When Outsourcing Should Be the First Solution
Obamacare exemplifies when vertical integration wasn’t the right approach to begin with. Many small businesses face the same challenges today. While maintaining in-house back office and accounting functions in the long-term may make sense, for many small business, outsourcing these functions in the early stages may be the best solution for keeping focus on what counts; your business’ operations.
To outsource or not to outsource; this is a question that cannot be ignored. Furthermore, if you plan to keep your company advancing into the future, you also cannot ignore the increased reliance on other outsourced functions within your industry. Outsourced accounting is in its infancy, and as it grows from toddler to maturity, we are going to see more work performed by professionals and not by business operators. Some will be performed by accounting groups that are at the peak of professionalism, others, not so much. I believe that we will see a backlash not unlike the software industry has seen with outsourcing to India. Nothing raises a person’s ire off the charts than when they have technical questions that cannot be immediately addressed. On the accounting side, the largest issue that I have heard addressed is the difference between capturing transactions accurately and the other functions the internal accountant serves. “She not only does the books but also orders office supplies.” Outsourcing accounting won’t address your need to purchase supplies and inventory.
What does all this mean? From my view point, it means that companies continue to look forward and discover additional ways to save cash flow while delivering a product. A properly implemented outsourced back office creates immediate savings. At a minimum, costs such as payroll taxes, worker compensation and employee benefits expenses are eliminated while also reducing the risk of employee lawsuit. The reality, a strong outsourced solution provider does not equate to merely contracting a data entry specialist, but the trusted partner that acts as sounding board and a solutions provider. From an operations viewpoint, businesses can keep a watchful eye on operating metrics and industry dynamics rather than relying on inaccurate and untimely financial information from their internal back office. Outsourcing cannot be ignored, companies that do so might find themselves out priced and out serviced.
Daniel R. Litvin, CPA/MBA