Any business has only three relevant and critical functions: marketing, sales, and operations. I’m including post-sales customer support in operations. Everything else in the company is overhead or support functions. And yes, that includes accounting.
In this discussion, I will provide real-life examples of my involvement in a leadership position instead of giving you ideal sizes for a small company accounting department. My examples cover several industries, giving you a better idea of the depth of such departments.
$12 Million Job Board
This organization has about 35 FTEs and is spread out across three locations across the U.S. The accounting department comprises the following:
- 1 Contract CFO
- 1 Accounting Manager
- 1 General Ledger accountant/analyst
- 1 AP Clerk
- 1 AR Clerk
Payroll is outsourced to the company’s PEO, and the accounting department’s only duties are the bi-weekly journal entries after each pay period.
Not counting the contract CFO (that would be me when I served this client), these five staff members rarely fell behind in their work. After I left this role, we hired a full-time CFO and one FP&A professional.
$27 Million Food Distributor
Like the job board firm above, this company also runs lean in its accounting department.
- 1 Controller
- 1 AP Clerk
- 1 AR Clerk
- 1 Financial Analyst who did all the reporting and analysis
Payroll was (and still is) outsourced, and HR did all the heavy lifting before and during each pay period. Only accounting performed the by-weekly payroll journal entry.
This company has surpassed $100 million in revenue, and the FTE count is similar, although the controller is now a CFO. Instead of a controller, the CFO has an accounting manager.
$11 Million IT Firm
This count may seem low, but somehow, we pulled off the accounting duties with just one accounting manager. I was Denise’s contract CFO. Bob, our owner, oversaw the LOC movement, and our front desk person did simple AP data entry. While we were lean, we never got behind on billing clients. Accounting work was always in tip-top shape.
Payroll was a bear, and working with our service provider, ADP was a frustrating experience. I created a journal entry template that Denise used for years. Because of their poor customer service and convoluted reporting, I still don’t recommend ADP to other businesses.
Oddly, Bob maintained our 13-week cash flow projections. He loved doing it and signing every vendor check.
$22 Million Newspaper and Contract Printer
I inherited a great team from my friend Kevin Coleman. When I replaced Kevin as that company’s CFO/Controller, the only thing I changed was speeding up the company’s close. I also promoted our best accountant to accounting manager, who became a CFO for a growing organization a few years later. Here was our FTE count:
- 1 CFO/Controller
- 1 Accounting Manager
- 1 AP Clerk
- 1 Tax Manager and General Ledger Accountant for our real estate venture
- 2 Billing/Collections Specialists
- 1 Classified Ads Billing Analyst
- 1 Cost Accountant
- 1 Commercial Billing Coordinator and Analyst
- 1 Receptionist (but we piled her plate with accounting grunt work)
The list of ten people above looks high compared to the other entities. However, we had a lot of complexity due to running two different businesses (a newspaper and a printer may seem similar, but they are not).
Incidentally, we did payroll in-house, but HR performed that work. HR was independent of the accounting and finance department as the director of that group was an owner and reported directly to the president.
Summary
There is no rule of thumb or set formula for determining the number of FTEs needed in an accounting department. Need dictates size. Look for ways to improve and accelerate with fewer resources, but never skimp on required staffing.
In broad generalities, every business requires team members to handle incoming and outgoing cash. One person needs to be in charge. Ideally, that person should manage and supervise the work, not do it.
If the person in charge isn’t doing actual work or heavy lifting, you’ll need a fourth person to manage the department, handle month-end work, and perform other compliance-related tasks.
The answer for the CEO seeking a short answer to the FTE count for an accounting and finance department is three to four people, give or take one.
Article Inspiration
Quora named me a Top Writer in 2018, a social media platform where I have more than nine views on my answer and more than 10 thousand followers. Surprisingly, my answer on this topic generated more than 27 thousand views. That answer inspired the article above.