What does it cost to hire a new Employee today ?

Are you planning to hire a new team member for your practice? An accounts assistant would cost about £ 23000 these days varying from about £21k to £29k based on a city. You would be wrong if you consider this to be your total costs for a new hire. There are various other employment costs that you need to keep in mind too.

Hiring Costs

To get the right person you would either take help of some recruitment agency or do it yourselves on social media and job sites. The recruitment agencies normally charge around 20-30% of yearly pay, which would come around £ 5000. In case you use LinkedIn or other job sites such as monster it will cost you around £300 – £ 500, add your time costs for interviews etc.

Bonuses, NI Contribution & Pension

A bonus has become a norm these days and average payment as per govt estimates are around 5% of yearly pay. Employer NI contribution adds another 13.8% & pension adds 2%. Total costs around 20%.

Other Overhead costs

As if this was not enough there are various other hidden costs to be considered too.

Office space The cost of providing a desk in your office. Calculate this from your rent.

Office Equipment – Computers, peripherals, phone line etc.

Training – Most of the new employees would require in-house training just to understand your way of working. This would normally come to 10-15 days of time.

Misc. HR costs Sick pay, Holiday cover, maternity leave etc.

Total Employee Costs

  1. Salary                                 –           £23000
  2. Hiring Costs                     –          £5000
  3. Bonus, NI & Pension    –          £4600
  4. Other Overheads             –          £8000

The total amount that you would spend on a new hire in the first year would be £40600 as opposed to £23000 that you would pay. The total costs nearly double the “perceived costs” and small to mid-sized practices need to budget carefully while taking on a new member on their team. No doubt taking on new people is essential for the future growth of practice but creating unnecessary financial burdens also take its toll.

We at Sapphire provide ample opportunities to accounting practices to grow their practice by outsourcing their work to us. You can expand and grow without extra financial strain on the practice. Please contact us at info@sapphireinfo.net  or call at 020 3002 6314 for further details.

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GDPR

The General Data Protection Regulation comes into force from May 2018 thereby overtaking the Data Protection Act of 1998. The 1998 Act governing the rules were thought to be inadequate to regulate in current business environment & the massive amount of personal data available today. The new regime would have major impact on accounting practices & it does apply to all sizes of businesses if you handle personal data.

The GDPR regime differs with the previous one in terms of massive increase in fines & places the responsibilities of data security on the user. The main points emphasised are:-

  • Documentation
  • Consent
  • Security
  • Processing
  • Privacy
  • Reporting

Documentation – The new regulations place statutory obligations on you, whether you’re a data processor or data collector. You need to show that you have an adequate level of protection & proper documentation for that. In case you don’t have a documented security policy, you would need to draft one based on your internal processes & IT architecture so as to be able to justify that you have proper platform in place to protect the client’s data.

Consent – The terms of engagement letter would need to change so as to show explicit consent has been given by the client for data handling by third parties, if you use any sub-contractor or third party for your process. You must be able to demonstrate that consent was given & not inferred from silence or ticking on the boxes.

Security – Run checks on your IT systems to ensure data is stored in a secure environment. Also see if you might need to have an information systems audit done.

Processing – Check if you have internal control policies to ensure safe processing of data & identify the need to carry out specific tasks & document them. You also need to ensure specific procedure for gathering young person’s data.

Privacy – You shall need to have specific procedure to enable you to delete client data if requested to do by the client. Also you have to have a process to allow client to make a copy of data relevant to themselves.

Reporting – you shall need to report any breach of privacy of client’s data in a timely manner.

At present most of the regulatory accounting bodies are trying to put in place guidelines for their members on how to handle the regulations & hopefully accountants will have something in their hands after busy season is done.

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Cloud Accounting – Need for Accountants

The entire world is increasingly adapting to cloud services from connected appliances to internet-based educational programs. Basically, cloud platforms have helped medium & smaller businesses to offer their services more effectively to their clients using shared technology platforms.

This has mostly happened by eliminating the need of dedicated IT infrastructure to handle data, accessibility & interconnectivity. The large businesses have also benefited by cutting their IT costs & availing latest technology at a fraction of their in-house costs.

So what does this entail for accounting profession & how it can benefit the accounting practices today? First of all, let us know the difference between cloud & traditional accounts.

