The trend today for many employers is to outsource any function of business that is not directly related to the generation of income. But what exactly is outsourcing?
Simply put, outsourcing is the long term contracting of a company’s business processes to an outside service provider, helping to increase shareholder value by reducing the costs of non-core functions.
Of course, outsourcing is not a new concept. For years companies have outsourced their legal, advertising, printing, and computer services so they could benefit from professional expertise without substantially increasing overhead.
Outsourcing Your Accounting Is a Positive Idea for Your Business if Any of the Following Applies to Your Current Situation
- You are spending too much time managing your books and not enough time growing or running your business.
- You find that you are cutting corners, or you are uncomfortable with your accounting because it is too time consuming, or you do not really understand how to do some of it.
- You want professional grade accounting but either cannot afford or simply do not have the need for a full time accounting person or department.
- You have a basic understanding of financial reports, so that you can stay informed about your business on an “at-a-glance” basis.
- You are not afraid to ask questions if you notice things on financial statements that you do not understand.
- You want the flexibility to examine your accounts whenever and wherever you’d like, combined with the peace of mind that your books are being maintained by dedicated professionals.
Outsourcing 101
Definition of Outsourcing
Outsourcing is the act of obtaining services from an external firm.
Business Process Outsourcing
In the corporate environment, the term “outsourcing” often refers to a particular type of outsourcing, business process outsourcing (BPO). BPO occurs when an organization turns over the management of a particular business process (such as accounting or payroll) to a third party that specializes in that process. The underlying theory is that the BPO firm can complete the process more efficiently, leaving the original firm free to concentrate on its core competency.
Roots of Outsourcing
The concept of outsourcing was first made popular by Ross Perot when he founded Electronic Data Systems (EDS) in 1962. EDS would say to a potential client, "You are good at designing and manufacturing widgets, but we are skilled with managing information technology. We will sell you the IT services that you require, and you can pay us periodically.” Today, EDS is a multi-billion dollar company with over 70,000 employees and is only one of many global BPO firms.
Offshore Outsourcing
Offshore outsourcing, or “offshoring”, refers to outsourcing to firms in foreign countries, often to take advantage of labor arbitrage. In the past 10 years, business process outsourcing contracts have increasingly been given to firms in developing countries. Typically educated workers in developing countries, such as India or China, work for a much lower wage than do similarly educated workers in developed countries, such as Japan. Savings from the lower wage rate must exceed the increased costs of management and risk associated with offshore outsourcing for it to be economically viable.
The Politics of “Offshoring”
Offshore outsourcing has recently become a hotly-debated issue in the national media. When the American economy began to pull out of recession in 2001, unemployment did not decrease as expected. Offshore outsourcing was blamed as a contributing factor to this “jobless recovery”. Information Technology was a particularly soft sector, and many American programmers lost their jobs to lower-paid foreign counterparts. Many economists however have recently conjectured that the higher-than-expected unemployment numbers were not the result of offshore outsourcing, and that offshore outsourcing has actually had a positive impact on the American economy. Undoubtedly the debate will go on. For its part, OSI is proud to maintain a 100% U.S. based staff.
Outsourcing Benefits
Outsourcing Is Cost Effective
Employing a bookkeeper in-house can be expensive. That cost is not just comprised of salary, but the other direct costs such as employer payroll taxes, worker's compensation, medical insurance, retirement plans, and other benefits. Additionally, there are employee vacation and sick days to consider as well. And don’t forget the time and expense involved to place classified ads, as well as interview, screen, test, and train an employee. Our fees to provide superior service to your company are quite competitive by comparison; we also provide flexibility in adjusting the level of service to meet the seasonal needs of your business.
Outsourcing Reduces Your Year-End Work and Fees
Since we maintain your general ledger and subsidiary schedules as part of the ongoing recording of data and preparation of documents, your year-end work can be significantly reduced. That translates into lower accounting fees and faster turnaround time in preparing tax returns and financial statements.
Outsourcing Investment
Each business is unique. We can calculate your monthly investment either by asking some simple questions or actually diagnosing your accounting files.
Complimentary Proposal
For a free, no-obligation proposal, please contact us. We will be glad to help show you the services you can get and the savings you can achieve by outsourcing your bookkeeping with OSI Business Services. |
