In-House vs Outsourced Accounting: Cost Calculator (US & UK)

This worksheet helps you compute the real, all-in cost of an internal accounting team versus an outsourced partner. It includes salary, employer taxes or National Insurance, benefits, software, equipment, office, recruiting, onboarding, management time, and rework. Use it to make a like-for-like comparison for In-House vs Outsourced Accounting: Fully-Loaded Cost Calculator (US & UK).

Step 1: Gather the right inputs

Team and scope

Roles and headcount: AP/AR, payroll, staff accountant, senior accountant, controller
Scope by process: AP, AR, payroll, month-end close, management reporting
Transaction volumes: invoices per month, payroll runs, journals, reconciliations
Working model: on-site, hybrid, remote

Pay and employer on-costs

US: Base pay, employer FICA, FUTA/SUTA, state payroll taxes, healthcare, retirement match, paid leave accruals
UK: Base pay, Employer NI, pension contributions, Apprenticeship Levy (if applicable), paid leave accruals
Variable pay: bonus, overtime, allowances

Tools and enablement

Software per user: GL, AP automation, payroll, expenses, OCR, close management
Security: SSO, device management, backup
Equipment: laptop and peripherals (annualize over three years)
Facilities: office seat or WFH stipend

People costs beyond pay

Recruiting fees or internal recruiter time
Background checks and right-to-work
Onboarding and training hours
Expected tenure and annual attrition rate

Management and quality

Manager hours per week on reviews, approvals, coaching, and escalations
Rework rate from errors and follow-ups
External support hours for audit and tax queries

Outsourcing partner inputs

Pricing model: per FTE, per transaction, or fixed monthly retainer
What is included: software, automations, audit support
Transition cost and timeline
SLAs: accuracy, cycle time, cutoff adherence
Governance: weekly standup, monthly KPI review

Step 2: Use the cost formulas

A) In-house annual cost per role

Cash Compensation = Base Pay + Employer Payroll Taxes (US) or Employer NI (UK) + Benefits (healthcare or cash allowance, retirement match/pension) + Bonus or variable pay Work Enablement = Software Licenses (role share) + Equipment (annualized over 3 years) + Office/WFH stipend Talent Acquisition (Amortized) = (Recruiting fees + Hiring manager hours × manager loaded rate + Onboarding hours × role loaded rate) ÷ Expected tenure (years) Management Overhead = Manager hours/week × 52 × manager loaded hourly rate × allocation to this role Quality Cost = Rework rate × productive hours × role loaded hourly rate Total In-House Cost per Role = Cash Compensation + Work Enablement + Talent Acquisition (Amortized) + Management Overhead + Quality Cost

Loaded hourly rate (in-house)

= Total In-House Cost per Role ÷ (Paid hours × Utilization)

B) Outsourced annual cost for the same scope

Total Outsourced Cost = Annualized Subscription or FTE Fee + Pass-through Software (if any) + Transition & Knowledge Transfer (amortized over contract term) + Client-side Oversight (hours/week for vendor management × 52 × internal manager loaded hourly rate)

If pricing is per transaction, convert to annual using forecast volumes.

Step 3: Compare on a like-for-like basis

Match scope: List deliverables for close, AP, AR, payroll, and reporting on both sides.
Match volumes: Use the same forecast for invoices, journals, and payroll cycles.
Match quality: Include rework and error handling for both models.
Include oversight: Count internal manager hours spent coordinating the partner.

Decision metric

Cost per Accurate Transaction = Total cost ÷ number of transactions that met SLA and quality targets

Track Cycle Time and Cutoff Adherence as secondary metrics.

Step 4: Worked mini-examples (replace with your numbers)

US example: Staff Accountant equivalent

Base pay: $70,000
Employer taxes and benefits: $17,500
Bonus: $3,500
Software and equipment: $2,000
Recruiting and onboarding (amortized): $2,400
Management overhead: 1 hour/week of Controller at $100/hour → $5,200
Rework cost: 3% × 1,600 hours × $60/hour → $2,880

Total in-house: $103,480

Outsourced equivalent

Fixed fee: $6,800/month → $81,600/year
Transition amortized: $3,000/year
Client oversight: 0.5 hour/week of Controller → $2,600

Total outsourced: $87,200
Difference: outsourced saves $16,280 for the same scope.

UK example: AP Specialist equivalent

Base pay: £30,000
Employer NI and pension: £4,800
Bonus: £1,000
Software and equipment: £1,000
Recruiting and onboarding (amortized): £1,200
Management overhead: 0.5 hour/week of Finance Manager at £60/hour → £1,560
Rework cost: 2% × 1,600 hours × £28/hour → £896

Total in-house: £40,456

Outsourced equivalent

Fixed fee: £2,500/month → £30,000/year
Transition amortized: £1,200/year
Client oversight: 0.25 hour/week of Finance Manager → £780

Total outsourced: £31,980
Difference: outsourced saves £8,476 for the same scope.

Note: These examples show structure, not guidance on pay levels. Use your actual rates and benefits.

Step 5: Sensitivity checks that change the answer

Utilization: Raise from 70% to 85% and recalc the in-house loaded rate.
Volume: Add 25% more invoices. Check if partner pricing scales linearly or by tier.
Manager time: Double oversight during year-end and see impact.
Attrition: Model 15% churn and re-hire cost.
Quality: Reduce rework to 1% with better controls. See where in-house breaks even.

Record the break-even utilization where in-house equals outsourced on total cost.

Step 6: Practical checklists

In-house checklist

RACI by process and documented close checklist
Salary bands, hiring plan, and backfill plan
SOPs per task with target times and control steps
Cross-training to reduce single-point risk
Tooling map, license ownership, and access reviews

Outsourcing checklist

Written scope with SLAs for accuracy, cycle time, and cutoff
Named team, coverage hours, and escalation path
Data handling, access controls, and audit support inclusions
Transition plan with shadow and reverse-shadow sign-offs
KPI pack: volumes, defects, rework, root-cause actions
Exit and knowledge return terms in the MSA

Step 7: Common pitfalls to avoid

Comparing salary to a vendor quote without adding taxes, benefits, tools, and manager time
Ignoring transition effort and the first-month learning curve
Under-counting rework and follow-ups during audits
Missing transaction growth and seasonality in pricing tiers

Copy-paste calculator template (per role or per process)

ROLE / PROCESS: Country: US | UK A) In-house Base pay: ______ Employer taxes or NI & benefits: ______ Bonus/variable: ______ Software & equipment: ______ Recruiting & onboarding (amortized): ______ Management overhead: ______ Rework cost: ______ TOTAL IN-HOUSE: ______ B) Outsourced Annual fee or per-transaction total: ______ Pass-through software: ______ Transition amortized: ______ Client oversight: ______ TOTAL OUTSOURCED: ______ Like-for-like comparison Transactions meeting SLA: ______ Cost per accurate transaction (in-house): ______ Cost per accurate transaction (outsourced): ______ Cycle time and cutoff adherence notes: ______ Cost difference (annual): ______

Decision rules that keep you objective

Choose in-house if you need tight cross-functional collaboration, frequent process redesign, or can run utilization above 85% with low attrition.
Choose outsourced if you want predictable cost, extended coverage hours, faster time to steady state, and access to skills you do not plan to hire today.

Action with Madras Accountancy

Use this In-House vs Outsourced Accounting: Fully-Loaded Cost Calculator (US & UK) to get your baseline, then run the sensitivity checks. If you want a decision-ready model with your data, Madras Accountancy can build the cost workbook, validate your assumptions, and propose a transition plan with SLAs and KPIs. Book a 30-minute cost review to finalize go or no-go.

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