Part-Time vs. Full-Time Accounting StaffPosted on December 9th, 2018
Outsourced Accounting Department, Inc.
In my previous article, “Difference Between a Bookkeeper, Controller, CFO, and Tax Accountant,” I briefly described the responsibilities of these various accounting roles. In this article I will discuss the advantages of outsourcing these tasks vs. when it’s time to bring them in house.
To start, this article from the October 2016 issue of Entrepreneur Magazine provides a good overview of accounting roles: “How and When to Grow Your Company’s Accounting Function.” One role the article leaves out is that of the Controller, which falls between bookkeeper and Chief Financial Officer. The difference between the two is that the Controller’s position is more of an accounting role, while the Chief Financial Officer (CFO) role is more “big picture.” In reality, sometimes they are combined into one position, which I believe is what the author of this article was assuming.
Again, in our business, the organization chart would look something like this with the client in the traditional role of “Chief Executive Officer,” and the boxes in red are the services we typically provide:
In our business, the data entry may be performed to a degree by the small business owner using QuickBooks, and to a larger extent by a part-time bookkeeper on our staff. Or in some cases, it’s performed entirely by our staff person when the owner doesn’t want to have anything to do with bookkeeping.
The next level up on the chart then is the Controller, who reviews, adjusts, and closes the books after everything has been entered and reconciled by the bookkeeper, and then issues and analyzes the financial statements (going back down the right side of the chart). The emphasis here is on tying out the client’s books to source documentation such as loan documents, capitalizing and depreciating fixed assets, and matching costs to revenues (or in the case of the latter, on “management” and “financial” accounting vs. “tax basis” – see previous articles referenced above and below). I refer to this “value-added” level of bookkeeping as “Part-Time CFO/Controller.” This is where I believe we differ from individuals or firms that perform only data entry or QuickBooks consulting functions, who often leave it up to the tax preparer to “fix” the accounting at year-end, and often in their tax software, not your books (thus rendering your books completely useless for managing and planning your business).
While the business is small, the internal accounting can be accomplished on a part-time, “as-needed” monthly basis, with each accounting level remaining more affordable during the early growth stages. Then as your business grows larger, the accounting functions become more full-time in terms of hours required, and that is when it’s time to consider bringing the positions in-house on your payroll. While there are no hard and fast rules as to when it’s time to add a full-time accounting staff, I tend to use these rules of thumb:
|Gross Revenues||Accounting Staff||Annual Compensation|
|Start-Up to $100,000||Outside Tax Accountant||$500 to $2,000 (Tax Returns only)|
|$100,000 to $5 million||Part-Time CFO/Controller||$2,100 to $12,000 (Combined)|
|$5 to $10 million||Full-Time Bookkeeper + Controller||$35,000 + 75,000 = $110,000|
|Over $10 million||Full-Time CFO||$75,000 to $100,000 +|
Obviously, every company’s accounting needs are different, so there will be some overlap between business sizes as to when you actually start adding a full-time staff, who, and at what salary. Also, a major controlling factor as to when to hire a full-time staff person is the company’s bottom line profit. A company with higher profit margins can afford to add staff people sooner than a company with thin margins. Aside from that issue, as I’ve said previously, most small business owners know when the time is right to add a full-time accounting department staff. But until that time, it is essential that proper accounting not be ignored, as that historical financial data will be needed later when applying for a business loan or selling the business.