Outsourcing is basically the corporation around core competencies and long-term outside relationships. A costly business process always distract your organization services. Now the question is “How much does outsourcing services cost?” So, what brings you to this post? It is just the cost- benefit analysis. This is the reason why most businesses around the globe are outsourcing to India. Let’s explore how the top offshore accounting companies price their services and compare it to the true cost of recruiting in-house accountants.
A) Actual Cost of Managing employees:
Expensive affair: When accounting firms feel the need to hire new employees, it’ usually a good sign of growth and development. Though, for many accounting firms in the UK, the practice of hiring new employees, training them, and paying them every month is too expensive. Hiring in-house employees has always been an expensive affair for accounting firms in the UK. The kind of work which is done in UK for a very high price, can be obtained at a much cheaper rate in the developing countries like India. The difference varies to up to 60%.
Recruitment cost: In UK, recruiters often charge 20%-30% of the final salary amount to source talent. The average cost per recruit in the UK is £3,000. But, the true cost of hiring qualified accountants is much higher. Small-scale accounting firms in the UK usually have to deal with additional costs. It includes specific processes like Job description, screening, Initial Interview, face-to-face interview, staff onboarding, training etc.
Training cost: Most companies in the UK offer either in-house training or funding towards external training. Either way, this comes at a cost. It’s vital cost as training can help improve employee retention rates. The average UK company spends over £1,000 per employee.
Other costs: There are other costs to consider such as the HR costs to deal with new starters, holiday cover, sick leave, Cover for maternity leave, company cars, software license cost, office space and equipment cost etc.
Review work cost: Other factor usually arise that your in-house staff can only do compliance work to a draft stage. So they require a senior accountant to review the work papers. Time spent on your in-house staff to review and handle the team’s work will increase the extra cost.
As per the recent reading, if we add these expense to other costs like holiday coverage, sick leaves, HR Costs etc., the true long-term cost of hiring one in-house accountant in the UK is close to £12,000. By outsourcing accounting services, small-scale accounting firms in the UK can curtail or even eradicate these employee- related costs.
B) Cost as per BPO Model:
BPO deals in back office and front office outsourcing. It occurs when an organization turns over the management of a particular business process such as accounting or payroll. They prefer third party that specializes in that process. The fundamental concept is that the BPO firm can complete the process more efficiently, leaving the original firm free to concentrate on its core competency.
Benefits for availing Outsourcing company services:
• Receive fixed hours of output from your outsourcing company for fixed prices. Hourly rates can range from anything between £8/ hour to £18/hour, depending on the complexity of the work. Accounting firms in the UK only have to pay for pre-determined amounts of time. If the firm has large volumes of work, it can easily add hours on the clock for minimal fees. Firms can even buy pre-paid blocks of hours (e.g. 1200 hours) for fixed amounts.
• Saves on investment: There is no need to spend extra on developing infrastructure. When the work is outsourced, the partner who takes over the outsourced work, make necessary infrastructural changes as per the requirement of the work.
• Round the clock work: It has a great time zone benefit. Outsourcing companies provide 24 X 7 services. There will be difference in the time of two countries. But one can assign work and relax, as the work will be done by the other in time. Therefore work will be going on round the clock. This system is also beneficial for weekly off days also.
• Charge as per the work: Outsourcing companies only charge you as per the work done. Lean period
is not charged from you.
• Involve review work: BPO Model involve senior accountants with lots of experience. They review the work done by the junior accountant and assure quality of work to be provided to their clients.
Most of the outsourcing companies in UK offer this engagement model, and it’s the most popular one amongst large-scale accounting firms in the UK. Full-time services can cost up to £2000/ month (a relatively low figure given how much in-house accountants charge). These models typically involve senior accountants from offshore countries with lots of experience. Accounting firms that deal with high volumes of knowledge work can save a lot of resources utilizing this model.
In conclusion, the true cost of partnering with outsourcing experts is significantly lower than hiring accountants in – house. That’s why accounting firms in the UK that went to lower their operational costs must consider outsourcing!
