Improve Your Profits by Hiring the Right Accounting Staff
Written by: Rafael Vidal, President & Co-Founder, ProNexus, LLC
As a CPA and Co-Founder/Partner of ProNexus, I am often asked if our firm can help our clients fill a vacant CFO or Controller position on an interim and/or full-time basis. I always reply with a question: “What’s the nature of the vacancy and which role are you seeking to fill?” Typically, the response is, “There’s a difference?”
The next question we ask is: “What is the scope of work to be performed?” Often, the response is, “Hands on, closing the books, preparing financial statements, and helping us use this information to make business decisions.”
Yes, there certainly is a difference in roles and scope of tasks to be performed. It is the equivalent of asking if you want your family doctor or a cardiologist performing open heart surgery. Indeed, each has medical training, but their expertise and associated skills are very different.
As with any position, the type of organization, culture, cash flow, and many other variables dictate the kind of role you need to hire. Considering this, the distinction between each role in the accounting department breaks down into salary range and key tasks:
- CFO (Chief Financial Officer) – Uses financial information to make decisions impacting profitability, stability and future strategic plans.
- Controller (or Accounting Manager) – Ensures financial statements are accurate through review of financial results and monitoring of financial controls.
- Staff Accountant – Prepares the financial reports, reconciles account balances and posts adjusting entries to make sure the financial statements are correct, under the supervision of a Controller.
- Accounting Clerks – Enters the information that feeds the financial reports through processing accounts payable, accounts receivable, sales orders, and payroll under the Controller supervision.
Given the cost of staffing an entire accounting department, many businesses choose not to hire all roles and seek someone to cover some or all of the roles in one. Often, a small business will try to draw the interest of a seasoned professional with higher level titles (CFO or Controller), pay them 10-20% below market rate, and expect them to cover all duties above clerical. The typical result is a deficiency in one or all the required roles that quickly results in burnout and employee dissatisfaction. Good people don’t take less money to perform multiple duties or work below their capabilities.
A better solution is to leverage a combination of outsourced services and in-house staff, with each person in the right role. With today’s technology, a hybrid on-premise and outsourced solution is a viable strategy to maximize performance across all accounting roles.
How do I know who to hire and what tasks they should be responsible for?
A business’s annual revenues and transactional volumes (number of invoices/payables/purchase/orders, etc.) typically dictate which role to hire and which role to outsource.
In my experience, the following graph fairly represents the outsource/staffing combinations based on typical business workflows:
As a rule of thumb, if your business is generating less than $300K of cash flow per year, you should look hard at outsourcing some of your accounting functions.
How can my company benefit from outsourcing some or all of my accounting functions?
- Increased Profits – Small businesses typically need some, if not all, of each accounting role and its associated expertise, but cash flows frequently don’t justify the cost of the entire staff. Outsourcing offers you cafeteria options. Pay for 8 hours of CFO consultation if you only need 8 hours to get the job done. Pay for 20 hours of accounts payable time, if you only need 20 hours to get the job done. You keep the cash generated by the efficiencies!
- Focus – Outsourcing a financial result, such as receiving accurate and timely financial statements, reduces the time a leader is required to supervise an accounting team. The additional time can be used to drive sales and improve operating results!
- Employee Retention – Employees like to utilize their strengths. If they are a CFO performing staff accountant duties, they tend to feel underutilized. If they are a staff accountant, being asked to partner with operations to improve shop productivity, they may be in over their head. Let experts do what they do best!
- Sustainability – Unemployment is at a record low allowing talented people to seek new opportunities with less risk. You can ensure continuity and control costs by outsourcing part-time functions to another organization.
- Enhanced Employee Development – As you grow, it becomes increasingly critical to have expertise at all levels of your organization. If you’re a sales-oriented owner, you may struggle to develop an accounting team. Outsourcing allows accountants to groom accountants.