Top economists agree: outsourcing is a good business strategy. Whether to a firm down the street or across the globe to Mumbai, outsourcing can cut costs, improve efficiency, reduce the time necessary to produce deliverable and allow corporations on core competencies.
Though traditionally handled in-house, financial management is something that many small-to-medium sized businesses are contracting out to specialized accounting and bookkeeping firms. This outsourcing strategy has allowed many corporations to reduce overhead and control expenditures without losing the benefit of engaging with accounting experts.
Controlled Costs
Most companies who outsource financial management see a significant savings. Since these companies no longer pay for in-house employees, the costs of providing health insurance, vacation time and other benefits are eliminated. In addition, companies no longer need the physical resources required to maintain an in-house accounting department, such as computers and software, as well as the personnel needed to support these resources.
These large, fixed cost expenditure, then, are converted into variable costs, which can release capital for other uses. These savings allow most businesses who outsource to invest more capital directly into revenue-producing activities which can, in turn, make these corporations more attractive to potential investors.
Increased Efficiency
Companies that do financial management in-house have higher costs in the way of research and development, which must be passed on to customers. Companies can leverage the economies of scale with an outside provider to save money and give a competitive advantage.
Access to Experts
Many companies do not outsource their money management because they fear that without direct access to accountants in-house they will lose touch with where their funds are going. The opposite is, in most cases, is actually true. Companies who outsource their accounting and bookkeeping generally are extremely satisfied with the quality of the services they receive from the outside firm.
Businesses providing financial management are experts in this field and clients receive professional advice about money management any time it is needed. This shift in attention away from the peripheral can allow a business to focus on its core functions and better serve its customers.
Level Playing Field
Though small businesses to not have the resources to keep up with larger corporations in terms of in-house accounting teams, outsourcing can help smaller firms act larger than they are by giving them access to the same expert information and economies of scale that bigger enterprises enjoy.
Much of the risk of starting a new business can also be mitigated by outsourcing. Since markets and financial conditions change quickly, outside companies can manage some of this risk in the area of money management.
With all of these advantages, there are, of course, a few drawbacks. Outsourcing does lead to a fragmentation of services that is unattractive to some businesses. Still, by focusing on core competencies rather than non-core activities, most businesses no matter the size find that they can improve quality while at the same time cutting costs.
About AccountingMatters.com
AccountingMatters.com is a leading company for both large and small business financial management. Providing a variety of accounting and money management services, Accounting Matters dedicates a team of professionals to every client. These professionals draw on years of experience in accounting and business management to save clients money and allow them to focus on the activities that generate revenue. Accounting Matters can provide clarity about financial health matters.