 

Traditional Cloud
A.   Data stored on files or local hard drives

 

B.   Data information is used by a single user.

C.   Automation of data entry not possible or not cost-effective.

Stored data on a web-based server available for access to authorised users from all over the world.

Multiple access available for updating & retrieval of data.

Automation-assisted accounting helping to reduce error & reduce time.

Advantages of Cloud Accounting

  1. Improve performance & efficiency by automating data entry process thereby reducing errors.
  2. Ability to employ remote employees provides flexibility, convenience & affecting the practice.
  3. Better safety for customer data provided by cloud service providers than viable for small & medium practices on their own.
  4. Ability to serve new geographical areas with help of cloud accounting. The practices can market their services over a vast range of geography & be able to effectively provide their services too.
  5. Ability to develop & target a niche clientele all over the country by using cloud services e.g. say providing personalised service in a very specific sector of agriculture which would not have been viable eventually because of a low number of prospects.

 

However, a word of caution for some of those practices who do not wish to give access of client’s data to a third party & lose control of their accounting data, that this might not be the route for those.

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Importance of WIP (Work In Progress) Sheets in Practice!!!

Closings are the time of month you dread the most. Many enterprises form businesses to govt entities dislike the time as they need to put in extra time & energy to close their books. The public as well as other stakeholders rely on receiving reliable financial information on a monthly basis. An accountant is the only person responsible for preparation of management accounts & information required for various stakeholders on a timely basis. This is where a work in process sheet is essential.

The goal of monthly WIP sheets are to:-

  • Use it as a tool to plan & allocate your available resources.
  • Tool for timely completion of monthly tasks in hand.
  • Outline due dates.
  • Document responsibility of each resource person for achieving the targets / completion of tasks.
  • Keep the whole practice on course.

It should be used as planning tool to determine available resources vice versa the time required to complete the tasks in hand. In terms of shortfall of resources you might feel to postpone the important tasks to a later date & vice versa in case of excess of resources postpone some tasks for next month. Needless to say that monthly WIP sheets play an important role in ensuring your practice stays on course.

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Have you considered Outsourcing? Why Not?

1

For small & mid-sized accounting practices outsourcing their work can be quite a dilemma. There are quite a few issues which need to be considered & most of the time partners/owners are in dark about major factors to arrive at a proper decision.

Cost is not the only factor for making the decision as there are many other positive aspects which far outweigh cost & other considerations.

Basic Questions to be answered : 

  1. Do you need to do your Bookkeeping & Accounts production in house?
  2. Will outsourcing bring negative effect on your business, your employees & your clients?
  3. Do you have in house talent to do all the work & the projected increase for the next 2-3 years?
  4. Have you accounted for increased resources required meet your growth targets?
  5. Whether incremental investments required for growth is justified in terms of comparable ROI?
  6. Did you account for any staff redundancy for next 2-3years?

Once you are able to answer these basic questions you will be in a better frame of mind to make a decision to outsource or not. You will need to consider all the answers to make an informed choice. Once you have done so, the next stage would be to decide on the vendor.

Making Choice

How To Make A Choice 

Now comes the million-dollar question.

How would you choose a vendor to outsource your work? What should be the basic criteria for outsourcing?

As per my views there are five essentials for selecting an outsourcing partner.

  1. Take note of the qualification of directors, whether they have a UK qualification or work experience. Believe it or not a UK qualification is a great advantage. Check whether the staff has certifications in or is well versed in accounting software’s such as SAGE, IRIS, QUICBOOKS, CCH & XERO.
  2. Whether the outsourcing vendor has a UK dedicated set up or is it working with other countries as USA, EUROPE & AUSTRALIA too. The one, which has a UK set up, is going to be the most appropriate as keeping update with tax related changes in various territories is a huge task & no one can be reasonably up to the task. So if a vendor is concentrated more than 1-2 territories it has a better chance of having a grip on legislative changes in those geographies.
  3. Check for references & how long they have been in the market. A new entrant is a new entrant; you get some of the knowledge through work experience only.
  4. Check for TAT. i.e how quickly the vendor is enable to turn around the job.
  5. Check how much of their internal processes are documented & automated. Also see what is their level of operation on various technological platforms i.e. Cloud, VPN, RDP etc.

