Outsourced Accounting Costs for Mid-Market Companies

9 min read

Market companies. Within this middle ground of the market, businesses are often growing and changing quickly, and this can cause growing pains for businesses that result in operational challenges, expenses that balloon out of control, and shrinking profit margins. 

Mid-market business leaders must keep a close eye on business growth and growth strategies, putting solutions in place that are specifically designed to meet the needs of businesses of this size.

One particular source of difficulty for growing mid-market companies is the back office. Mid-market companies require solutions that are much more robust than those required by small businesses. However, attempting to manage the back-office demand entirely in-house could result in exorbitant costs that a mid-size company's current cash flow cannot support. 

For most mid-market businesses the smart back-office solution is continuing to use dynamic outsourced accounting services that are powerful, flexible, and capable of keeping up with your business's growing needs.

Does Your Business Need Outsourced Accounting?

Outsourced accounting can be an enormous boon to both small and medium-sized enterprises (SMEs) because these services not only improve and streamline your back-office function but can also help you improve and streamline every aspect of your business with powerful data-based insights.

When considering whether your business needs outsourced accounting services, consider the following questions:

• Do you have a sound business plan in place? Is your business plan working? Does it inform your operating framework, help you set short-term benchmarks, and help you meet them to achieve long-term goals?
• Does your business operate with optimized and favorable costs?
• Are your processes and policies efficient?
• Are you adequately leveraging your available resources? Do your resources generate a healthy ROI?
• Is your business flexible, able to adapt to a changing market, and able to support new technology?
• Are you ready for taxes? Are you ready for an audit?
• Are you paying for recruiting, training, and turnover costs in your bookkeeping or accounting department?

If any of these aspects of your business need improvement or you aren't sure about the answers to these questions, then your business would most likely benefit greatly from outsourced accounting services.

The Benefits of Outsourced Accounting

Saved Time and Saved Money

The biggest benefit to outsourced accounting is that it saves business owners time and resources that can be redirected toward supporting the core functions of the business.

In-house back offices are expensive primarily because they cost more to run (due to recruiting, training, paying, and replacing in-house employees). In-house back offices are also less efficient and effective (due to having access to fewer back-office resources).

Improved Operations

With outsourced accounting services, you can improve almost every aspect of your business because you'll have access not only to basic financial reports but also to management reports that help you make data-based decisions to run your business.

Outsourced accounting provides daily monitoring, timely and reliable reporting, sound and secure processes, clear roles and responsibilities, and top talent in the industry. Plus, it eliminates the need to manage or cover the cost of carrying in-house back-office personnel.

Is it cheaper to outsource accounting?

In-house Vs. Outsourced Accounting: What’s right for your business? Get a customized quote to learn more.

No Tax or Compliance Worry

Outsourced accounting services ensure their clients are compliant and always audit-ready and tax-ready. This means you don't have to worry about the headache of ensuring your records are kept up to the required standard because your outsourced accounting team will do it for you.

Business-Wide Goal Alignment

Having a well-appointed back office enables you to better align your entire organization around your business's short and long-term goals. You can then use your reports to assess performance and improve productivity across departments.

Read More: Unlock Business Growth With Written Goals

Flexible, Dynamic, and Adaptable Solution

With a growing small or mid-market company, it's essential that your back-office solution is able to readily adapt to your changing needs. Whether you're handling an increased volume of monthly transactions, hiring a new wave of employees, taking on a greater number of new clients, or expanding your list of vendors, you need an accounting solution that can be scaled quickly to accommodate your business's needs.

Outsourced accounting can scale quickly. With the right partner, you can easily adapt your service plan to include a larger team, accommodate a larger volume of bookkeeping, or add CFO services to assist with your business's growth from a financially strategic perspective.

