In the early days of running a business, small business owners often end up working across multiple functions. You might find yourself working on marketing one day; sales and operations the next.
As your business grows and cash flow is healthier, you can start to think about sharing the workload. And while taking on permanent staff is one option, outsourcing can be a cost- and time-saving alternative. One place to start could be your finance department. Once your company hits a turnover of £500,000, it’s likely that you’ll benefit from getting support with your finance function, says Alan Healey, an associate partner with accounting firm Haines Watts.
This guide will help you to understand if outsourcing your finance function could be right for your business, as well as how to go about it.
Which finance functions can be outsourced?
1. Accounting manager and staff accountants
Your accounting manager will work with a team of accountants to ensure your company accounts are kept up-to-date and compliant. Many larger accounting firms will provide outsourced services to do this.
2. Accounts receivable/payable
An accounts receivable or payable service will pay the money your company owes to suppliers and collect money that is owed to the company by customers.
3. Financial controller
This person will usually report directly to a company’s financial director and is responsible for providing accurate and timely company records by managing the accounting function. They are responsible for creating financial statements to support the overall business strategy.
4. Payroll manager and assistants
This team is responsible for making sure your employees are paid correctly, and on time. They will calculate hours and benefits, ensure deductions are made accurately, and calculate your weekly or monthly payroll, before issuing payslips to workers.
5. Finance director
The most senior financial role that can be outsourced is your finance director (FD). Using an outsourced FD can give your business access to an experienced professional with insight that could help your business develop more effectively. For example, your new FD might have experience in applying for grant funding, or expertise in understanding tax issues when exporting products that you don’t have.
Advantages of outsourcing finance roles
Cost savings
There are many advantages to outsourcing your finance department, but the most important is usually cost. According to PA Consulting, 71% of UK companies using outsourcing say that cost reduction is a major driver [1].
Outsourcing finance and accounting can easily reduce finance costs by 30%, says Healy, and that’s important for SMEs, where cash flow can often be an issue. “A full-time, in-house FD or financial controller is probably overkill for most businesses with turnover below £3 million," says Healy. "You’ll have great books if you hire someone in-house, but that money could probably be used better elsewhere.”
Time savings
It can take months to recruit an in-house finance team, train them, and teach them the characteristics of your industry. Outsourcing finance functions give you access to a ready-assembled team that can hit the ground running, says Healy.
SwetWipes is a UK company that makes biodegradable wash wipes for adults. Revenue and profits grew by 50% during 2021, and the target for next year is even more ambitious. Managing director Liz Barnes says that outsourcing finance and accounting gives her more time to focus on managing that rapid growth.
“We outsource everything that isn’t one of our core competencies, because it frees up my time, and keeps costs down,” she says. “It doesn’t make sense for me to spend a morning figuring out someone’s wages when I can pay £15 per employee, per month for someone else to do that for me.”
More flexibility
One of the key competitive advantages of being a smaller business is being able to pivot quickly, and outsourcing can help with this, says Healy. For example, if your company needs to hire additional workers during a busy season, or apply for an important business grant, those things need to happen at pace. "When someone pays for my time as an outsourced FD, they aren’t just buying my time. It’s the whole team behind me,” he says.
Using an outsourced payroll company that specialises in working with start-ups has provided SwetWipes with access to important expertise. The company’s first employee joined through a government kickstart scheme, creating specific issues around pay, adds Barnes. “I had no idea what to do in terms of their wage, but our outsourcing provider does everything from calculating deductions to creating payslips,” she says. “It takes away the stress of worrying if we’ve got something right, and means we can get the right people in, and onto the payroll, quickly.”
Advantages of keeping finance roles in-house
Handling increased complexity
As your business grows, your accounting processes can become more complex, which can be an argument for bringing your finance department in-house. What's more, if your growth is steady and you don't need the same flexibility in staffing levels, it may be beneficial to focus on hiring and retaining finance staff who understand your business deeply, rather than investing time and money in bringing on board an outsourcing provider each time you are short-staffed.
One way to improve employee retention of these key workers is to use employee rewards. An American Express® Business Card can help business owners collect Membership Rewards® points¹ through their business spend. The points earned can be used to invest in your employee rewards initiatives, such as gifts, vouchers, and tech upgrades.
Business insight
In other cases, in-house staff can be helpful for their insight into unique business circumstances that aren’t available from an outsourcing company. “To some extent, outsourcing is always a trade-off between cost and customisation," says Healy. "You pay a reduced fee, but you won’t get someone who has specific knowledge of processes and payment procedures that are specific to your industry or business.”
Having an in-house finance team also means you can be sure you’re only paying for the services you need, and not wasting money on services that might not add value to your business.
You’re in control
While tailored service can be achieved to a certain extent through careful Service Level Agreements, there will always be some standardisation across processes that may feel uncomfortable for some business owners.
“When an outsourcing company is running payroll for 200 businesses, they can’t do that in 200 different ways,” says Healy.
If you have a very specific set of financial processes that are bespoke to your industry sector, and that add value to your organisation, then there may be a good argument for keeping your finance department in-house. For example, if your business uses seasonal workers and you need to run payroll so that shift workers are paid after each shift, rather than on a monthly basis.
How to decide which finance roles to outsource
When deciding which finance roles to outsource, experts suggest identifying which roles are central to the identity of your business (core competencies). If someone else can’t do a job as well as you, and that job is critical to your business, then it should remain in-house.
If a job can be delivered to the same or a higher standard externally and is a standard process (such as bookkeeping), then it will usually be more cost-effective to outsource that role either to a manual team or an automated platform.
Don’t forget that accountancy automation tools, such as QuickBooks and Xero, can be paid for with an American Express Business Gold Card. It has payment terms of up to 54 days², giving you more time to clear your balance.
- Membership Rewards points are earned on every full £1 spent and charged, per transaction. Terms and conditions apply.
- The maximum payment period on purchases is 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date. If you'd prefer a Card with no annual fee, rewards or other features, an alternative option is available – the Business Basic Card. If you'd prefer a Card with no annual fee, rewards or other features, an alternative option is available – the Business Basic Card.
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