What if we told you there is a way to add money to your bottom line AND alleviate the pain of finding and retaining a good employee? That’s where outsourcing the accounting function comes in.
A Tale of Two Bookkeepers
Let’s look at a hypothetical story, based on our past experiences, of a Maryland general contractor that had two in-house bookkeepers in its accounting department. With their combined salaries plus benefits, the two bookkeepers accounted for $170,000 of the company’s payroll. Although the two bookkeepers did a decent job, that was a lot of money for two employees.
When one of the bookkeepers decided to retire and the other left the company to stay at home with her children, the company was suddenly left with an unstaffed accounting department.
The owner of the company, Grace, immediately advertised the two open positions, never stopping to consider whether she could approach her company’s accounting needs in a different – and potentially less expensive – way going forward. Her company’s accounting department had been staffed by two bookkeepers for so long that it just seemed natural to hire two more.
Geez, Where Are All the Good Bookkeepers?
Grace, along with her HR manager, spent gobs of time wading through the resumes of dozens of unqualified job candidates. Some had no bookkeeping experience at all, while some were seasoned CFOs demanding a six-figure salary.
If you’ve ever been involved in the hiring process, including writing an ad, reviewing resumes and interviewing, you know how much attention it can take away from your regular duties.
After a disappointing round of initial interviews with bookkeeper candidates, Grace’s college friend told her that he outsources his company’s accounting function to his CPA firm.
Grace was intrigued about this idea and took the time to learn more about the benefits of outsourcing the accounting function.
Time for an Accounting Department Makeover?
Like many business owners, Grace assumed that bringing in a CPA firm to handle her company’s day-to-day accounting needs would be too expensive. She was skeptical. But as soon as she finished yet another horrible interview – this time, with a trainer of exotic animals who claimed to have bookkeeping experience – she called her CPA firm. Enter Plan B.
Grace was glad she made that call. Plan B ended up saving her business $74,000 a year in salary and benefits. Here’s how …
Grace’s CPA explained how it can be hard to know when it makes good business sense to outsource your accounting function. After he listened to what Grace expected from her bookkeepers in terms of day-to-day tasks and reporting, he came up with a plan to deliver that, and more, to her.
After getting her CPA’s unbiased feedback about how her bookkeeping staff had been doing things the same way for years, Grace realized that she wasn’t getting nearly the bang for the $170K that she thought she was getting. For example:
- Her bookkeepers weren’t producing reports that helped Grace and her management team with decision making.
- Some of the accounting department’s day-to-day tasks that were essential a decade ago were no longer relevant due to changes in the company’s structure and operations. Yet the bookkeepers performed the tasks anyway because no one told them to do otherwise.
- With the two long-time bookkeepers firmly entrenched in the company’s accounting department, internal controls weren’t as strong as they could have been.
- One of the bookkeepers didn’t have adequate training on the company’s accounting software system. As a result it took her twice as long as it should to get her invoices out.
- The company’s accounting function probably didn’t need two full-time employees to adequately support it. Had the bookkeepers’ job descriptions been more in line with the company’s current accounting and reporting needs, and if they had better knowledge of the accounting software system, two full-time employees was overkill.
Outsourced Accounting to the Rescue
Grace hired her CPA firm to streamline the accounting function in her company. Together they mapped out a plan to ensure that the accounting function only perform tasks that are absolutely essential to (1) operating the business day-to-day and month-to-month and (2) supporting her management team’s decision making.
Next, an accountant from Grace’s CPA firm assumed responsibility for handling her company’s accounting function. The accountant got quickly up to speed on the company’s accounting needs and settled into his role. In addition to compiling monthly financial statements and handling quarterly payroll filings, the accountant is available to Grace and her management team for questions and guidance any day of the week.
The Cost Savings
The cost of outsourcing the accounting function to her CPA firm was $8,000 per month. At $96,000 annually, outsourcing the accounting function saved Grace’s construction company $74,000 in wages and benefits (by outsourcing, the company no longer had to cover the cost of health benefits, parking and dental insurance).
Grace loved seeing the $74,000 she saved in salaries and benefits go straight to her company’s bottom line. It was an instant boost in profitability! And she didn’t have to meet with anymore trainers of exotic pets claiming to have bookkeeping experience.
The Next Step
Next on Grace’s agenda as she plans big things for next year? She’s going to consider bringing in an outsourced CFO to prepare cash flow projections, improve reporting for her management team, and form a strategic plan for significant growth in the next three years.
Need Help?
If you’re in Grace’s boat and want to explore how you can get more out of your company’s accounting function, talk with our Smart Accounting Support Solutions team to see if outsourced accounting makes sense for you. Contact us online or call 800.899.4623.
