You may be overlooking one of the most significant reasons to outsource; the cost of losing someone on your accounting team….

Finding and retaining the best talent is critical for a business to thrive in today’s economy.  According to data gathered  by CompData Surveys  the rate of voluntary and total employee turnover has incrementally increased by 1% over the last 4 years.  In 2016, the total turnover rate for all industries was 17.8%.  This growing trend, paired with the rising cost of losing valuable employees is enough to keep business owners up at night.  To better understand the impact of turnover, let’s dive into an exercise to identify direct and indirect costs of losing a valuable employee from your internal accounting staff.

Assume you are paying an accountant $60,000 annually.  This is clearly above the bookkeeping rate, but well below a CFO cost.  For this exercise we will not consider the benefits, employer payroll taxes, or other special arrangements. Let’s also assume that this individual is primarily responsible for your accounting function and that you do not have an HR department within the organization.

Here are some of the costs you may incur immediately to replace this individual:

  • • You may hire a recruiter at a cost of 20-30% of the first-year salary.
    • • Subtotal: $12,000 -or-
  • • You may choose to place an add yourself using Indeed or CareerBuilder.
    • • If so, you must consider the cost of the ad and the time involved to write one.
    • • In addition, you might have employment test or screening costs.
    • • Current employee time lost to respond to resumes and interview candidates
    • •Opportunity cost of the above depending upon their position
    • •Estimate: $2,000.
  • • If the accountant had accrued PTO – that’s cash out as well.
    • • Assume two weeks: $2,308.
  • • Getting the job done during the hiring process. These costs can end up being major, depending upon the time it takes to replace. Let’s estimate eight weeks. This is a big one- because there are a few different choices that can be made here:
    • •Current team picks up the slack. This could mean overtime paid by the hour or asking salaried employees who are already full to step in and fit the bill. Depending on how long it takes, overtime can be very costly, and you don’t want to upset the salaried employees.
    • • Overtime for an hourly worker who makes $20 per hour could amount to $300 per week, or about $2,400 for 8 weeks, being entirely conservative at 10 hours per week.
    • • Hire a temporary person to fill the basic accounting needs. This person will come at a premium rate, will not know your business, and will likely disrupt current staff asking questions about how to get the job done.
    • • Same scenario, but $20 per hour would be tripled- $7,200 for 8 weeks.
    • • Some companies look to their CPA to provide a temporary fix, and that is typically a premium hourly rate as well.
    • • These rates are typically over $150 per hour, so $12,000 for 8 weeks

If you consider some of the assumptions and estimates above and apply some simple math; the exercise demonstrates that you could potentially be on the hook for more than half of the lost employee’s salary during that 8-week period. To extrapolate that even further – you may end up paying 150% of the annual salary by the time the new hire is trained and fully productive in the position.

Now consider this scenario from an investment standpoint – does it make financial sense? This is the textbook definition of being stuck between a rock and hard place. The two choices that come to mind are to attempt to proceed without replacing the lost employee (NOT RECOMMENDED!), or you can proceed with the above scenario (OUCH!). Are there any other options? I believe so!

A third option might be to outsource the back-office accounting function. By choosing to outsource your organization would gain a team of professionals that have deep accounting experience, documented procedures, strong internal controls, and no future impact on your organization if there is additional turnover of accounting staff. Additionally, business process outsourcing firms tend to leverage technology that is designed to streamline processes and create efficiencies. These efficiencies eventually lead to a faster close process which translates to timely and accurate reporting.

If you find yourself in this same scenario, then unstick yourself from that rock and hard place, and consider business process outsourcing as a viable third option. At WVC RubixCloud, accounting is what we do best, and we would love to talk with you about your situation.