SMEs, should you hire or outsource your basic finance function in 2023

SMEs, should you hire or outsource your basic finance function in 2023

When considering the cost of hiring a staff versus outsourcing an executive staff in Malaysia, several factors come into play. Here is a summary of the main aspects to consider:

1. Recruitment and Training Costs:
   
   Hiring a staff member involves expenses related to recruitment, advertising, interviewing, and selection processes. Additionally, there may be costs associated with onboarding and training the new employee. In contrast, outsourcing an executive staff generally eliminates these expenses as the outsourcing company takes care of the recruitment and training processes.
   

2. Employee Compensation and Benefits:
   
   When hiring a staff member, the employer usually looks only at the basic salary and often overlook their further responsible on top of providing a basic salary or wages, along with other employment statutory benefits such as medical insurance, paid medical leave, paid annual leave, paid public holiday leave, maternity or paternity leave depending on gender and retirement and/or statutory contributions. These costs can vary depending on the seniority of the executive staff. However, when outsourcing an executive staff, the cost is usually a fixed fee agreed upon in the outsourcing contract. This can help in budgeting and forecasting as the costs remain consistent.
   

3. Overhead Costs:
   
   Hiring a staff member involves additional overhead costs such as office space, equipment, utilities, and other infrastructure needed to support their work. In terms of finance, it is about paying for the software and maintaining the software too including support and maintenance fees. Outsourcing an executive staff eliminates these overhead costs as they work remotely or operate from the outsourcing company’s premises.
   

4. Flexibility and Scalability:
   
   Outsourcing provides greater flexibility and scalability compared to hiring a staff member. When business needs change, it may be easier to adjust the scope and scale of outsourced services compared to reconfiguring an internal team. With InTune, we have packages from Small to Medium to Large depending on the SMEs needs and requirements
   

5. Expertise and Experience:
   
   Outsourcing an executive staff allows access to specialized expertise and experience in a particular field or industry. With InTune, our top managements are certified practitioners with over 25 years in the accounting industry. InTune have also serve more than 400 clients over the past 15 years since 2018. This can be especially beneficial if the company requires specific skills or knowledge that may be difficult to find or afford locally.
   

6. Management and Supervision:
   
   When hiring a staff member, the company needs to allocate resources for managing and supervising the employee’s work. Management and supervision can take between 20% to 40% of the supervising officer’s time especially when there is crisis such as tax audit or compliance issues. With outsourcing, the outsourcing company takes care of the management and supervision aspects, allowing the business to focus on core operations.
   

Let’s consider an example of the cost differential for hiring an entry-level accounts executive staff in Malaysia compared to outsourcing the same role. Please note that the following figures are hypothetical and should be used as a general guideline:

1. Hiring a Staff Member:
   
   • Recruitment and Training Costs: RM 5,000
   • Employee Compensation and Benefits: RM 3,400 (basic salary, inclusive of statutory contributions based on the following assumptions)
   • Bonus: RM 3,400 (one-month bonus, paid annually excluding annual trips)
   • Cost of Annual Leave: RM 283.33 per month (based on 14 days of annual leave per year)
   • Cost of Medical Leave: RM 250 per month
   • Cost of Maternity/Paternity Leave: RM 500 per month. Note that actual maternity leave is about 3 months of pay
   • Overhead Costs: RM 1,000 per month
   • Management Cost: RM 2,000 per month
   • Total Monthly Cost: RM 11,833.33 (excluding taxes)
     

2. Outsourcing to InTune Outsourcing:
   
   • Outsourcing Fee: RM 3,000 per month
   • Sales and Service Tax (SST) at 6%: 6% of RM 3,000 = RM 180
   • Additional Printing and Courier Charges: RM 100
   • Total Monthly Cost: RM 3,000 + RM 180 + RM 100 = RM 3,280 (including SST and additional charges)
     

In this example, if the entry-level executive staff is required for a 12-month period, the total cost for hiring a staff member would be: Total Cost for Hiring = (Recruitment and Training Costs + (Employee Compensation and Benefits + Bonus + Cost of Annual Leave + Cost of Medical Leave + Cost of Maternity/Paternity Leave + Overhead Costs + Management Cost) * 12 months) = (RM 5,000 + (RM 11,833.33 * 12)) = RM 160,999.96

On the other hand, if the function is outsourced to InTune Outsourcing for 12 months, the total cost would be: Total Cost for Outsourcing = (Outsourcing Fee + SST + Additional Charges) * 12 months = (RM 3,280 * 12) = RM 39,360

Total Cost for Hiring = RM160,999.96 Total Cost for Outsourcing = RM39,360

Difference = ((Total Cost for Hiring – Total Cost for Outsourcing) / Total Cost for Hiring) * 100 = ((RM160,999.96 – RM39,360) / RM160,999.96) * 100 = 75.55%

The percentage difference between the total cost of hiring and the total cost of outsourcing is approximately 75.55%. This indicates that outsourcing your basic finance function results in a significantly lower cost compared to hiring, with a cost reduction of about 75.55%.

It’s important to note that these calculations are based on the assumptions provided, and costs can vary based on various factors such as the specific role, industry, market conditions, and the outsourcing provider’s pricing structure. Therefore, conducting a comprehensive cost analysis and considering other factors such as expertise, flexibility, and management requirements is crucial when making a decision between hiring and outsourcing.

How InTune Outsourcing Can Support SME Business Owners?

InTune Outsourcing is one of the Malaysia’s Most Advanced and Top Outsourced Accounting, Finance, HR and Payroll services providers.

We have served more than 400 clients todate and InTune offer full-range services from start up to small to medium-sized companies.

InTune takes away the stress and pains from managing Accounting, Finance, Payroll and HR, including Bookkeeping, Payment Services, Accounts Payable, Accounts Receivable, Payroll and more, by providing an expert team of CPAs and other accounting professionals who understand the special accounting needs of growing businesses.

We can also help in preparing Budgets too as part of our Consultancy Package.

Contact us for more detail now.