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Outsourcing is a growing trend with seemingly countless benefits. Typically, responsibilities such as accounting and financial decision-making, marketing, and programming will be among the first that businesses make the decision to outsource. By delegating these tasks to experts, your business will be able to not only save money but also save time that can be used to advance other business objectives.Jan 16th 2020
With the beginning of a new year, countless businesses are reevaluating their strategies and their general operational approach. While some of these businesses will elect to make some minor tweaks and adjustments in-house, others will decide to outsource many of their operations and turn to specialized experts.
Outsourcing is a growing trend with seemingly countless benefits. Typically, responsibilities such as accounting and financial decision-making, marketing, and programming will be among the first that businesses make the decision to outsource. By delegating these tasks to experts, your business will be able to not only save money but also save time that can be used to advance other business objectives.
If your business has never outsourced work before, you likely have a lot of questions. How much does outsourcing typically cost? What are the primary benefits of outsourcing? How can my business find an outsourcing partner that can maximize our organization’s full potential?
In this article, we will discuss the most important things for you to know about outsourcing in 2020. By understanding why businesses, of all varieties, make this crucial decision each year, you’ll be able to generate a reliable plan for your business.
Businesses outsource in order to save money. In fact, according to recent surveys, 59 percent of businesses choose to outsource in order to reduce their expenses. There are quite a few reasons why outsourcing certain business functions can be cost-effective. Not only will your outsourcing partner operate via an economy of scale (allowing you to purchase goods and services at a discount), but they will also have the infrastructure in place in order to help your business operate more efficiently. Furthermore, your business may find itself in a situation where it needs a “fraction” of a specific service without making a full commitment. In response, fractional CFOs and other services have become extremely popular in the digital era.
Businesses also choose to outsource in order to gain access to experts. Regardless of how smart or well-versed a business owner might be, it is incredibly unlikely that they know how to do everything as well as a certified expert. In fact, according to Deloitte, two of the most common reasons for outsourcing include improved performance (62 percent) and reduced errors (53 percent). Because only a fraction of business owners have accounting or financial experience, these functions are often among the first to be outsourced.
Furthermore, businesses look to outsource in order to access new systems, structures and technologies. The aforementioned survey revealed that 51 percent of businesses choose to outsource in order to access new technologies. In the world of digital accounting specifically, 93 percent of businesses hope to incorporate cloud technologies into their accounting practices. By working with the cloud and various other eCommerce tools, businesses can operate more effectively and access crucial decision-making information from anywhere in the world.
Accounting and finance are often among the first set of duties to be outsourced. These tasks, which require considerable attention to detail and expertise, can help businesses protect themselves from financial and legal hazards while also finding creative methods to improve their bottom line. An outsourced accountant can help your business organize (or reorganize) your books, prepare its taxes, generate long-term financial projections, establish an eCommerce platform and much more.
A 2018 Client Accounting Services (CAS) Survey revealed that about 80 percent of all businesses would refer their outsourced accountant to another business. However, accounting isn’t the only field where businesses are happy with their outsourcing partners. Legal, software development, marketing, and payment processing are all frequently outsourced as well. Even many of today’s Fortune 500 companies will make the decision to outsource.
Naturally, whether your business should make the decision to outsource will depend on many different factors. When deciding if outsourcing is appropriate for your business, you will need to do so using a comprehensive framework that accounts for opportunity costs.
Suppose that your business’ accounting responsibilities require 100 hours of work per month. If you consider each hour of work to be worth $40 (or whatever number you deem fit), this means your business’ total accounting costs will amount to $4,000 per month ($48,000 per year). However, if your business could generate $50 worth of revenue for every operational hour that it gains, this means you are missing out on $5,000 per month ($60,000 per year) in positive cash flows.
In this situation, when all else is equal, making the decision to outsource would initially have a $12,000 annual impact on your bottom line. When factors such as added tax deductions and better financial practices are accounted for, the amount your business can save with an outsourced accountant will be even greater.
While this hypothetical situation is obviously simplified, it demonstrates that the financial benefits of outsourcing may be even greater than you initially assumed. Your business, regardless of its size, only has a finite number of resources—it will be in your best interest to use these resources as efficiently as you possibly can.
With so many outsourcing options available to choose from, it can be difficult to know where to begin your search. Fortunately, the digital era makes it easy to find outsourced accountants, fractional CFOs and whatever outsourced help you might need.
When comparing potential partners, be sure to conduct a preliminary interview. Ask questions about the firm’s qualifications, experiences and other important details. Identify which services the firm offers and see if there are discounts available for bundling multiple services into a single (highly personalized) package. New technology makes it easy to access countless different outsourced firms, which may be located in different states or even in different countries.
2020 is the perfect year for your business to outsource its accounting needs or outsource various other responsibilities. Outsourcing can help your business gain access to expertise, use its resources more efficiently and, ultimately, improve its bottom line. Whether you are looking for a digital accountant or anyone else, you may want to consider outsourcing and gain access to these desirable benefits.
reprinted with permission from: https://www.accountingweb.com/practice/practice-excellence/why-you-need-to-consider-outsourcing-in-2020
