How Much Does It Cost NOT to Outsource?
A key step in deciding whether to maintain an in-house back office and accountancy team or to outsource is a cost and service comparison.
We’ve noticed, though, that most Directors aren’t thorough in their comparison – they look at their back-office staff’s salary and weigh that against the cost of the service, but this isn’t the only saving there to be made.
This can lead to bad decisions and lost profits – and for a Director, lost profits are always a cause for concern.
So, aside from your back-office team’s salaries, what else do they cost you?
Base Salaries Aren’t the Full Story
Don’t just consider your team’s base salary – remember employers’ NI and staff benefits. You should have a record of these somewhere along with expected training costs – after all, you need to be able to make informed decisions about recruiting new members.
You should also be ready for extra short-term costs if you need to make staff redundant or pay notice.
Between their desks and their data storage, how much space are your back-office team taking up?
How much revenue could be generated by filling that space with recruiters instead?
This may be the best example of ‘hidden costs’ out there.
Let’s not kid ourselves – specialist accounting software is not cheap, especially if you want one that also generates invoices. Producing VAT returns, year-end accounts and management accounts isn’t feasible without them – but they are expensive, and need to be kept up to date.
Additional costs can be caused in printers, scanners, and other peripherals.
Stationery, Postage, and Paperless Offices
There’s always an additional cost in producing invoices, accounts, and other reports. Paperless office systems can cost less than regular printing, but there’s still a cost to the business to be considered.
Any agency Director knows that recruiters generate high telephone costs to bring in their income. Back office teams often generate costs just as high, between calls with clients, candidates, banks, finance providers, HMRC and more. Their bills can get even higher if credit control is managed in-house.
HR & Contingency Costs
Between additional expenses for back office team members when out of the office for holidays, sickness, or maternity/paternity leave and the contingency costs of losing your back office at a key point in the invoice/payment cycle due to bad weather or power cuts, there are more hidden costs.
Your Own Time
Most Directors forget to account for their own time spent managing their back office. You can cost this by logging the number of hours spent on back office tasks and comparing your hourly rate – how many hours’ work are you wasting? Could those hours be spent making more placements?
All these costs are often ignored when weighing up the benefits of outsourcing your back office.
Usually we see people ask how much it’ll cost to outsource, but as we hope we’ve shown you, the question really is how much it costs not to.
To find out more about how you could outsource your back office to TBOS, cut costs, and improve service, please contact our office.