cost has to be accounted for each and every time a new employee is brought on board. Additionally, the average time to fill a position is 42 days, potentially leaving an accounting and finance team – especially a small one – understaffed for more than a month.
Choosing the right partner is critical for positive outsource accounting results. To learn more about our effective outsourced accounting solution, get in touch with Consero today.
