Back-Office Cost Calculator

Why most owners get this number wrong

Ask an owner what their back office costs and they'll quote the bookkeeper's invoice. The real number is usually two to three times bigger, because it hides in four places: wages, subscriptions, external providers, and — the big one — the owner's own time. This page walks you through building the true figure so you can compare in-house, outsourced and hybrid options on equal footing.

The inputs to gather

• Internal wages — the fully loaded cost of anyone doing bookkeeping, payroll, accounts payable/receivable, HR admin or IT support. Fully loaded means salary plus super, leave accruals, workers' compensation and the equipment and software they use.
• External providers — your bookkeeper or BAS agent, accountant (the compliance portion, not advisory), payroll bureau, IT support contract, and any HR hotline or advisory subscription.
• Software — accounting platform, payroll add-ons, document storage, rostering, expense tools, password manager, backup. Small subscriptions compound; list every one.
• Owner and manager time — hours per week spent approving invoices, chasing timesheets, fixing payroll queries, wrangling IT problems and re-keying data between systems.
• Error and rework costs — late-payment interest, penalties, double-handling, and time lost to fixing mistakes. Harder to pin down, but even a rough quarterly figure belongs in the total.

The method

Step 1 — Annualise everything

Convert every input to a yearly figure. Monthly subscriptions × 12, weekly hours × the weeks you actually work.

Step 2 — Price the owner's time honestly

Value your hours at what they'd earn deployed on the business — winning work, pricing, leading the team — not at an admin wage. If you'd rather use a market rate, use what you'd pay a general manager. This single line usually changes the conclusion.

Step 3 — Add the coordination overhead

Count the hours spent moving information between the silos: telling the bookkeeper what the payroll provider did, telling IT who started and left, answering the same question three times. This is the coordination tax, and it's the cost line most comparisons omit entirely.

Step 4 — Build the comparison

Lay out three columns — current state, fully in-house, and outsourced/connected — and put every line item in each. For any option you're considering, get real quotes rather than assumed figures.

What the result means

The output is your true annual cost of administration, and a like-for-like view of alternatives. Two readings matter:

• Cost per employee or per revenue dollar — useful for tracking whether admin is scaling faster than the business.
• The owner-time share — if a large slice of the total is your own hours, the problem isn't the bookkeeper's invoice; it's that the business still routes through you. That's a founder dependency problem wearing a cost-line disguise.

Traps to avoid

• Comparing an outsourced quote against only the bookkeeper's wage, not the loaded, coordinated total.
• Ignoring switching costs — data migration and parallel running are real, one-off, and worth pricing.
• Assuming cheapest wins. The right question is which option gives you accurate numbers, on-time compliance and your evenings back — then what that costs.

Every business's mix is different, so treat the framework here as a starting structure and plug in your own figures and quotes.