Companies in the US and Canada saw the cost of their finance departments leap this year compared to last, while nearly half anticipate the cost of compliance continuing to rise—not a coincidence.
The median cost of internal financial staff in US companies jumped to 2 percent in 2014 compared to 1.4 percent last year and 1.5 percent in 2012, and in Canada that cost rose to 1.5 percent this year from 1 percent each of the previous two years, according to the 2014 Benchmarking The Accounting And Finance Function survey conducted by staffing agency Robert Half and the Financial Executives Research Foundation.
Paul McDonald, senior executive director at Robert Half, attributed the increase to companies investing in enterprise resource planning systems and other technology, whether cloud-based or in-house. He added that especially finance and accounting departments have been tasked with using data more efficiently and effectively, requiring the tools and staff to collect and manage the data.
“There are also more initiatives to push companies into forecasting mode, so we’re seeing demand for really good people to do this, and there’s a cost of labor factor,” Mr. McDonald said. “There’s high demand for those professionals and short supply, so the law of economics takes over.”
Nevertheless, the survey found companies still have a long ways to go in terms of automating financial functions: 59 percent of US companies and 66 percent of Canadian companies still reconcile accounts manually.
Companies also face a shortage of expertise on the compliance front. Mr. McDonald said the Bureau of Labor Statistics recently reported that the unemployment rate for compliance officers was a mere 1.1 percent, creating significant demand for those professionals. Because of short supply companies often turn to project professionals or consultants, and “because this expertise is so hard to find today, companies are looking for high-potential employees internally and investing in them,” Mr. McDonald said.
The survey found that the average percentage of temporary or project staff in US finance and accounting departments is 8 percent, compared to 5 percent in Canada.
In fact, compliance is likely to be a major factor in finance department costs for years to come, Mr. McDonald said. The survey found that 99 percent of respondents believed the cost of compliance in the US would remain the same or rise, of which 47 percent thought it would rise. The percentages were similar in Canada.
Mr. McDonald said that the survey’s 1600 respondents worked in a wide range of industries, suggesting concerns about compliance costs rising are widespread. However, the healthcare and finance industries stood out, with companies in the latter facing an array of new regulations including the Dodd-Frank Act and Basel III rules.
The implementation of ICD-10, reforming the official classification of diseases and related health problems, was delayed earlier this year. But healthcare companies had already devoted resources in preparation, and many believe there will be additional impact from the Affordable Care Act, Mr. McDonald said.
The survey also found that payroll and taxes are the two most outsourced functions, with 47 percent citing the first in both the US and Canada. US-based accounting and finance managers work an average of 47 hours per week, according to the survey, while staff-level professionals work 42 hours. In Canada, managers average 46 hours weekly, and staff-level employees work 40 hours.