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Outsourcing – A strategic move

The concept of outsourcing is a boon to many of the companies with numerous positive factors supporting the process. During the current economic melt down, company management need to focus on analyzing current critical issues, creating solutions, formulating risk management strategies and anticipating competitors and market rather than spending their time and efforts on compiling of financial data generated from multiple software sources at frequent intervals.

The benefits of outsourcing are many. Whoever is doing the compilation of financial data can be re-directed to other projects with greater return, the risk of fraud or embezzlement will be reduced and one gains peace of mind never thought possible before. Perhaps the biggest benefit is that managers and executives can consistently receive financial information in a timely and accurate way. When the daily business operations are running efficiently, it’s a lot easier to forecast increased profitability. The board, management, investors, banks and even employees of the company will have greater peace of mind when the books are in the hands of a financial professional.

The outsourcing process can be used in core business operations as well as in non-core areas. The non-core areas which are not critical to the existence of the business can be easily shifted to a professional service provider. Some of the benefits of outsourcing the accounting are:

Cost savings- The costs of recruiting and maintaining an in-house employee is always higher than the cost of an external service provider.

Better quality services- Since external service providers always strive to excel at the services they provide, businesses are guaranteed of better quality than an in-house employee would give. Additionally, any service provider will always look to give the best of services since their reputation is at stake.

Access to specialized skills- External service provider will be an expert at the service that it provides. In fact, to beat competition, it would have to keep honing the skills of its employees. Also, the service provider would build up specialized skills in it's niche area of operation.

Compliance and controls- Accounting needs tight controls, and in most small companies this factor is compromised because they are financially unable to hire enough people to separate task assignments. The external service providers provide the needed segregation of duties, even if it means providing part-time personnel to you.

Staffing issues- By outsourcing a non-core function, a business avoids all the headache associated with hiring and maintaining staff for such non-core function.

Risk mitigation- Many a times, non-core functions may become critical and would need skilled intervention, which the business may be lacking. At such times, if the same function is outsourced and becomes critical in the hands of the service provider, because of the talent pool available at the service provider's end and because of all the experiences it would have gained by way of servicing other clients, it would be in a much better position to counter any kind of risks.

More management time- The service of an external service provider will free-up Manager’s high-end time, allowing them to focus on strategic and management issues, thus yielding better financial results. Because the Manager does not have the experience and training possessed by a professional bookkeeper, keeping records will take an exorbitant amount of time. Another thing that eats up time and money is error correction.

Capacity management- There may be times when the non-core function may need additional hands to meet deadline. In such times, it would become difficult for in-house employees to tackle the pressure. However, if the function is outsourced, the headache of meeting the deadline is of the service provider. Also, the external service provider can effectively manage the issue since he has a large talent pool at his disposal.

High level of confidentiality- External service providers typically ensure that their clients’ data is secure and leaves no infringement of confidentiality.

High level of security- External service providers typically ensure that their clients’ data is secure and leaves no hassles of back-up data.

What you can outsource?

Many firms outsource various accounts related tasks, such as invoice generation, compilation of financial statements, trial balances, profit and loss account, pay roll processes, credit card accounts and lots more. Outsourcing these services will save money that would have been wasted in hiring an in-house staff for managing such routine accounting tasks.

The market for financial and accounting outsourcing has matured in terms of the type of work outsourced from routine, transactional work to delivering customized, complex and higher-value services such as business forecasting, financial planning, post dated cheques management and treasury management.

The strategic change towards outsourcing gears your business to catch up with the complex business environment. It gives a clear edge to your core business with value addition generated from managerial time in partnership with focused quality efforts in the financial and accounting outsourcing by an external service provider.

- By George Mampilly

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