TBOS receives many calls weekly from existing recruitment agencies looking at the possibility of outsourcing their back-office and accounting functions. However, when we speak to the directors about their current set up verses using our outsourced function, they will often only work off one or two numbers (mainly staff salaries) to see how we compare from a cost perspective.
We believe that when a director is looking at using an outsource provider they should first understand the true cost of their current set up before they compare this to the cost from a back-office provider:
COST OF STAFF SALARY INCLUDING EMPLOYERS NI AND BENEFITS
The main cost of an internal staff member is their salary, and back-office staff will have a salary dependent on their skill level and experience. When calculating the cost, however, you need also to include the employer’s national insurance, pension contributions and any other benefits they are entitled to within this cost.
Every staff member within the business will take up office space, but often a member of the back-office team will require much more desk space than a recruiter. This is due to the back-office team requiring dual monitors, printers, scanners and filing space as certain documents need to be retained.
COMPUTER AND TELEPHONE COSTS
Back-office staff will often have PC’s which have specific software to manage the back-office functions such as invoicing software, online timesheet systems, expense modules plus bookkeeping and payroll software. Back-office staff will also require a phone to chase debts with clients and liaise with candidates and suppliers about payments.
HOLIDAYS, SICKNESS AND HR ISSUES
When you have internal back-office staff, you need to have made provisions for any HR issues that may occur whilst they are working. This can range from provisions for holiday and sickness cover through to maternity/paternity, as an agency needs to ensure that candidates and suppliers can be paid and invoices are sent on time should this occur.
EXTERNAL ACCOUNTANTS COSTS
Very few recruitment agencies have the internally based skill sets to complete some of the more complex accounting tasks such as management accounts, VAT returns and year-end statutory returns, so they will often engage an external accountant. These costs will likely be on a fixed fee basis for the required accounting tasks, but any advisory service will be charged on an hourly basis and can fluctuate depending on the task complexity.
DIRECTORS MANAGEMENT TIME
One of the main costs that most directors always forget to include when they do a cost analysis is their own time either completing some of the back-office functions themselves or managing the internal team daily. If the director is heavily involved in this process instead of helping to grow and manage the sales team, then the benefits of outsourcing are much higher.
While a recruitment agency will often like to have someone internally processing back-office and accounting tasks (which sometimes falls to the director), it has been our experience that outsourcing these functions is a much more cost-effective solution for a recruitment agency.
The additional benefits to the agency also include more time for staff training, the ability to manage the sales team, fewer distractions from back-office and better quality reporting to be able to make business decisions on the company profitability and growth.
TBOS currently manages the back office and accounts of over 100+ recruitment agency clients, ranging from new start-up agencies to large scale contract recruitment businesses. Please contact our office if you would like further information on how we can help your agency.