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​In Pursuit of Profit

Read our expert article below or sign up to get articles sent to your inbox.​

3/11/2019

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The Cost of Hiring an Accountant

 
Picture
As a business grows, staffing requirements increase as well.

​For smaller companies, each incremental hire becomes less critical because there is a wider system to support new employees.

​However, while the company is in its infancy every hire is vital.
Large organizations have the advantage of being able to list numerous positions at once and let their HR teams work through a continuous pipeline of potential employees. Better cash flow and continuity planning allows large companies to both wait for the right candidates and also hire before there is a dire need for more staff. Small businesses, however, often delay hiring for as long as possible to minimize employee-related expenses.

The result is that smaller companies typically need to hire more quickly than their larger counterparts because they wait longer to begin the candidate search. This urgency can lead to hiring a candidate that is either less qualified or less committed to the company. While hiring in-house is a costly process, a bad hire is far more costly.

Smaller companies frequently overlook the benefits of outsourcing job functions instead of hiring in-house. The key advantage to outsourcing professional roles like accounting and finance is the ability to forgo the costs of recruiting, onboarding, and retaining employees.

​Recruiting Costs

According to Glassdoor, hiring a new employee costs an average of $4,000 and 24 days. With specialized roles like accountants these numbers may underestimate the true cost, which is likely around $5,500 instead. 

However, even this figure fails to consider the risk of hiring in-house. There is a substantial cost for bad hires when employees are a mismatch for the role or the company. In a recent survey, 25% of employers reported that a bad hire cost the company more than $50,000 due to lost productivity, time needed to find a replacement, diminished workplace morale, and brand damage with customers. In the case of an accountant, this cost could be even higher due to the nature of the job. Financial errors can result in serious consequences such as cash flow issues, tax penalties, state or federal fees, and damaged vendor relationships.
Searching for Candidates Costs

Many smaller companies do not have dedicated HR teams. Instead, they use HR agencies to fulfill hiring functions, which typically charge around 20% of the hire’s annual salary. Instead of outsourcing recruiting to fill a position internally, it typically makes more sense to outsource the position itself.

For companies that manage their own job postings and candidate screenings, there are also fees to list positions on job search engines or get more exposure for free listings. Openings that take too long to fill can become quite costly to maintain on these job boards.

Verifying Credibility Costs

Ensuring that applicants have represented their abilities and experience correctly is a time-consuming process. Interviewing candidates, checking references, running background checks, and performing hiring assessments takes away from the day-to-day functions of running a business. Time wasted on candidates that are not qualified or decide to reject offer packages cannot be recouped.

Coordinating Travel Costs

Candidates that must be brought in to interview will likely have their travel expenses paid for as part of the process. Reimbursing applicants for mileage or flights, hotels, and meals is a substantial cost when several qualified applicants are being considered.

Onboarding Costs

As tedious as the hiring process seems, making a competitive offer and waiting for a response is the easiest part. After an offer is accepted, the most time-consuming part comes next – onboarding a new employee.  

Relocation Costs

Some employers pay for relocation costs directly as part of the offer package, while others pay indirectly in the form of waiting for a new hire to start in the role. The only way to forgo this opportunity cost is to confine the job search solely to local candidates. However, unless the business is in a major metropolitan area, this will significantly limit the candidate pool, and may result is settling for a less desirable applicant.

Training Costs
​

On average, it takes 8-26 weeks for an employee to become fully productive in a new role, with more senior-level jobs taking longer than entry-level positions. Even for specialized positions like accountants, who come into a role with a skillset that often does not need to be overseen by existing management, training is still required to integrate them into the overall business structure.

Employment Expenses

​According to recent figures, salaries only account for 68% of the cost of an employee.

​The remaining 32% is the cost of benefits and miscellaneous employee-related expenses, totaling an average of $11.60 per hour.  
employee benefits
Health Insurance Expenses
​

Health insurance is the largest expense that employers incur when hiring internally. On average employers pay approximately $6,000 annually for individual health insurance coverage or $17,500 annually for family health insurance coverage. This cost is the most salient reason for choosing to outsource finance and accounting functions.  

Paid Time Off Expenses

Senior-level employees are typically granted more PTO than less experienced employees, making it a substantial expense for these types of positions. Non-work time, like PTO, diminishes employee output. When a single employee is the only one in a role, PTO provisions limit the amount of work that is feasible. In the case of an accountant, this may mean sacrificing long-term financial strategic planning in favor of prioritizing routine financial necessities like accounts receivable/payable, bank reconciliations, payroll, and financial reporting.

Cost of Retirement Benefits

Contributions to employee 401K plans add to the cost of hiring in-house. While some businesses opt to make minimal retirement investments, the best companies understand that generous retirement benefits increase retention. However, 401K matching comes at a steep price for employers.  

Employment Taxes
​

Payroll taxes for Social Security, Medicare, and worker’s compensation, add to the cost of an internal employee, which is another reason why companies outsource professional services. Some states have additional requirements like unemployment insurance fees to further elevate employee expenses also.
​​
Everything might be working well for you and you may feel there is no reason to change the structure or team. You get accurate, timely reports and it’s not ‘broken’, so why fix it?

If however you notice flaws, gaps or errors, you might be considering a change in the structure or adding a new (or another) accountant to our team. The costs of hiring an accountant can quickly add up. There is an option. You can outsource to our team. We can do the job remotely or onsite. Call us today!
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