The Total Cost of an Accounting Department is Not Just the People
In today’s business world, many companies are finding themselves stretched when it comes to resources. Downsizing, rising costs and a shortage of skilled workers, especially in situations where highly specialized knowledge is required, can make it difficult for companies to hire and retain the employees that they need. This tends to be especially true in the case of accounting departments. Although it’s easy to understand the cost of maintaining a department in terms of strictly “head count” and payroll, there are actually many other expenses involved in maintaining a well-trained and competent accounting department.
Shortage of Specialized Employees
Working as an accountant requires a great deal of specialized knowledge, especially if a company does business in a number of different states, or even in a number of different countries. Keeping up with the various tax laws can almost be a full-time job. In order to find potential accounting employees who already have this kind of expertise, companies usually have to turn to recruiting agencies. Even then, it can be a long and arduous search. The fees charged by recruiting agencies and the costs involved with the interview and hiring process are an expense that must be considered when calculating the overall cost of an in-house accounting department.
On-going training is an absolute must for accountants. Laws change and the regulations that govern issues such as payroll taxes can be quite complex. A company’s accounting staff has to be knowledgeable in local and federal tax laws, in addition to the laws of other countries if they have global locations. As a result, companies usually have to dedicate a rather large training budget to their accounting department. Depending on the size of the department and the complexity of the company’s accounting needs, this can add up to a sizable expense.
The Risk of Penalties and Lost Tax Credits
Companies who do not have an adequately staffed accounting department are often at risk of missing deadlines or making mistakes that can result in stiff penalties. Additionally, because there are so many available federal and state tax credits available, it can be easy to miss a credit or program that could save a company thousands of dollars in taxes. Utilizing these credits can be extremely advantageous to companies, but it can often be difficult to figure out who may qualify and how best to leverage these tax credits. The financial loss of missing a tax credit or the impact of being forced to pay a penalty because of a missed deadline or inaccurately calculated taxes can be considerable, and should be included in the overall cost of maintaining an in-house tax department.
General Overhead Costs
In addition to the specific costs mentioned above, there are also other costs inherent in maintaining an accounting department. There are management costs, benefits, computer and equipment costs, utility costs, and office space costs. In some cases, companies may even maintain a separate building for their accounting department. As a result of these and other costs, many companies are making the decision to use accounting firms as opposed to maintaining their own in-house department.