The True Cost of Hiring an In-House Finance Team
As your business grows, so does the complexity of your finances.
What started as a business owner keeping an eye on the bank account and sending invoices can quickly turn into bookkeeping, payroll, credit control, management accounts, cash flow forecasting, budgeting and financial planning.
Eventually, you may find yourself asking:
"Do we need to build an in-house finance team?"
For some businesses, the answer will be yes.
But before you start advertising for a Finance Manager or Financial Controller, it's worth understanding the true cost of hiring an in-house finance team.
The salary is only one part of the cost.
Once you include recruitment, National Insurance, pensions, software, training, holidays, management time and the cost of employing additional people as you grow, an in-house finance team can become a significant overhead.
For many growing businesses, outsourcing finance can provide access to the same expertise at a fraction of the cost of building a full finance department internally.
What does an in-house finance team actually cost?
The answer depends on the size and complexity of your business.
A small business might start with a bookkeeper.
As the business grows, you may need:
Bookkeeper
Finance Assistant
Management Accountant
Financial Controller
Finance Director
The problem is that you don't necessarily need all of these people full-time.
Yet building an in-house finance function often means hiring employees before the business has enough work to justify them.
Let's look at some of the costs involved.
1. Employee salaries
The most obvious cost is salary.
A growing business might eventually require several different finance roles.
For example, you could have:
Finance Assistant - £25,000 – £30,000
Bookkeeper - £28,000 – £35,000
Management Accountant - £40,000 – £55,000
Financial Controller - £55,000 – £75,000
Finance Director - £80,000 – £120,000+
These figures are illustrative and vary considerably depending on location, experience and the complexity of the role.
But they demonstrate an important point.
A finance department can become expensive very quickly.
You could potentially be looking at well over £100,000 a year in salaries before you've even considered the additional employment costs.
2. Employer National Insurance
Salary isn't the only cost of employing people.
As an employer, you also have to consider employer National Insurance contributions.
For a business employing several finance professionals, this can add a significant amount to the annual cost of the finance team.
And unlike a fixed outsourcing fee, employment costs can increase as salaries rise.
3. Pension contributions
Employers also need to consider workplace pension contributions for eligible employees.
Again, this may not seem significant when you're employing one person.
But when you have several employees across a finance department, the cost adds up.
4. Recruitment costs
Finding good finance professionals isn't free.
You may need to pay for:
Recruitment agency fees
Job advertising
Background checks
Interviews
Management time
Onboarding
And recruitment isn't guaranteed to work first time.
If an employee leaves after 12 months, you may have to repeat the entire process.
There is also a less obvious cost:
the time your senior team spends recruiting.
Every hour a business owner spends interviewing candidates is an hour they aren't spending growing the business.
5. Holiday and sickness
An employee isn't available 365 days a year.
You need to account for:
Annual leave
Bank holidays
Sickness
Parental leave
Other absences
Yet the finance function still needs to operate.
This can mean having additional employees or outsourcing certain tasks to ensure there is sufficient cover.
6. Software and technology
A modern finance department requires technology.
Depending on your business, you may need:
Accounting software
Payroll software
Expense management software
Credit control software
Reporting software
Forecasting tools
Document management systems
Payment platforms
The cost of individual subscriptions might seem small.
But when you have multiple systems and multiple users, the monthly cost can become substantial.
7. Training and professional development
Finance doesn't stand still.
Tax rules change. Accounting standards change. Technology develops.
Your finance team needs to keep up.
That can mean paying for:
Professional training
Courses
CPD
Conferences
Software training
Professional memberships
It also means employees spending time away from their normal responsibilities.
8. Management time
This is one of the most overlooked costs of an in-house finance team.
Someone needs to manage the finance department.
That might be the business owner, Managing Director or another senior member of the team.
You may find yourself:
Managing employees
Reviewing work
Dealing with performance issues
Recruiting replacements
Approving holidays
Managing suppliers
Choosing software
Resolving internal issues
The financial cost of this management time can be significant.
But the opportunity cost can be even greater.
9. The cost of hiring the wrong person
This is perhaps the biggest hidden cost.
A finance team is only as good as the people in it.
Hiring an inexperienced or unsuitable finance professional can result in:
Poor financial reporting
Incorrect forecasts
Missed deadlines
Weak credit control
Poor cash flow management
Incorrect accounting
Missed opportunities
And replacing someone takes time and money.
The cost isn't simply the recruitment fee.
It can affect the entire business.
The finance team often grows faster than you expect
One of the biggest problems with building an in-house finance department is that businesses often underestimate how quickly it needs to grow.
You might initially employ a bookkeeper.
Then the business grows.
Suddenly the bookkeeper is spending all their time processing transactions and doesn't have capacity for management reporting.
So you hire a management accountant.
Then you need better financial controls.
So you hire a Financial Controller.
Then you realise you need someone to provide strategic financial guidance.
So you hire a Finance Director.
Before long, what started as one finance employee has become an entire department.
What does an outsourced finance department cost?
