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Accounting & Finance Staff Cost

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Posted Sun, 04/25/2010 - 11:03pm by Michael AuYeung (Controller)

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I am working in a company with the businesses majoring in trading and maufacturing of building material.  I am wondering how much (%) the Accounting staff (including financial transactions & management reporting) cost it should be to the sales dollar amount.  Could someone give me some insights of it in generally speaking or specifically in trading or manufacturing industry?

  • Accounting
  • 1520 reads

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Acctg & Finance Staff Cost

by Dorise Steele (Director of Accounting) - 04/30/2010 - 11:22am

Unfortunately, I don't think there are any hard and fast guidelines. A lot depends on the workload and responsibility--i.e. any work done by corporate vs local level, etc.

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Potential Guidelines on Accounting Cost

by Paul Benedetto (CFO - Controller, & Cons) - 05/04/2010 - 5:28am

A goal that I shoot for is to ultimately get your accounting function down to 1% of revenue. I agree with others that there is no hard and fast rule here, as there may be a number of industry specific variables at work.

However, generally speaking, in my experience you "should" be able to get to the 1% figure by the time a company reaches $20M-25M in revenues. This includes staffing, tax and benefits, related overhead and systems. Adding audit and tax fees may push the price out another 50 basis points, again at the $20M level.

Startups to low levels (say $1M) could be as high as 8% of revenue. I wouldn't say that the rates drop in a completely linear fashion vs. revenue growth, but the trend line approximates such.

There is some research you can do by pulling data from like companies (e.g. industry ratio guides), creating a survey on your own, etc.

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Accounting & Finance Staff Cost

by Michael AuYeung (Controller) - 05/04/2010 - 5:41pm

Thanks Dorise and Paul. It provides me a starting point. I have been trying to access other companies' data in their annual reports or from the information they disclose publicly but mostly in vain. Could you please suggest any sources available for the industry ratio guides? Million thanks.

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Accounting & Finance Staff Cost

by Rebecca Potter (Controller) - 05/06/2010 - 8:21am

Perhaps you could check on getting data collected by the Bureau of Labor Statistics (BLS) as well.

Companies utilize their finance staff in different ways (ie heavy on transactions vs heavy on business partnering) so comparibility may be difficult even within the same industry. A combo of public info and BLS data might be helpful.

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F&A Costs

by Philip Alford (CFO Partner) - 05/06/2010 - 9:17am

Industry trade groups often accumulate this data and then provide members with the data.
Sometimes public companies in the MD&A sections of 10k/q break out data on Selling vs G&A cost trends so you might read those sections for relevant companies.

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F&A Costs

by John Jepsen (Consultant) - 05/06/2010 - 1:40pm

If you belong to FENG or know someone who does they may be willing to put the question to it's 35,000 members.

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Accounting & Finance Staff Cost

by John Herndon (Accounting/Finance Consu) - 05/07/2010 - 9:43am

Is it your intention to start your evaluation using the depts cost as a % of revenue for cutting headcount? If not, what is the point? If so, I hope you plan on doing more than just that to define your relative spend level. What other criteria are you using to objectively evaluate your spend analysis? Only reason I ask, I am helping a client with the same problem.

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Processes

by Wray Rives (CPA) - 05/26/2010 - 7:40am

To John's point, if you are looking for opportunity to reduce cost. I would start with a process analysis. Finance and accounting departments are notorious for allowing complexity to creep into their processes. If the business has been around for any length of time, I will almost guarantee you can simplify some of the business processes in the finance and accounting areas.

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Finance Staffing Level

by K Wong (Consulting Manager) - 05/25/2010 - 7:45am

My personal experience, as well as looking at IPO filings, is accounting staff for small companies tends to be 10-15% of total staff.

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Acctg & Finance Cost

by J Roy Martinez (CFO/Controller) - 05/25/2010 - 8:56am

I have actually been thinking about this through some "model P&L" work I was doing on backs of napkins.

I don't think metrics as a % of revenue work. Otherwise, the finance & acctg costs become overwhelming for low margin businesses. I prefer % of GM.

I like the metric - Sales & Marketing < 25% of GM.

I haven't yet been able to set a target for Finance & Acctg. But my gut says 5-10% of GM. This leaves room (35-40% of GM) for profit, "G", & R&D.

I hope this helps.

Roy

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Finance Staffing Level

by Jack Henrie (Owner, President & CEO) - 05/27/2010 - 6:29am

While this depends on many factors, in my twenty years of CFO experience in small and mid-sized companies, my staff has never comprised 10 to 15% of the total. Analyze it, but it is generally cost-efficient to outsource payroll, and probably then better to look at accounting and financial costs relative to revenue. My range has been from 0.4% (too low) to 5%, with 3 to 5% generally about right with established policies and streamlined processes. Paul Benedetto is right that this percentage would continue reducing relative to increasing revenue, but it may be too lean to be at 1% or less unless revenue exceeds $250 million.

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Finance Staffing Costs

by Darin Janecek (Vice President, Finance) - 05/26/2010 - 10:54am

The Financial Executives Research Foundation published a report in NOvember 2009 called 'Benchmarking the Finance Function' that contains much of the data you are looking for:

http://www.financialexecutives.org/eweb/DynamicPage.aspx?site=_fei&webcode=ferf_publist&pub_type=FERF%20Report

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