Apart from this you can also check if they are financially sound & have a secure platform to work on. What is the service level agreement & specifically check for security, confidentiality & indemnity clauses in it.

You also need to consider what type of work you need to outsource & what is the best managed in house. Normally you would need to send across various documents to your vendor for processing. Best choice is to send the works in one go, so that the job is not held up at vendor level for want of records. Those of your clients having work processing for more than a certain no. of hours i.e. says 7-10 are ideal for outsourcing. Any client which requires less than 2-3 hours work & with incomplete information to start with is a big no-no for outsourcing.

Cost vs Benefit

Cost v/s Benefit

Perceived costs put off most firms from outsourcing. They think it to be an additional operational cost & therefore being unnecessary to the business. However, in reality the savings can be quite considerable.

The savings include cost of additional resources you might need to employ to do the work & overheads associated with these. It can be an average of not less than 50% of the in-house cost.

The other major benefit form productive time savings of key persons of the operations. This can be better utilised to bring in additional revenue by meetings, networking & building relationship with clients. The time of key persons could also be utilised to explore the high end lucrative work such as tax investigations, estate planning etc.

If done properly outsourcing can benefit your practice.

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5 COMMON ACCOUNTS OUTSOURCING MYTHS ~ BUSTED! (PART-2)

MYTH Busted

  1. Cheaper the labor, lower the service quality.

It is a general tendency to assume the quality of a commodity in proportion to the cost price. But, when the global factors are in play it is a whole different game. In India, there are a lot of skilled, highly-qualified and experienced college graduates  in the workforce.  Service provider’s long track record of working in the British environment is an asset.

Sapphire is able to successfully provide you a competitive pricing as compared to other local outsourcers as it is located in a sub-urban area (as opposed to a metropolitan). The skilled and trained qualified workforce along with the locational advantage is what Sapphire offers to all its clients.

2. Outsources have tendency to extend the working relationship which is against the long-term interests of the company.

The process of outsourcing is at best an ‘evolving’ one. Both parties see in time how things are working for them, what needs to be changed so on and so forth. As a business looking to outsource your operations one should openly discuss the plans for the future with their outsourcing vendor, which must be signed under an agreement between both firms.

Being straightforward about the kind and volume of work will ensure that confusions are kept at bay.

Communication is the key!

3. Constant excuses for not delivering as promised.

Such hitches can be avoided by ensuring that you choose an outsourcing company with high work ethics and adherence to the standards of service quality. The accountancy getting their work outsourced should keep the teams (both offshore and onshore) involved, giving incentives and appreciation as an encouragement to work harder.

At Sapphire we maintain a strict regime of maintaining and adhering to the work processes. We also ensure timely exchange of information between the client and the team to avoid any kind of gap that may lead to unwanted delays.

4. Different person to deal with every time.

It is the basic protocol of any outsourcing firm to dedicate a specific team to their client. The team manager (Accounts Manager in this case) will be there to receive any query or instructions from the clients end. In case there is a new person on the job Sapphire ensures that he is properly trained to deal with the specific conditions of the client and a prior notice is given to the client informing them about the change.

5. Impossible to bring the services back in-house In future.

Or is it? Most accounts outsourcing businesses have their own technical infrastructure. At Sapphire, we access your systems through a remote desktop access. At any point you wish to bring back the activity into your facility, you simply change the login details provided to us and that would terminate our access to your system. All data is kept and processed on your systems and none of it is held by us.

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5 Common Accounts Outsourcing Myths ~ Busted!!! (Part ~ 1)

MYTH Busted

Outsourcing your core services (bookkeeping, tax preparations, payroll etc.) can prove to be an intimidating task, since you’ve never done it before or are dealing with a new outsourcing vendor of a new
country. And often, these fears and uncertainties can give birth to a lot of myths. Let’s try and bust some!

  1. Outsourcing is only for big and mature companies

This is the most common myth among the newly established British accountancy practices (small-scale to medium scale) that prevails. But, contrary to the popular belief, the decision to outsource their activities if a fruitful one as these practices are looking to grow from startup to a mature organisation.

The erratic nature of work inflow is what Sapphire is beautifully accustomed to and hence is more than ready to tackle it.

