Introduction
If you are a like most founders or business owners, you would prefer to spend your time focusing on growing your business and serving customers, not reconciling bank accounts. However, accounting is a necessary part of every business whether it’s just for filing taxes at year end or to analyze and optimize your performance. This is why outsourced accounting can be so valuable to entrepreneurs- it lets you direct your energy to what matters most in your business while having confidence that you have a qualified team to take care of the day to day back office. While we’ve talked about the benefits of outsourced accounting and CPA services before, in this article, we go over the important considerations for outsourcing your accounting and provide a rubric for how much, and what levels of accounting, you may need depending on your business size.
Table of Contents
- Why Outsource Your Accounting
- Things That Impact Price
- What is the Typical Structure of an Outsourced Accounting Team?
- Pricing Guidelines
- Optimal Structure
- Conclusion
Why Outsource Your Accounting
Nobody starts a business to be an accountant (well except for us of course). Most owners want to use all their waking energy to find new leads, set the strategy, hire employees, and build profitable systems. However, accounting can play an important role from providing visibility into trends in revenue and operating expenses, insights into what’s working and what’s not (financial analysis), and even light tax planning.
When you have an accountant in-house, you are beholden to their level of expertise regardless of your needs whereas with the right outsourced accounting partner, you have can access an optimal blend of expertise and knowledge at any point. Additionally, it is getting harder to find qualified CPAs every day as more accountants leave the profession than start each year. By using outsourced accounting, you get the benefit of the right mix of personnel and service to help you achieve your goals. Additionally, when compared to hiring all the individuals in house, you may be able to save money.
Things That Impact Price of Outsourced Accounting
Every business is different so there is no sure-fire way to predict accounting costs, but the points below outline the facts that will impact the price you pay for outsourced accounting services.
- Total Revenue
- If your business is generating revenue, the volume of sales and invoices you generate may correlate to more work, and more complications, for the accounting team
- Complexity of operations
- Each business is different in how they sell to, and service, customers. The more complex the sales process, the more potential work for an accountant
- Number of employees
- With some businesses, more employees lead to higher volume of transactions or more reporting or internal control requirements (departments, approvals flows, reimbursements, reviews)
- Accounting system
- The more you can integrate into the accounting system the easier it could be for your accountant to perform month end closes
- How much involvement you need from the team
- The benefit of outsourced accounting is that you can tailor the solution to meet your needs. The team can handle many tasks that an in-house member may perform including:
- Invoicing & Receivables Tracking
- Payables Processing & Management
- Budgets & Cash Flow Forecasts
- Financial Analysis
- Strategic Guidance and Support
- Communication with external stakeholders (investors, lenders, etc.)
- The benefit of outsourced accounting is that you can tailor the solution to meet your needs. The team can handle many tasks that an in-house member may perform including:
What is the Typical Structure of an Outsourced Accounting Team?
Depending on the volume and complexity of the transactions in your business, you may need one or all of the typical back-office roles to close your books and gain the necessary insights to achieve your goals. A typical outsourced accounting engagement may involve any combination of each of these positions working with your management team on a regular basis.
- A/P Clerk– processes payables for approval and payment and to get in to accounting system
- Staff Accountant– records information into the accounting system
- Accounting Manager– reviews financial statements, communicates questions and results
- Director– quality review, answers complex questions around accounting and potentially light tax guidance
- CFO– Strategic insights, dashboards and analysis
Pricing Guidelines
With all of this in mind, below is a few ways to think about pricing for outsourced accounting as a percentage of total operating expenses or as a percentage of total revenue. Of course, the facts and circumstances of your business will impact the price you ultimately pay, but the below metrics can be used as a guideline.
% of Total Operating Expenses (pre-revenue) for Outsourced Accounting
| Monthly Operating Expenses | % of Total | $/Month | Deliverables |
| $0-100k | 3% – 5% | $400-$750 | Accounting for Tax Only |
| $100k-$250k | 3% – 5% | $2,500-$8,000 | Monthly financials plus insights into trends
Potential to add/include cash forecasting |
| $250k-$500k | 3% – 5% | $4,500 – $10,000 | Monthly Financials
Cash Flow Forecasting Multi-year Financial Model In depth strategy & analysis Support with external stakeholders |
| $500k-$1M | 3% – 5% | $6,000 – $15,000 | Full Stack accounting and finance |
| $1M+ | 3% – 5% | $15,000+ | Full Stack accounting and finance |
$ of Annual Revenue for Outsourced Accounting
| Annual Revenue | % of Total | $/Month | Deliverables |
| $0-$500k | $400-$750 | Accounting for Tax Only | |
| $1M – $2.5M | 2%-3% | $2,500 – $8,000 | Monthly financials plus insights into trends
Potential to add cash flow forecasting |
| $2.5 – $5M | 2%-3% | $4,500 – $15,000 | Monthly Financials
Cash Flow Forecasting Multi-year Financial Model In depth strategy & analysis Support with external stakeholders |
| $5M – $10M | 2%-3% | $6,000 – $15,000 | Full Stack accounting and finance |
| $10M + | 2%-3% | $15,000+ | Full Stack accounting and finance |
