🔒Glastonbury firm finds growth with increasing demand for outsourced accounting, HR services

In 2016, when Mary Jane Foster assumed the role of president and CEO of Interval House, a Hartford-based nonprofit that provides emergency shelter and support services to domestic violence victims, she inherited an organization that had in-demand services and, for the first time, outsourced its financial management to a third party.

“Prior to my arrival, the organization had a part-time bookkeeper to handle accounting and it just wasn’t effective,” Foster said, noting her board of directors made the decision to outsource Interval House’s finances.

Foster says the pressures to keep administrative expenses low and the increasing complexity of nonprofit financials — which include multiple revenue streams, allocation tracking and varied grant reporting requirements from funders — makes it challenging for a small nonprofit like hers to maintain a full-time, skilled accounting professional in-house.

“Our resources go to direct service [to clients],” said Foster, whose nonprofit has an annual $2.8 million budget. “Only 11% goes to administrative costs.”

Her organization is not alone. In fact, as nonprofits and small business owners strive to remain lean as they recover from the financial impact of COVID-19 and adjust to an increasingly remote and virtual workforce, more of them are looking to outsource key functions like finances or human resources.

According to 2021 small business research data from Clutch, a Washington, D.C.-based B2B research firm, more than 80% of small companies plan to outsource business functions this year, with nearly one in four (23%) looking to outsource finance and accounting and 10% looking to farm out their human resources.

That’s created a strong opportunity – the U.S. market alone for outsourced accounting is expected to grow annually by 4.9% through 2025 — for firms like Glastonbury-based Accounting Resources Inc. (ARI), which was founded in 1988 to provide comprehensive accounting and bookkeeping services, including CFO-level services, to small- to medium-sized businesses and nonprofits, including Interval House.

Over the past decade, the now 40-person company — which largely serves businesses with less than $10 million in annual revenue — has also added HR services as part of its offerings and has seen steady demand in the first half of 2021, says ARI CEO Tony Allen, who acquired co-ownership of the company in May along with Chief Operating Officer Anthony Zambrello as part of the firm’s succession planning.

Saving time

Allen estimates his firm, on average, saves clients between 30% to 50% versus an in-house team. But for some of the firm’s 200-plus clients — with leaders who wear multiple hats in their professional roles — it’s as much about the time savings as the cost savings.

Mike Lanz, who co-owns and operates Ellington-based Scotty’s Kiddy Korner Preschool and Daycare with his wife Lillian, has been working with ARI for more than a decade.

“We have monthly meetings [with ARI] about our cash flow and finances and reinforcing what we want to know,” Lanz said. “They do the bookkeeping and make sure everything goes into the right accounts and that everything is ready to go come tax time.”

Lanz estimates that outsourcing his accounting functions saves him roughly 10 hours a week, which provides more time to focus on business concerns. That’s a growing priority among small business owners and nonprofit leaders.

A 2021 Deloitte report found that 55% of leaders surveyed cited lack of resources and time as the biggest barrier to delivering strategic value to clients and 52% noted that adding a partner to advise on emerging regulatory and compliance issues was a top value of outsourcing.

While roughly 85% of ARI’s clients use the firm’s accounting services only, the number looking for HR consulting is growing too — whether it’s full-service support or project-based needs.

With his firm serving multiple business sectors — including property management, manufacturers and construction companies — Zambrello says many of the compliance-related functions like sales tax or payroll issues do not differ greatly by industry.

However, because many of the firm’s Connecticut-based business clients have locations in other states, that can create financial and compliance complexity.

“We have a team of CPAs on staff that can, from a compliance standpoint, identify risk areas and can research as necessary to make sure [our clients] are compliant,” Zambrello said.

One of the key value-adds to clients, he added, is ARI’s fixed fee pricing, which he says incentivizes his company to be efficient.

The formula has been working.

Over the past five years, ARI’s revenue has increased annually, Zambrello estimates, between 13% and 15%, but dipped to about 2% growth last year as the company focused less on profit than helping clients navigate PPP funding to weather the pandemic.

He says the company provided more than 250 hours of pro-bono support to help clients complete PPP paperwork, track funds and ensure the loans were forgivable. For its accounting clients, ARI also made its HR services available for consultation at no cost as many clients grappled with furloughs and staff cuts.

That extra level of service has paid dividends, especially among nonprofits.

Zambrello says ARI has seen several referrals in the first six months of this year, which has accelerated growth and required the company to hire six new employees to meet the increased demand.

Both Allen and Zambrello said they remain bullish about ARI’s future, but are targeting balanced growth – 15% to 20% annually — as a strategic objective, both to ensure continued quality service, but also to attract and retain employees.

Allen says the pandemic has changed the landscape and mindset of many clients, who’ve adjusted to virtual relationships and interactions, especially younger business owners.

It also provided an opportunity for ARI to consult more with clients about priorities and future needs, which has given rise to a new service the company plans to add to its portfolio: strategic consulting aligned directly with a client’s budgeting and finances.

“A lot of organizations [we work with] have their heads down focused on operational imperatives of the day,” Allen said. “We want to help them think more broadly and long term about where they’re going and help them plot the path, set budgets and execute accordingly.”