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Accounting & Finance Staff Cost

Michael AuYeung's Profile

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?

Answers

Dorise Steele
Title: Director of Accounting
Company: Sherwin Alumina Company
(Director of Accounting, Sherwin Alumina Company) |

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.

Topic Expert
Paul Benedetto
Title: CFO, Director of Finance, Consultant
Company: Nextwave Software, Rethink Fabrics
(CFO, Director of Finance, Consultant, Nextwave Software, Rethink Fabrics) |

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.

Michael AuYeung
Title: Controller
Company: Arnhold & Co. Ltd.
(Controller, Arnhold & Co. Ltd.) |

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.

Rebecca Potter
Title: Corporate Controller
Company: Turbocoating Corporation
LinkedIn Profile
(Corporate Controller, Turbocoating Corporation) |

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.

Philip Alford
Title: CFO Partner
Company:
(CFO Partner, ) |

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.

John Jepsen
Title: Consultant
Company: Jepsen Consulting
(Consultant, Jepsen Consulting) |

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

John Herndon
Title: Senior Consultant
Company: NOWCFO
(Senior Consultant, NOWCFO) |

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.

Wray Rives
Title: CPA CGMA
Company: Rives CPA PLLC
(CPA CGMA, Rives CPA PLLC) |

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.

K W
Title: VP Finance
Company: Montg
(VP Finance, Montg ) |

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

J Roy Martinez
Title: CFO/Controller
Company: In Career Transition
(CFO/Controller, In Career Transition) |

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

Jack Henrie
Title: Owner, President & CEO
Company: Executive Resources for Great Outcomes, ..
(Owner, President & CEO, Executive Resources for Great Outcomes, LLC) |

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.

Darin Janecek
Title: Vice President, Finance
Company: ARI Network Services, Inc.
(Vice President, Finance, ARI Network Services, Inc.) |

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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