About
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Careers
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Contact
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Services Industries Knowledge Center People

About Our Services

We offer tailored solutions — whether private company or owner; public or private fund, adviser or fund service provider; or Fortune 1000 enterprise. Learn how we can help you.

Learn More

Assurance Services

Employee Benefit Plan Audits Internal Controls Investment Company Audits Private Company Audits SOC Readiness & Compliance

Tax Services

Federal Tax Planning & Compliance High Net Worth & Wealth Transfer International Filings & Structuring Investment Company Tax State & Local Tax Tax Credits & Incentives Transaction Tax Planning

Advisory Services

Business Valuations Data & Insights Digital Finance Solutions IT Strategy & Implementation M&A Advisory Outsourced Accounting Solutions Risk Assurance & Advisory Transaction Services Turnaround & Restructuring

Our Industry Expertise

Our industry experience means you can find professionals who speak your language and bring earned insights to the table. Learn how we can help you.

Learn More

Key Industries

Digital Assets Investment Companies Manufacturing Private Companies Private Equity Real Estate & Construction Technology & Life Science
VIEW THE COMPLETE LIST

Knowledge Center

Our team wants to help your team stay up to date. Browse our thought leadership, events and news for insights and a point of view on business-critical topics.

Learn More

Insights

Browse valuable articles and publications our experts have written to help you and your organization answer key questions — and consider new ones.

Read Our Insights

Events

Join us in person and online for events that address timely topics and key business considerations.

Explore Our Events

News

Find out what is happening at Cohen & Company, from industry recognitions and growth updates, to where we are contributing to important media stories.

Read Our News
People
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Back to Insights

Outsourcing Your Financial and Accounting Function: Why It Might Be Time

by Jim Boland

January 11, 2022 Digital Finance Solutions, Outsourced Accounting Solutions, Private Companies

Goodbye 2021. A year of great anticipation, January 2021 was filled with goodbyes to 2020 and turning our focus to a year of recovery. And recover we did! Segments of the economy re-opened, the S&P 500 registered 68 record highs and by March job openings increased 80% over the prior year, according to FRED US Bureau Labor and Statistics. Yet even with all of that progress, sitting here in January 2022 we face many new challenges that require more thoughtful solutions.

A Hard Look at the Labor Force Today

Our greatest challenge is one we all face, a new labor dynamic constricting growth across industry supply chains. This year we learned terms like “The Great Resignation” and saw employment models like gig workers’ spike in popularity. The result is an empowered workforce that has been able to capture more compensation working in more flexible virtual environments. According to Q4 2021 US Bureau of Labor and Statistics data, April 2021 registered twice as many job “quits” as April 2020, and employee compensation was 15% higher than the prior year. However, over the subsequent eight months employees struggled to outpace an inflationary environment, actually losing buying power as CPI increased three percentage points while employee compensation year-over-year is off five points.

CC_QuitRateChart_1-10-22.jpg

Ultimately these statistics will stabilize as the labor supply and demand curve settles, but the Labor Force Participation Rate (LFPR) points to a potentially significant longer-term implication on labor supply. Heading into the COVID-19 shutdown of April 2020, the LFPR was north of 63% before dropping to 60% and only recovering to and remaining steady at 61.5% (61.8% in November 2021). If participation rate fully rebounded, 2.4 million workers would be added to the workforce. However, the total pool of participants is shrinking as well, due to large shares of retirement, some pandemic induced, and workforce exits. December 2021’s payroll numbers showed 400,000 new jobs with an unemployment rate dropping to near 4%, but when we talk about the new normal, a workforce with millions fewer workers at full employment requires us to think differently.

Turnover and Outsourcing: More New Normals?

In September 2021 we wrote about the tightening labor market, looking at three tactical ways to help a business become less dependent on recruiting, developing and retaining non-core employees. Our follow-up piece in October explored technologies that are helping eliminate manual data entry, accounting and reporting processes. Now, turning the page to 2022 and facing (yet another) new normal, businesses are accelerating investments in these technologies and the corresponding opportunity to outsource supporting business processes in a different way than before.

McKinsey Quarterly highlights the labor challenge facing business leaders, noting from a recent study in their “Great Attrition” article that 40% of employees are somewhat likely to leave their current job in the next three to six months. In that survey, 18% of workers say they are “likely to certain” they will change jobs over that time period. This turnover can be very disruptive and costly to businesses. The day-to-day investment of time required to source, recruit, interview, onboard and develop employees is significant, especially when nearly one in five employees is likely to turn over every three to six months.

Looking deeper at finance and accounting (F&A) jobs, these roles are becoming more compelling candidates to outsource. CFOs as stewards of the business require scalable, credentialled resourcing models that can reliably deliver real-time analytics and trusted monthly financial and management reporting. This information is critical for business leaders to make informed revenue and operational decisions, and the new technologies help outside parties deliver more efficient data management processes across internal and external data sources. The result is better reporting with a lower related cost to deliver.

For example, the American Productivity & Quality Center benchmarks cite average F&A personnel costs at 1.4% of revenue, with best-in-class businesses operating at the 0.6 to 0.7% range. Within specific process areas like managing collections, these benchmarks present an even greater cost reduction opportunity with average performance at $0.92/$1,000 revenue and best-in-class down at $0.20/$1,000 revenue. For a $1 billion revenue company, this can equal over $700,000/year in cost savings. Couple that with HR’s backlog of core jobs that need filled, and outsourced F&A jobs become even more valuable.

At the very least, having the conversation with an outside resource that offers outsourced F&A services, expertise in leading technology platforms and CPA-led service teams is worth the time to find opportunities to achieve these best-in-class benchmarks.
 
Contact Jim Boland at jboland@cohenconsulting.com if you are interested in learning more about how outsourcing solutions can be configured for your business.

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.

About the Author

Jim Boland, MBA

Partner in Charge, Advisory
jboland@cohenconsulting.com
216.774.1211

Sign Up for Our Emails & Events

Receive insights from our specialists in a variety of areas and timely information on upcoming events directly to your inbox as they go live in our online Knowledge Center.

Subscribe Today
Subscribe to our newsletter
About Contact Submit RFP Privacy Policy
LinkedIn Twitter Facebook
© 2023 Cohen & Company