Looking to cut costs? Outsourcing internal audit makes too much sense.

You stare at your financial statements. You’ve cut costs, delayed major projects, your Accounting software badly needs an upgrade, and yet that “net income” line still isn’t where you need it to be.

You might be a drilling company where day rates haven’t risen at the same rate oil has.

Maybe you’re a manufacturing company that has seen fuel prices drop but your delivery costs haven’t.

When the term “Consultant” comes to mind you immediately think of the expense related to temporary or project-based help. Maybe it’s time to take another look at your internal audit and/or internal controls team as a solution to reduce some expenses. Think I’m crazy? Let’s look at the facts.

According to a recent update (this page updated 3/15/2022)from Indeed, the average salary for an “internal auditor” in the state of Texas is $74,144. Now, this salary can fluctuate depending on experience, location, travel, and level within the department (Staff, Senior, Manager, Director, etc). Another report by Glassdoor states the average salary in Houston for an Internal Audit Manager is $115,352.

Those numbers are misleading though. They don’t include your “hidden” costs of benefits and taxes. Not to mention providing computers, desk phones, office space, software, and “continuing professional education”. Two recent studies found the average cost of benefits and taxes is approximately 30% of the total base salary.

If you increase both of the above salaries by 30%, you come out with $96,387 and $149,957 respectively. You forget, we haven’t included the Director/VP of Internal Audit yet. Using information from Payscale, the average salary of an “Internal Audit Director” is $149,269 in Houston. Using the same formula, we’re at $194,050.

For a three-person department, your total annual cost is $440,394. Almost half a million dollars for a three-person department. Add two more “staff” levels and you’re over $633,000 (or a little below if you bring in entry-level staff).

Now let’s look at the alternative of using a smaller-sized firm to outsource this department for you. I say “smaller” for several reasons. 1) Better stability and a greater chance of the Owner/Partner working directly on your account 2) Smaller firms typically have lower rates than the big boys 3) Smaller firms don’t hire people with little-to-no experience, which means you aren’t paying them to train their people for them! (See this post about why mid and large firms are failing themselves and their clients.)

$440,394 divided by an hourly rate of $125 per hour equals 3,523 hours per year. If you have three consultants (with strong experience and knowledge to add value to your company) work 6 weeks a quarter (half the quarter) that comes out to 720 hours a quarter or 2,880 hours a year. Multiply that by our example rate of $125 per hour and you are saving $80,394 per year. Not to mention if you have an annual audit plan scheduled just right, you can probably reduce that even further.

That extra money can go directly to the bottom line, or be used to add headcount in other areas where you need it. You suddenly have some flexibility while potentially strengthening your internal audit department.

One last note before you e-mail us for more information at info@r-vmc.com I used the hourly rate of $125 per hour as an example for easy math. Our rates in 2022 are a MAXIMUM of $125/hr and are often below this rate for longer-term or projects with multiple consultant needs. Go with Re-Vision Management Consulting and get better rates (even fixed cost proposals) and get higher quality performance.