Outsourced Accounting Costs for Mid-Market Companies

Within this market segment, businesses frequently experience rapid growth and change, which can result in operational difficulties, soaring expenses, and dwindling profit margins.

Key Takeaways

Is Outsourced Accounting Necessary for Your Company? Do you have a well-thought-out company plan? Is your company strategy working? Does it help you educate your operational framework, create short-term benchmarks, and fulfil them in order to reach long-term goals?

• Improved Operations: Outsourced accounting services may help you enhance practically every part of your firm since you’ll have access to not just basic financial data but also…
• The cost of an In-House Back Office: In addition to other indirect expenses, you must include the cost of benefits, taxes, insurance, bonuses, paid time off, and turnover. To cover back-office personnel compensation alone, the yearly cost is $973,701 ($81,142 per month).

Mid-market company executives must maintain a tight watch on business growth and growth plans, putting in place solutions that are especially intended to fit the demands of companies of this size.

The back office is a particular source of trouble for rising mid-market enterprises. Mid-market firms demand much more sophisticated solutions than tiny ones. On the other hand, attempting to handle back-office needs wholly in-house, on the other hand, may result in extravagant expenses that a mid-sized company’s existing cash flow cannot sustain.

The wise back-office answer for most mid-market organizations is to continue to employ dynamic outsourced accounting services that are strong, adaptable, and capable of keeping up with your business’s changing demands.

Does Your Business Need Outsourced Accounting?

Outsourced accounting may be a huge assistance to both small and medium-sized businesses (SMEs) since these services can help you enhance and simplify not just your back-office function but also every element of your organization with strong data-based insights.

Consider the following questions when determining if your company needs outsourced accounting services:

• Do you have a well-thought-out company plan? Is your company strategy working? Does it help you educate your operational framework, create short-term benchmarks, and fulfil them in order to reach long-term goals?
• Is your company’s cost structure optimal and favourable?
• Are your policies and practices effective?
• Are you making the most use of your existing resources? Do your resources provide a good return on investment?
• Is your company adaptable, capable of shifting markets, and capable of supporting new technology?
• Are you prepared to pay your taxes? Are you prepared to face an audit?
• Do you have to spend on hiring, training, and turnover in your bookkeeping or accounting department?

If any of these parts of your business need improvement or if you are unsure of the answers to these questions, your company might profit immensely from outsourced accounting services.

The Advantages of Outsourced Accounting

• Saved Time and Money

The most significant advantage of outsourcing accounting is that it saves company owners time and resources that can be devoted to supporting the core tasks of the firm.

In-house back offices are more costly because they are more expensive to manage (due to the costs of recruiting, training, paying, and replacing in-house staff). Because they have access to fewer back-office resources, in-house back offices are also less efficient and effective.

• Enhanced Operations

Outsourced accounting services may help you enhance practically every part of your organization since you’ll have access to not just basic financial reports but also management reports that can assist you in making data-driven choices about how to operate your company.

Outsourced accounting offers daily monitoring, timely and accurate reporting, solid and secure procedures, defined roles and duties, and industry-leading expertise. Furthermore, it removes the need to manage or pay for in-house back-office workers.

• No Tax or Compliance Worry

Outsourced accounting services guarantee that their customers are constantly compliant and audit- and tax-ready. This means you won’t have to deal with the hassle of keeping your records up to date since your outsourced accounting staff will handle it for you.

• Alignment of Corporate Objectives

A well-equipped back office allows you to better coordinate your whole organization behind your company’s immediate and long-term objectives. Your reports may then be used to evaluate performance and boost efficiency across departments.

• Flexible, Dynamic, and Adaptable Solution

With a developing small or mid-market business, it’s critical that your back-office system can easily adapt to changing demands. You need an accounting system that can be expanded fast to fit your business’s demands, whether you’re processing an increased amount of monthly transactions, adding a new wave of staff, taking on a larger number of new customers, or extending your list of suppliers.

Accounting outsourcing allows for rapid expansion. With the proper partner, you can quickly expand your service package to incorporate a bigger staff, support a higher volume of accounting, or add CFO services to help your firm develop financially.

Related Topic: Top 10 AI Accounting Tools 2023: A Comprehensive Guide

The Costs of Outsourcing Accounting Services vs. an In-House Back Office

The Price of a Back Office In-House

The expense of an in-house bookkeeping and accounting staff capable of meeting the demands of a mid-market firm is prohibitively expensive. For optimum functioning, these back offices must have at least the following team members (with median salaries):

• CFO ($433,088) [1]
• Controller ($248,772) [2]
• Accounting manager or Senior accountant ($121,338) [3]
• Financial analyst ($64,946) [4]
• Staff Accountant ($62,064) [5]
• One or more bookkeepers ($43,493) [6]

To cover back-office personnel compensation alone, the average yearly cost is $973,701 ($81,142 per month).

However, as a company owner, you are aware that compensation is not the sole expense of in-house staff. Expenses for benefits, taxes, insurance, bonuses, paid time off, and turnover must also be taken into account. There are additional indirect costs to take into account, such as the lost productivity as a result of employee sick days, vacation, and turnover. According to a conservative estimate from the US Bureau of Labor Statistics, the average cost of benefits for private-sector workers is $12.06 per hour [7]. Working 40-hour weeks for a year, this extra expense amounts to slightly over $25,000 per person – only for benefits – and this is just an average. The higher the employee’s seniority, experience, and education, the higher the benefits expenses are expected to be.

The Cost of Outsourced Accounting Services:

Typically, outsourced accounting services are paid for via a tiered and configurable subscription pricing plan. This implies that the cost is directly proportional to the scope of services required by your company. In other words, you pay for the accounting services that your company requires.

Outsourced accounting services from a respectable vendor typically cost between $5,000 and $12,000 per month. This implies that SMEs (as well as bigger, expanding mid-market companies) may get the back-office services they want for a fraction of the expense of recruiting and maintaining an in-house bookkeeping and accounting staff.