Professional financial advice is crucial for any business. It is even more important for small business and start-ups because they lack resources and expertise to attract talent, especially at the top level. This is because hiring in-house professionals can be expensive, and many SMEs either need to open their pockets or settle for less. At the same time, good accountants have a ‘special’ importance as they have access to key information and controls. Even if their performance is sub-standard, the fear of another recruitment cycle is preventing many business owners to make a change. The result is missed growth opportunities and financial underperformance in all key aspects – cost control, budgeting, access to funding, etc. Luckily, there is a way small business can make sure they are getting the best of their finance teams – outsourcing.
Outsourcing a finance director, or indeed the whole accounting function can work out well for SMEs of all sizes, but particularly small and medium enterprise with a turnover < £15m.
Let’s explore why.
Problems with In-House accounting teams
Common problems that hinder SMEs management ability to recruit and retain finance professionals are:
High recruitment costs - many SMEs don’t’ have internal HR an Recruitment teams, so they have to involve external recruiters, who will often do a good job. However, recruitment fees (15-25% of annual salary). For a finance director, this can be around £10-25k, which is a lot of money. But this is only tip of the iceberg.
Time to fly - usually finance professionals are tied up with 3 to 6 month notice periods in their current role. More importantly, there is also a learning curve for a new employee to find their foot in the company, which is normally another 6 to 8 months. This means that it will take at least from 9 to 12 months from the start date to reach their full potential. That’s a lot of waste for SMEs which is not usually factored in recruitment decisions.
High staff turnover rates - as finance professionals in SMEs are highly involved in day to day operations of the company, it makes it very difficult to replace them. At the same time, XperHR Labour Turnover Rates 2022 survey reports that 70% of respondents report increase in turnover rates in past 12 months. According the to same survey. the average turnover rate for financial staff in SMEs is one of the highest. There are many reasons for this, chief of which is higher pay offers from elsewhere and burnout. With the average cost of turnover per employee being at least £30,000 (much higher for a good financial controller or a finance director), replacing financial staff is a costly endeavour.
Staff quality - many SMEs struggle to find the professional support that they need from qualified accountants and financial experts. It's not just finding the right staff that can be difficult, but also retaining those professionals as they get higher paying offers from larger companies or competitors.
Difficult to scale - scaling the business and the financial department can also be a problem for small businesses. It's expensive and time-consuming to hire new financial staff, which makes it harder for SMEs to scale when they need to. Knowing when it makes financial sense to hire new staff isn't always easy.
Benefits of outsourcing
Outsourcing usually eliminates above problems. While you still need to go through a selection process, it is usually much simpler, because you get access to references and testimonials for the company. No recruitment fee, worrying about replacement of an employee or hiring. Its also easier to let them go, as most will offer only 1 month notice.
Other benefits include:
Free up your time -With outsourcing, there is no need to recruit, retain, train and motivate an employee. You get a highly motivated expert from day one. Now you can go and build your business and solve important problems knowing, that you will get all the necessary reporting and advice on a timely manner.
Expert Help -One of the greatest benefits of outsourcing the finance functions is that you get a team of expert accountants that can benefit your business from day 1. You can get expert financial advice and assistance from qualified accountants without going through cumbersome recruitment process. Outsourcing your financing essentials ensures your business gets the required support throughout the financial year and can save money at the same time.
Easily Scale the finance function - Outsourcing makes it easier to scale your accounting as your business grows. If you're handling things in-house, it can be difficult to know when it's time to hire more staff or invest in new tools. However, when you outsource, it's much easier to scale up the services that you need when necessary and even scale back down again if you need to.
Create Lasting Relationships -SME owners may fear outsourcing, wary of losing the control that they are afforded by keeping an in-house financial controller and accountants. However, the truth is that outsourcing could result in a much longer-lasting business relationship. The outsourced company treats your business as a customer, while the employee treats your business as a workplace.
Outsourcing your business's finances delivers multiple excellent benefits. Choose outsourcing to save time and money and achieve great results.
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