When a Director decides to consider outsourcing their back office and accountancy processes for their recruitment agency instead having these processes in-house, they will often do a cost and service comparison. However in our experience of the enquiries we get in the TBOS office, this comparison will involve only looking at the salary cost of the accounts staff against the cost of the outsourcing company service which isn’t a true representation of the cost saving. Looking at all of the costs and the differences in services is the only way to truly understand the savings that can be made, and ensure the continuity (or increase) in services being provided.
Below is a full list of the costs that need to be considered and compared when moving to an outsourced service provider for your recruitment agency:-
1. FULL SALARY COST (NOT JUST BASE SALARY)
When calculating the full salary cost the staff in the current accounts department you need to consider not only their base salary but also the employers NI, staff benefits and training costs. You may also need to consider the costs should you need to make any staff members redundant or pay notice.
2. OFFICE SPACE
Internal back office and administration staff can take up valuable space that could be used by recruitment consultants within the office. This can also be space for storage of accounting data and filing. By looking at the amount of space this currently takes up within the office and seeing the additional revenue that could be generated by filling it with recruiters is a better use of the office space.
3. COMPUTER COSTS (HARDWARE AND SOFTWARE)
All back office and accounting processes are done on a computer which often requires specific software to produce invoicing and complete bookkeeping processes. These accounting packages are not a cheap cost to a business, especially as the business gets bigger and requires more complex software to produce VAT returns, management accounts and in some cases year end accounts. The computer costs could also include expenses such as printers, scanners and photocopiers which can take up more office space and are not cheap to maintain.
4. STATIONERY, POSTAGE AND PRINTING
When the back office and accounting processes are handled in house then there is always an additional cost for stationery, postage and printing. Even with paperless office systems and sending documents such as invoices and payslips directly by email, there will still be a cost to the business.
5. TELEPHONE COSTS
Internal back office and accounts departments can sometimes generate the same telephone costs as a recruitment consultant as they will often speak to clients, candidates, banks, invoice finance companies, suppliers and HMRC. If the credit control is being handled in-house then this will also have a cost impact on the telephone bills.
6. ACCOUNTANCY KNOWLEDGE AND FEES
Many recruitment agencies will often use external accountants to provide some of the services they require should their internal staff not have the required expertise. This may include providing bookkeeping services, producing management accounts, VAT returns and year end accounts. However these accountants will not necessarily be specialists within the recruitment sector and be able to give the required advice to keep up with legislation such as onshore/offshore quarterly reporting.
7. HR AND CONTINGENCY COSTS
One of the costs that is often overlooked when doing a comparison is looking at the HR and contingency costs. These are the times when your internal back office team are out of the office (sickness, holiday, maternity/paternity, etc.) or if the office is unavailable due to power cut or bad weather and could have an impact on payments to your candidates or suppliers.
8. DIRECTORS TIME
The last cost which most Directors forget to look at is their own time and the value of this. By outsourcing, this should dramatically reduce the time the Director spends on managing back office tasks and making accountancy decisions. The main way to cost this is to work out the Director’s hourly rate against the number of hours spent doing back office tasks (authorising payments, managing accounts team, liaisons between accounting suppliers, even raising invoices, etc.) and see how many hours the new service will reduce this down by. The hours saved should then be used to motivate the sales team and hopefully produce more placements.
Once these costs have been monetised and the services have been identified, it is easier to know what you need and how much you are expecting to be saving. You may also want to decide if you want to spread the outsourcing across multiple companies or put them all under one company who can provide everything. It is important to understand from any potential provider what you will need to do as part of the process to ensure that by outsourcing doesn’t mean you end up still having the same costs as before.
TBOS provides a fully comprehensive back office and accountancy service for any size recruitment agency making contract and permanent placements. Over the years, TBOS has helped a number of existing agencies move from an internal accounts department and external accountants to our full back office and accounting service. These agencies now enjoy more time to concentrate on recruiting and motivating their sales team instead of managing the internal accounting process and being drawn into issues and concerns that can be a huge distraction. Also, many of these agencies are now receiving a more comprehensive service under one roof by receiving monthly management accounts and industry specific help and advice to enable them to grow their agency.