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Got a job you don’t like or can’t do well? Get someone else to do it

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Thursday August 11, 2011 at 9:00am

That’s the beauty of outsourcing, the contracting out of a business activity, usually carried out in-house, to a specialist provider. Of course for many SMEs and family owned businesses it’s not just the tasks that they don’t like that can be outsourced, it’s non-core activities, those that add limited value or require specialist expertise.

I recently wrote a blog (It’s time for accountants to offer more) about how the accounting profession needs to step up to the plate to manage the pent up demand from the SME sector for outsourced accountancy services. We are finding that businesses want to take outsourcing accountancy seriously for the first time as they can see real benefits. This got me thinking about what outsourcing is all about and why it adds real value to a company.

What can outsourcing do for you?

  • Allow focus on your core business – means the company does not spend time on something that must be done but is not core to the sales or production process. E.g. outsourced HR. It also provides the opportunity to pass the liability for delivery of a non-core service to someone else.
  • Make fixed costs variable and even lowers costs – activities that tend to be prime candidates for outsourcing are those that require people. People need to be hired, trained, managed and trained again. This is expensive; especially if they have specialist skills and a whole cost base tends to develop around this activity. People can’t be laid off if there is no work for them that day and so headcount tends to be fixed costs in the medium term. A pay as you go outsourced solution means the staff fixed costs disappear as the price of an outsourced service tends to vary with the amount it is used. The problem of managing capacity is passed to the supplier and costs become more predictable.
  • Improve quality – improvements are found for a variety of reasons, a service level agreement provides a legally binding contract for service, usually at a much greater level than was originally delivered in house. As the outsource company is a specialist in their field, new intellectual property and knowledge is introduced into the company that you would otherwise be unable to access.
  • Provide a catalyst for change and innovation – bringing in an outsourced solution can mean changes to working practices, access to experts in their field and moves towards best practice in a particular area. Something that would otherwise not have been possible on cost grounds alone.
  • Increase speed and efficiency – non-core activities tend to command less management time resulting in more things going wrong and frustration over the time and money spent on something that is not seen to enhance the business. Outsourcing to a specialist will often result in the service being provided faster, more standardised and more efficiently. It will also be more scale able, that is increase or decrease of activity actually changes the price to the customer. This is not true of an in-house service.

So when you put your mind to it there are more benefits to outsourcing than the initially compelling reason of simply passing the jobs that are too difficult, none core and too messy to someone else.

Of course, there are a number of business activities that lend themselves to being outsourced: HR, marketing and of course accountancy services. As with any outsourcing there are also some rules about picking the right people to outsource to. More of that in future blogs.

Andy Parker
Chartered Accountant Birmingham

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Parker Chartered Accountants and Financial Advisors is the trading name for PLW Advisors Ltd (Registered No. 10396831), and Parker Financial Planning LLP (Registered No. OC347027). Parker Financial Planning LLP is authorised and regulated by the Financial Conduct Authority. All companies are registered in England and Wales – registered office contact details here