By: Michele Renz
Sally has been your dedicated payroll clerk for 25 years. She has always been dependable, performed her assigned responsibilities well, and can generally handle any exceptions that arise related to her job. She has announced to you that her time has come: she is riding blissfully off into the retirement sunset at the end of this month. While you are personally happy for Sally, professionally, questions and thoughts begin to fill your mind:
- “I haven’t had to get involved in the daily details of Sally’s job for years. How am I going to find the time to sit with her to learn them between now and the time she leaves with all of the other things I am responsible for?”
- “I have to write the job description for this job. What do I want it to entail?”
- “Where am I going to advertise this position?”
- “How much time will I have to spend training this new person? Is there software training out there?”
- “Although Sally was excellent at what she did, it would sure be nice to hire someone with a greater skillset so that I can do less of the day-to-day accounting duties and spend more time on strategic planning and identifying cost savings opportunities.”
- “How much am I going to have to pay to get someone with the skillset I need? How am I going to convince my boss or board to spend the additional salary funds needed to get qualified candidates in the door?”
- “What if the person that I hire doesn’t work out?”
Situations like the above are all too common and are becoming more so: according to a June 2017 article at investopedia.com, 10,000 baby boomers are retiring each day. Hence, the chances are likely that someone in your accounting department is getting ready to retire or will be retiring within the next 5-10 years. If not, there is always the chance that one of your accounting employees will unexpectedly leave to care for an ill or aging family member or pursue another opportunity. What is your plan if – rather, when – this happens?
An option to consider when replacing any accounting employee – a bookkeeper, payroll clerk, accounts receivable or payable clerk, general ledger clerk, or equivalent – is outsourcing accounting responsibilities to a CPA firm. The following paragraphs discuss three benefits to outsourcing accounting responsibilities.
The first, and arguably most desirable, benefit of outsourcing accounting services is cost savings. Let’s continue with the example of replacing Sally, the payroll clerk. According to the Roberhalf.com salary calculator, the current salary range for a payroll clerk in the Pittsburgh, Pennsylvania region is $30,625 to $58,800, or an average of roughly $44,700. However, you know that hiring Sally’s replacement will cost you much more than $44,700 as you will pay fringe benefits to the full-time replacement including vacation pay, sick pay, employer taxes, health care, and retirement contributions. Using the Bureau of Labor Statistics June 2017 average fringe benefit rate of 31.7%, Sally’s replacement will cost your organization approximately $58,900 annually – and that’s not including hiring and training costs.
Depending on the industry in which you operate, the 31.7% fringe rate can run more in the 40-50% range. For example, 2017/2018 retirement contribution rate alone for public school employees, according to the Public School Employees’ Retirement System (PSERS), is 32.57%. Clearly, the fringe rate for the public school system easily approaches or exceeds the 50% range.
As far as the total cost savings advantage obtain from outsourcing the payroll function: it depends. It depends on the extent of services that the organization desires to be performed and the level of experienced staff required. However, considering the payroll example above and assuming the performance of routine payroll procedures, it is very feasible that most organizations would realize a cost savings by outsourcing the payroll function or similar function to a CPA firm. This, in turn, allows organizations to use these savings for investing in, advancing, and/or growing the organization.
Access to More Skills and Expertise
A close second benefit to cost savings is gaining access to more skills and expertise. When outsourcing an accounting function to a CPA firm, you are getting individuals who are experienced in performing the function for which you are hiring. This translates into less learning curve for the CPA firm individuals and less time invested in explaining and educating on your part. Furthermore, you aren’t just getting the person or small team working on your particular project – you are gaining access to an entire team of accounting professionals. Hence, should a question arise that the assigned person or team cannot answer, there is a firm with multiple CPAs who likely know the answer or how to find it. Finally, being that they are experienced not only in the accounting function, but have experienced performing the function at multiple organizations, CPA firm personnel can perform highly efficiently.
When outsourcing accounting services, you have significant flexibility in which functions you want to outsource. You can continuously outsource one or multiple traditional accounting functions entirely or only contract out a portion of the task that you desire. Another benefit: no more worrying about who will cover when an employee is on vacation!
Need assistance on special, short-term project such as integrating a merger into your account system or merger accounting entries? This is something accounting professionals in a CPA firm can help with. Not experienced with reviewing the financial impacts of a complicated lease agreement? Again, CPAs can be a tremendous resource for this purpose. Want help getting organized for your annual audit? No one knows what is required for an audit more than a CPA firm. In summary, agreements can be structured for just about any financial-related project and any duration.
As you can see, outsourcing accounting functions to a CPA firm can be very beneficial to organizations. Organizations can get high quality financial services from an expert whom they don’t need to hire full-time at a significant cost savings.
Cottrill Arbutina has a proven track record of performing outsourced accounting services and consulting for clients in government municipalities, school districts, non-profits, small- and mid-size businesses, and credit unions. Contact us today to discuss how we can help your organization.