      2. Communication and Technical Infrastructure imbalance

An expert outsourcing company will always be ready to deal with gaps in communication by ensuring superiority in technology and related equipment; establishing clear communication lines between the firm and the client & guaranteeing that the right person receives the necessary information.

At Sapphire communication is usually maintained between the parties via telephone, emails and online video conferences.

Our separate IT department is adept in dealing with sustenance of such technical requirements of the business.

     3. Cultural and linguistic differences creates obstacles in mutual understanding

Usually, this poses a risk if the outsourcing firm is in direct touch with your clients. The language style and cultural nuances become impediments to your success. But, as an outsourcer to another British accountancy practice there is little or no such risk.

Sapphire boasts of qualified, well-versed and capable staff dealing with the British atmosphere for about a decade now. Issues regarding the matter (if any,) are dealt with speedily and sorted out in no time.

      4. Lack of control and management

Managing personnel in-house is a lot easier. From operations to training to communications you have the ability to exercise control to ensure the standards are met. Ideally, a premier service provider ensures a well-trained staff, adjusted to your preferences and protocols.

Sapphire has been working with British chartered accountants since 2004, and has ensured that with timely communication and control, the jobs are executed as per the desired standards.

     5. Time Zone difference

Nobody can deny that there are issues in outsourcing to firm based in another country. But, such difference that also affects the work flow can be continually overcome by establishing flexible communication channels. Any urgent work can be done on priority and be promptly replied to and the normal operations can be done within the usual prescribed timeline.

At Sapphire, we pre-establish the work principles regarding the frequency and mode of communication along with singled out professional staff dedicated to your firm.

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Accounts Outsourcing – Gaining ground in the United Kingdom

UK Map

IT (information Technology) outsourcing has been a major trend globally for more than two decades now. US have been a leader in the world in outsourcing due to combination of high overhead costs and strong cultural affiliation between US and Asian technology companies. Most of outsourcing work started with requirements of companies worldwide to fix Y2K bug and thus arose need for cheap software programmers. As the business model proved successful, a lot of companies outsourced their Customer service, data entry and financial services later.  If US have been at the front to outsource the work, then it is India which has been major service provider. At present it is estimated that at least 285 out of Fortune 500 companies outsource some of their work to countries in Asia.

So where is the need for an Accountancy firm to outsource its work?

Like all businesses accountancy firms are there for profits and long term sustainability. Some of the major issues confronting the firms are:-

  • Staff Costs form a major part of the operational costs.
  • Small firms and startups have difficulty scaling their resources to meet fluctuating needs of business.
  • Tougher competition in a slowing economy.

In the midst of all this accounts outsourcing market in UK is growing every year. Most of the top 100 firms are either actively involved in the process or are on lookout.  The main mode of operation of these firms has been to set up captive centers in India. Apart from large accounting firms, large companies like BT and even some government councils etc actively outsource their finance and accounting work to India.

However it has been seen that only a small percentage of small and medium practices are into accounts outsourcing. There are apprehensions about various issues like staff non cooperation, software licensing, security issues, work quality, fear of redundancy of basic work etc., and these firms are trying to find a way out of these concerns. Many firms are just testing the waters and selectively indulging in the practice of accounts outsourcing to take care of busy season.

What have been the major benefits?

Operational costs are a major draw as it decreases. There is also an increase in total chargeable time of the existing staff which allows them to concentrate on high end work. Otherwise also savings from the outsourcing funds an additional full-time person with analytical capabilities for generation of consultancy work, business valuations, acquisitions, forensic accounting etc.

There are other hidden advantages also as you move from papers to a scanned documents, some sort of document management system comes into place. Moreover as you interact with service provider through emails, it forces firm to be clearer and more disciplined in their communication.

We do feel that accounts outsourcing shall continue to grow in UK at a faster pace than earlier and it shall be a major trend for the coming years for the reasons as summarised below:-

  • Firms that don’t consider accounting outsourcing as an option will be at a competitive disadvantage in the near future.
  • Significant cost savings are possible by moving accounting process to non-UK locations like India where the talent is capable and cost effective.
  • Using emerging technologies will reduce head count, producing even greater savings.
  • Firms will need to develop internal systems and discipline to achieve these changes.
  • Cost is not the only motivator. So is flexibility and the ability to change.

By: Kawitansh Khanna CA (Director, Sapphire Info Solutions (P) Ltd.)

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