In times of uncertainty, outsourcing is perhaps one of the simplest methods for accounting firms to increase swiftly and add new services to their existing portfolios. It not only helps businesses save money on overhead but also makes their daily operations easier and more efficient.
There are numerous things to consider when determining the cost of outsourcing accounting for every company. Although this may appear complicated or frightening, the accounting partner you’re speaking with performs this on a daily basis and should be able to simplify and perhaps even make the scoping process enjoyable. For some, change can be frightening, while for others, it can be exciting.
Your ultimate goal should be to locate the ideal partner for you, one who shares your values and is a good fit for your company.
‘How much do accounting outsourcing services cost?’ is one of the most often asked questions by accountants. Understanding the engagement models that decide the different vital components of the outsourced project, such as the number of hours of labour, the seniority of the resource, and so on, is critical to understanding how accounting outsourcing providers price their services.
We’ll go over the following topics in this blog:
Accounting outsourcing pricing and engagement model based on FTEs
The true cost of hiring in-house accountants
How outsourcing firms charge for their services
Outsourcing companies now offer a number of pricing models, each with its own set of advantages and disadvantages. Among these, the FTE model is the most frequent and chosen by accounting firms because of its numerous benefits and low risk. Let’s take a closer look at this model to see what it has to offer.
Dedicated resource model or full-time employee (FTE)
When it comes to accounting outsourcing, the Managed Full-time Employee (FTE) model has been demonstrated to be the most effective. As the name implies, in this model, an outsourcing provider delivers a committed staff to practice for a monthly charge. At the conclusion of each month, the fixed amount is billed to the accounting firm. The outsourcing provider determines the number of hours completed within the monthly cost in this arrangement.
Gives the accounting firm additional control by allowing them to plan and manage work for their dedicated FTE.
If you have a large amount of work, FTEs are more cost-effective than hourly rates because they can have their own email and phone number and can better collaborate with the UK team.
A dedicated Account Manager is assigned, reporting directly to the accounting firm.
Allows for better budgeting without the risk of expense increases.
Allows for complete openness and accountability for the task that is completed.
Allows for easy scalability and increased profitability for the practice.
It necessitates extensive managerial experience as well as a practice-wide accounting methodology.
Staffing can be disrupted by a significant change in requirements.
The true cost of hiring in-house accountants
The employment of personnel is one of the most telling signs of a developing accounting firm. When you hire an employee, however, you must pay compensation on a monthly basis. As you hire more personnel, it’s easy to fall into the trap of believing that monthly salaries are the only cost you’ll have to deal with. It is costly to hire employees in-house. Aside from the compensation, you may be responsible for:
In the United Kingdom, the recruitment sector is thriving. Most recruitment companies charge between 20 and 30 per cent of the ultimate remuneration, according to Business Advice. Creating the job specification, screening, initial calls, interviewing, onboarding, handover, and training are all included in the price.
Before they can begin processing duties, new staff must be taught. This will need you or someone else to take time away from revenue-generating pursuits. You may instead utilise that time to find new clients or work on existing projects. When you outsource, on the other hand, the outsourcing company guarantees that your outsourced personnel are up to date on any accounting responsibilities you assign them.
Equipment and office space
You must cover the costs of onboarding, furniture, workstations, office space, parking spaces, and other equipment when you hire an employee in-house. The annual cost may potentially reach £6,000 per year.
Cost of Time
The productive time of the in-house accountant is one of the concerns that accountants overlook. Although there are 253 working days in a year, your in-house accountant is unlikely to work for more than 225 days due to holidays (28 days including bank holidays), sickness, meetings, appraisals, and training.
Costs of management
The expense of maintaining and developing your in-house accountants is the final cost. Annual reviews, meetings to explore career options, and providing feedback on progress are all part of this process. It will most likely require three management days over the course of the year, possibly more if concerns develop.
Other expenses incurred by the employer
Employer National Insurance contributions, auto-enrolment pension contributions, employers’ liability insurance, holiday pay, sick pay, maternity pay, cost of coffee and toilet paper, phone costs, energy bills, and the occasional drink are some of the most noticeable employer expenses.
Is it a viable option for your accounting firm?
Most of the above-mentioned employee-related costs can be reduced or even eliminated by outsourcing accounting services. When you cut these costs, you not only save money but also gain time and resources to expand your practice.
Every firm is seeking a strategy to increase its profits. This can be performed in a variety of ways, with outsourcing being one of them.
One of the biggest benefits of working with an outsourcing accounting firm is that they can dial in the exact skill set for each function you’ll need at any given time. We may scale up or down each level as your accounting demands ebb and flow. When you recruit a team, that’s nearly impossible.
Small firms also profit from the fact that they do not require full-time workers to perform all of the functions of an accounting department. It’s impossible to hire a certain percentage of this and that. You can either over-hire (which is a waste of money) or under-hire (which is a waste of money) (lacking skills).
The most cost-effective method to scale your organisation is to outsource the accounting function.