With many years of experience at MAYACHI understanding how back-office and accounting processes can be structured within a recruitment agency, we are often asked whether an agency should operate its finance function in-house or outsource it.
There is no simple answer. The right approach depends on the size and complexity of the agency, its existing processes and the level of control the owner wants over the business’s finances.
Cost is often a deciding factor, but there are clear advantages and disadvantages to both an in-house team and a fully outsourced solution.
ADVANTAGES OF IN-HOUSE ACCOUNTING
GREATER DAY-TO-DAY CONTROL
Having an internal accountant or finance team can mean that financial information is readily available whenever the owner needs it. This allows directors to ask questions and resolve issues quickly.
This can be particularly useful for agencies with high volumes of weekly payroll, contractor payments, VAT and CIS transactions, where resolving issues quickly can help ensure clients and contractors remain happy.
A BETTER UNDERSTANDING OF THE AGENCY’S OPERATIONS
When an in-house accountant becomes familiar with the agency’s clients, recruiters, margins, payroll processes and internal systems, they can develop a detailed understanding of how these areas affect the financial performance of the business.
This can include identifying unusual costs, margin erosion or potential cash flow issues before they become more significant problems.
IMMEDIATE ACCESS TO FINANCIAL INFORMATION
With the finance function sitting within the business, directors can access additional reporting, debtor information and cash flow updates without having to wait for an external provider.
This can support faster decision-making as the agency grows and its financial requirements become more complex.
ADVANTAGES OF OUTSOURCING ACCOUNTING
LOWER OVERALL COST
The biggest advantage of outsourcing is often the cost, particularly when employing a full-time accountant can be expensive once salary, National Insurance, holidays, software and other employment costs are taken into account.
Outsourcing can provide access to accounting expertise at a fraction of the cost of employing a full-time member of staff.
ACCESS TO WIDER EXPERTISE
An outsourced accounting provider can bring experience from working with multiple businesses, particularly when they have specialist knowledge of the recruitment sector.
This can be extremely valuable when dealing with areas such as contractor payroll, VAT, CIS, invoice finance, credit control and cash flow management.
EASIER TO SCALE AS THE AGENCY GROWS
An outsourced accounting provider can increase its level of support as the agency’s turnover and transaction volumes increase.
This can be more flexible than having to recruit additional finance staff every time the agency reaches another stage of growth.
SO, WHICH IS RIGHT FOR YOUR AGENCY?
The right accounting structure depends on the size and complexity of the agency, but the most important consideration is whether the finance function gives directors accurate, timely and recruitment-specific information to make better decisions.
For some agencies, that may mean building a strong internal finance team. For others, outsourcing can provide greater flexibility, specialist expertise and better value for money.
The key is to make sure your finance function is working for the business rather than simply processing transactions.
MAYACHI has worked with many recruitment business owners to review their back-office and accounting structures and implement processes that work best for their agency.
We have trained internal teams as well as introduced agencies to recruitment-specific outsourced providers, helping ensure that each agency has the right financial support for its individual needs.