The Cost of Outsourcing Accounting Services Compared to an In-House Back Office

The Cost of an In-House Back Office

The cost of an in-house bookkeeping and accounting department that is able to meet the needs of a mid-market company is extremely high. At a minimum, these back offices require the following team members (and median salaries) for optimal operation:

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

That's a median cost of $973,701 annually ($81,142 per month) to cover back-office employee salaries alone.

As a business owner, however, you know that salary is not the only cost of in-house employees. You also must consider the cost of benefits, taxes, insurance, bonuses, paid time off, and turnover in addition to other indirect costs such as the productivity lag that occurs during employee sick leave, vacation, and turnover. A conservative estimate from the U.S. Bureau of Labor Statistics estimated an average benefits cost of $12.06 per hour for employees in the private sector ^[7]. Working 40-hour weeks over the course of a year, this additional cost equals just over $25,000 per employee - just for benefits - and this is just an average. The more senior, experienced, and educated the employee, the higher those benefits costs are likely to be.

The Cost of Outsourced Accounting Services

Outsourced accounting services are typically paid for with a tiered and customizable subscription pricing model. This means the cost directly correlates to the extent of services your business needs. In other words, you pay for the accounting services your business needs.

On average, the price of outsourced accounting services from a reputable provider falls in the range of $5,000 to $12,000 per month. This means SMEs (even larger, growing mid-market businesses) can access the back-office services they need at a mere fraction of the cost of hiring and maintaining an in-house bookkeeping and accounting department.

Read More: Cost Analysis: Outsourcing vs. In-House Accounting for Your Business

Essential Outsourced Accounting Best Practices for SMEs

Practice Due Diligence

Your company wouldn't work with an unlicensed, inexperience contractor, so don't work with an inexperienced, ineffective outsourced accounting provider, either.

Choosing the right outsourced accounting service provider is essential to success in outsourcing your company's back office. Look for client reviews and testimonials and make sure you choose a trustworthy, experienced, and successful outsourced accounting firm.

Look for Industry Experience

Just because an outsourced accounting provider seems to have a good track record, it does not mean that they are necessarily the right partner for your business. This is especially true in industries that are held to special regulations and compliance requirements. Be sure the provider you choose has experience working successfully with other businesses in your industry.

Consider Your Business's Needs

Before choosing a specific service plan, really consider your business's needs and goals. Think about how you would like an outsourced accounting provider to serve and help you improve your business. Are you just in need of day-to-day maintenance and compliance or are you looking for a provider that can be more of a strategic partner in improving the operations and goals of your business?

What your business needs out of its relationship with an outsourced accounting provider will influence the service package you sign up for, and it could even influence your decision of which outsourced accounting provider you choose to work with.

Remember that your business's needs will change in the future. So, consider your future needs, as well, when shopping around. Choose a provider that will be right for you now and in the future. Look for a provider that will be able to readily grow and scale its services to accommodate your business's changing needs.

Don't Settle for Less Than Team, Tools, and Technology

A good outsourced accounting provider offers thorough services and implements the experience and expertise of their team to overhaul and improve your company's back-office system. Your provider should offer you a combination of team, tools, and technology to automate, streamline, integrate, and improve your back-office processes, policies, and procedures to ensure your back office is working to optimize your business.

Outsourced Accounting to Grow (and Grow With) Your Mid-Market Business

With a solid outsourced accounting provider, your mid-market business will become increasingly flexible and financially healthy. As a result, you'll not only save money on your back-office function but you can also use your new provider's experience and expertise to identify creative ways to strengthen your profit margins and grow your business.

[1]  https://www.salary.com/research/salary/benchmark/chief-financial-officer-salary

[2] https://www.salary.com/research/salary/benchmark/controller-salary

[3] https://www.salary.com/research/salary/benchmark/accounting-manager-salary

[4] https://www.salary.com/research/salary/benchmark/financial-analyst-i-salary

[5] https://www.salary.com/research/salary/listing/staff-accountant-salary

[6] https://www.salary.com/research/salary/benchmark/bookkeeper-salary

[7] https://www.bls.gov/news.release/pdf/ecec.pdf