Each year, we hear from many recruitment owners who want to discuss how we can potentially help them outsource their back office and accounts function for their recruitment agency. Each agency has a different need on why they have called us in the first place but many already have a reason up their sleeve why they do not believe it will work for them. These reasons vary from person to person but in our experience there is always a practical and cost effective answer to justify their enquiry. Here are some reasons why people are apprehensive about outsourcing their recruitment agency back office and accounts functions:-
- “I can take on a cheap accounts person’s salary for the same money”
- “How do I know I can trust your company to make my payments correctly?”
- “Your cost eats up most of my margin”
- “I can easily raise a few invoices myself and make a few payments without any cost”
- “I have known my accountant for years so I don’t want to lose that service”
- “I don’t like the idea of not being close to my accounts department”
This is the most common reason for people not believing in outsourcing, however they are comparing apples to oranges. There are two big advantages to outsourcing instead of having internal staff; one is the cost of a cheap accounts person (their salary does not include their desk costs, computer costs, software licence cost, office space, etc.) and the second is that if you pay for a cheap accounts person’s salary you will often get a cheap and limited service for your money. By outsourcing all the costs are rolled into one figure and you will get the expertise of various back office functions in one price such as payroll, accounts, credit control, etc. Also, what happens if that accounts person is sick or goes on holiday? Who will do the work instead?
Using an outsourcing company to look after your payments gives you greater protection against fraud than having an internal staff member completing them instead. With the number of incidences of internal staff fraud rising for a number of years, by using an outsourcing company you are covered by their service level agreements and processes. Any unauthorised use of funds are covered under their insurances.
If the cost of outsourcing is greater than the profits generated on placements then maybe it is the margins that are too low. By having a fixed cost for internal staff it can be more costly, especially in quieter periods. By outsourcing, where the costs are often related to the placements, it can be easier to budget and manage the profits generated.
We hear this from many new start up agencies who feel that doing the work themselves is a more cost effective way of working. However, how much is that person’s time worth? If the average profit generated per month is £10,000 then this equates to £61.59 per hour, if that person takes 3 hours per week generating invoices, making payments and credit control then they have in effect lost the chance of generating an additional fee of £185 per week/£800 per month/£9600 per annum.
Retaining your accountant is possible with outsourcing but can often mean you could be paying for the same service twice. Outsourcing companies will employ accountants internally themselves to provide these services and by retaining your own accountant may mean that work is doubled up. By outsourcing the whole service to one provider can ensure continuity of the figures and often be a cheaper solution.
Having the accounts team internally can put you closer to the numbers but you have to understand how to manage people in the department as they do not work in the same way as recruiters. Managing a sales person and managing an accounts person can differ a lot and be very challenging especially as most recruitment agency owners are recruiters themselves and will view accounts people as “non-billers”. You will soon realise you cannot speak to an accounts person the way you do a recruiter.
We currently help many different size agencies in various industries who have come to us about outsourcing their back office and accounts. We ensure they remain compliant, are set up and run correctly and get the support from TBOS to enable them to grow without having to worry about the day-to-day processing.
TBOS provides a comprehensive back office and accounts service which also includes a full time telephone and email service, invoicing, payroll, payments, credit control bookkeeping, management reporting, VAT and year end statutory work.
Total Back Office Solutions Ltd help recruiters daily achieve their goal of concentrating on what they do best – selling – and if you would like further information please do not hesitate to ask.