Outsourced Accounting: How Much Does Outsourcing Your Accounting Cost?

September 25, 2020 Theresa Rex

outsourcing calculator

When it comes to exploring an offshore solution in the accounting department, the first question most finance leaders, business owners and startup founders have is: "How much does outsourcing my accounting cost?" It's a perfectly valid question! Using outsourcing to achieve a cost-containment goal is typically central to exploring it as an option at all – it's hard to get started if you aren't sure what sort of time and money you can expect to spend on it.

So why is it such a difficult question to get a clear answer to?

Some Finance and Accounting Outsourcing (FAO) providers guard this "secret" as if it were a priceless artifact. For busy leaders already strapped for time, it's frustrating to sit through the equivalent of a timeshare sales pitch before enjoying the "free vacation" of learning that outsourcing prices begin at $2,000 and go up from there.

Outsourcing accounting costs begin at $2,000 a month to start. Now, was that so hard?

An Accounting Outsourcing Cost Calculator – The Easiest Way To Find Rates For Offshore Accountants

Of course, there's more to it depending on what size team you need, whether you're looking for an outsourced controller or a supplemental accounts payable clerk and the experience they have, but why not just start with that? This lack of transparency before you even partner with them doesn't bode well for a relationship that requires a lot of trust.

That's one reason that we created a resource for CFOs and other finance leaders who don't have time to chase down quotes at all, let alone from vendors that are really dedicated to playing hard to get. You can use Personiv's Outsourcing Cost-Savings Calculator to see real outsourcing rates from us.

It's simple to use right away, but we'll walk through it in the rest of this article – and dive a little deeper into some other numbers of note.

Find Rates For Outsourced Accounts Payable and Payroll Specialists – And A Lot More

As soon as you open the calculator, you can get started immediately, but you'll get the best results if you have the following information:

A list of the roles you want to outsource

The total number of accountants or bookkeepers you need for each role

The salary you pay or expect to pay for each role

Tip: If you're not sure of the in-house salary cost, that's okay! Personiv's outsourcing cost calculator comes preloaded with the national average. Of course, that doesn't reflect the wide variance in the market. A payroll specialist commands a different salary depending on whether or not they live in Houston or Seattle. We like this salary comparison site that drills down into accounting salary information by city, state experience level and more.

After that, just enter the relevant data into the calculator and hit enter. No more runaround, no more black box. Ready for an example? Well, Personiv's finance and accounting solutions are unique because we don't have minimum hire commitments. Your team can be as small as a single full-time accounts payable clerk. So, let's start there.

Here's how to find the cost of outsourcing accounts payable services with Personiv:


how much does outsourcing cost?
 

And here's how to find the cost of three bookkeepers with outsourcing:

 
accounting outsourcing costs

Tip: If you need more than one resource at a 1:1 replacement rate, don't forget to make the in-house team size and number of outsourced resources match by selecting the same number from both dropdowns, as above.

The Cost of Outsourcing Vs. The Cost of In-House Hiring

The amount saved by outsourcing bookkeeping and accounting is pretty significant already, but it doesn't tell the whole story. Hiring in-house is a cyclical process because every employee eventually moves on. In a best-case scenario, it's after a decades-long mutually loyal relationship.

Ideally, cake is involved.

Realistically, employees move on every three to five years. Accounting professionals move on at a rate that's five times the national average, which makes the cycle very quick in finance departments. Here's what that cycle looks like. It's one that comes with additional costs:

 
accounting outsourcing steps

Note: This graphic comes from our white paper, Building Lean Accounting Teams: How Organizations Can Achieve Optimal Efficiency Through Outsourcing. You can find it in our resource library for finance leaders.

The "Secret" Costs Of Traditional Hiring

For instance, you probably noticed the field marked "Employee Burden" in the images above. It's a calculation of all the "extras" that come along with a traditional hire, like insurance 401(k) plans and other benefits. It averages out to be about 13 percent of the employee's salary.

They aren't included in the outsourcing rates - that box will stay at $0 - because you don't pay them when you outsource. Your provider does.

Since we hire the professionals on your virtual accounting team, we're responsible for the cost associated with attracting and retaining the GAAP-compliant, degreed and certified accountants you need.

Then there are the costs associated with employee turnover (anywhere from 13-50 percent). We touched on that a little above, but you can read a lot more about it in our white paper, Building Lean Accounting Teams, which breaks it down more thoroughly then we have space for here.

If 13 percent of an employee's salary represents a not-insignificant expense for employers who need to contain costs, 50 percent is flat-out prohibitive. Yet, finance leaders continue to eat the cost of separation, because it comes in the "hidden" form of training new employees, lost productivity and reduced output and quality instead of all at once.

The true cost of hiring in-house accountants vs. offshore accountants has to add the Employee Burden Cost (EBC) and Separated Hire Salary (SHS) to the Average Employee Salary (AES). Look at how quickly those additional costs accrue in three very different hiring markets:


outsourcing your accounting costs

Should You Outsource or Use a Staffing Firm?

Staffing firms and temp agencies are understandably attractive to busy leaders that need one or two accounting team members but simply do not have the time or resources that sifting through resumes and onboarding a new hire or two requires. Though the process isn't a cyclical one, it does come with it's own steep hidden costs:

 

Besides the employee’s hourly pay – based on the annual salary – there’s the markup you pay for the firm’s expertise, a multiplier of your contracted worker’s base pay that also includes the 46 percent the firm will spend on costs like insurance benefits. This multiplier will vary by region and firm. Factor in the disengagement cost (DC), and you’re left footing a steeper bill than you expected.

Let's look at those same three markets as above, and see how much it would cost to use a staffing firm to bring those same resources in with a staffing firm for a single year:

 
comparison tables outsourcing costs
 

Find Real Outsourcing Rates For Your Accounting Needs

That brings us back to the outsourcing calculator. Whether you're looking to learn how much it costs to outsource payroll services or need actual offshore accounts payable pricing, we don't want you to jump through hoops to find it.

Of course, a dollar amount and an overall percentage don't tell the whole story. Your whole story. We want you to be able to easily and transparently determine the cost of outsourcing accounting with the savings calculator, and then we want to hear the rest of your story.

Contact us today to tell us where you've been and where you want to go from here. We know every organization is unique, and that's why the solutions we build for them are tailor-made.

Until then, here's how you can access the resources we explored in this post. More can be found in our Finance & Accounting Resource Library.

download the interactive calculator

download the white paper
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