This is where outsourced finance becomes interesting.
Instead of employing an entire team, you can outsource some or all of your finance function to an external provider.
Depending on your requirements, an outsourced finance department can provide:
Bookkeeping
Management accounts
Payroll
Credit control
Cash flow forecasting
Budgeting
Financial reporting
KPI reporting
Financial Controller support
Finance Director support
You effectively get access to a team of finance professionals, rather than relying on a single employee.
And importantly, you can often scale the service as your business grows.
In-house finance team vs outsourced finance
Let's simplify the comparison.
In-House Finance Team
Employee salaries
Employer NI
Pension contributions
Recruitment costs
Holiday & sickness
Training & development
Multiple employees required as you grow
Software costs
Management time
Access to specialist expertise
Outsourced Finance Team
Monthly service fee
No recruitment costs
No holiday & sickness costs
No training & development costs
A team that scales with you
Reduced time spent by you and your management team
Access to wider expertise
The biggest advantage isn't necessarily that outsourcing is always cheaper.
It's that you only pay for the level of finance support your business actually needs.
But isn't an in-house team better?
Not necessarily.
There are situations where having an in-house finance team makes perfect sense.
For example, a large business with complex operations may need finance professionals working closely with the management team every day.
But for a growing SME, you may not need a full-time Financial Controller or Finance Director.
You might need their expertise for:
One day a week
A few days a month
Specific projects
Monthly management meetings
Budgeting periods
Business acquisitions
Fundraising
Strategic planning
Paying a full-time salary for expertise you only need part-time doesn't always make commercial sense.
The real question isn't "How much does an accountant cost?"
It should be:
"What does my business actually need from its finance function?"
A £1m business may not need five finance employees.
It may need:
A reliable bookkeeping function + accurate monthly management accounts + strong cash flow forecasting + credit control + access to senior financial expertise.
That can potentially be delivered through an outsourced finance department.
When should you consider outsourcing your finance function?
There are several signs that outsourcing could be the right solution.
Your business is growing quickly
Your financial requirements are increasing but you don't want to build a large internal team.
You're spending too much time on finance
The business owner shouldn't be spending hours every week chasing invoices and analysing spreadsheets.
You don't have accurate monthly management accounts
If you don't know how your business performed last month, it's difficult to make good decisions.
Cash flow is becoming harder to manage
As turnover grows, so does working capital complexity.
You need senior financial expertise
You want access to a Financial Controller or Finance Director but don't need one five days a week.
Your finance team is becoming overwhelmed
If your existing finance employee is constantly firefighting, adding more responsibilities may not solve the problem.
Outsourcing isn't just about saving money
It's tempting to view outsourced finance purely as a cost-saving exercise.
But the biggest benefit may actually be better financial management.
An experienced outsourced finance team can help you understand:
Where you're making money
Where you're losing money
Which customers are most profitable
Whether your margins are improving
How much cash you'll have in the future
Whether you can afford to recruit
Whether your growth is sustainable
That information can potentially be worth far more than the cost of the finance function itself.
The hidden cost of not having the right finance function
There's another side to the calculation.
What does it cost your business not to have good financial information?
Consider a business that:
Doesn't chase overdue invoices quickly
Doesn't monitor gross margins
Doesn't forecast cash flow
Doesn't understand customer profitability
Doesn't produce regular management accounts
Doesn't budget properly
The cost of those issues could easily outweigh the cost of employing or outsourcing a finance team.
Good financial management isn't simply an overhead.
It can be an investment in the growth and profitability of your business.
So, should you build an in-house finance team or outsource?
For many growing businesses, the answer doesn't have to be one or the other.
You could have a small internal finance presence supported by an outsourced finance team.
For example:
In-house:
Finance Assistant / Bookkeeper
Outsourced:
Management Accountant + Financial Controller + Finance Director
This can give you the best of both worlds.
You have someone inside the business dealing with the day-to-day requirements, while experienced finance professionals provide the reporting, forecasting and strategic guidance the business needs.
The bottom line
Building an in-house finance team can be the right decision for a growing business.
But don't make the decision based solely on salary.
The true cost of hiring an in-house finance team includes recruitment, salaries, National Insurance, pensions, software, training, holidays, management time and the cost of scaling the department as your business grows.
For many SMEs, an outsourced finance department can provide a more flexible alternative.
You get access to a team of finance professionals, without necessarily carrying the fixed cost of employing an entire department.
And perhaps most importantly, you get something that every growing business needs:
Clear, timely financial information that helps you make better decisions.
Welf Accountants: Your outsourced finance department
At Welf Accountants, we work with ambitious, growing businesses that need more from their finance function than traditional year-end accounting.
We provide a complete outsourced finance solution covering bookkeeping, management accounts, financial reporting, payroll, credit control, cash flow forecasting and senior financial support.
Rather than simply providing accounts once a year, we become an extension of your business and give you the financial information and expertise you need to make better decisions.
You don't necessarily need to build a finance department.
You just need access to one.