In recent years, the practice of outsourcing business processes has been on the rise. This has occurred due to advancing technologies and tightening economic situations. However, it is important to have an understanding of outsourcing before you decide if now is the right time to consider this approach for your company.
What Does Outsourcing Mean In Business?
In simple terms, outsourcing refers to letting a third party instead of an in-house team handle some of the business processes of an organization. The third party is typically a firm but, in some cases, an individual may be preferable.
Evolution of Outsourcing
The field of outsourcing has been affected by several trends and developments over the years.
During the 1990s, businesses opted for outsourcing mainly for cost reduction. It was intended as a short-term measure that provided quick fixes. The aim was to deliver the absolute essential results with minimal effort. There were pitfalls and problems that typically come from any cost-cutting approach, especially in the accounting function. While a cost-cutting focus still goes one, it is starting to lose popularity, leading the way to a more partner-focused outsourcing option.
Outsourcing has now evolved past mere cost reduction and is now seen as a partnership between the organization outsourcing the work and the firm handling the outsourced work. The shift occurred so that the outsourcing company can assist the organization in handling more work in an unpredictable economy to help the both companies out in the long run.
Top 3 Reasons to Outsource
Small to medium-sized businesses benefit from outsourcing their services, including the following:
Reduction of Payroll: Full-time employees are always costlier for a business. Apart from salaries, a company must pay for additional payroll benefits and perks. Outsourcing is a suitable alternative to hiring. It provides the organization with skilled and trained experts without additional payroll costs.
Utilization of OPR: OPR is short for Other People’s Resources. It is impossible for a business owner to be equally good in all functions of the organization. Training existing employees in new businesses is costly. Utilizing OPR allows all organizations to gain easy access to expertise and comprehensive knowledge.
Enhancement of Core Competencies: Organizations can focus more on their core competencies by outsourcing all non-essential functions. This bolsters their competitive advantage as they strategically focus on the capabilities of their existing resources.
The Right Time to Outsource Accounting
While there are several reasons why outsourcing is good, a company is not always ready to embrace it. The most suitable time to adopt this methodology is when the organization is structurally ready and fully aware of the benefits of this approach. A few elements must be considered to determine if the organization is ready to outsource its functions.
The senior management and leadership of the organization must be involved in the decision to outsource from the get-go. Many will also need to be involved in the implementation process so it will be essential to ensure they have the time to focus on this new approach. In addition, senior management must be capable of leveraging the outsourcing partner and providing strategic insight as to the benefits that the organization will enjoy upon outsourcing.
The Time Required For Outsourcing
The time needed for outsourcing your accounting functions varies depending on size and operational needs, but typically, the onboarding process is around 60 to 90 days.
Generally, a company starts by gathering quarterly data before the outsourcing company can provide reports. However, accounting and bookkeeping functions can be taken over by the outsourcing company almost immediately. After the end of the first quarter, the operations will be simplified considerably as the outsourcing company gets a handle on the organization’s processes.
There are several top reasons for outsourcing accounting processes. However, success with this methodology is determined by how much the organization is willing to engage with the outsourcing firm.
NuVest Management Services is an outsourced accounting and bookkeeping company aiming to bring the same competitive advantages enjoyed by large organizations to the small and medium-sized market. Contact us today to see how outsourced accounting could be right for your business.