Monday, September 24, 2007

Outsourcing: source it out

Not very many years ago the idea of any organisation that had no foreign connections or markets arranging for large sections of its non-core activities to be handled by outsiders was virtually unheard of. Today, outsourcing certain business sectors to specialist providers is a fact of business life.

Driven by market and other pressures, smaller businesses need to invest all their time and resources into core areas of their business. What they do not want to do are the back office functions, including non-core activities such as accounting, payroll, VAT, employment and human resources, and health and safety.

With some of these tasks, such as payroll and VAT, it is simply a matter of efficiency and cost effectiveness.

With others, there are additional problems in keeping abreast with complex and ever-changing legislation to contend with. No matter whether the business is large or small there are opportunities for an outsourcer to take the strain.

Commercial organisations now look to their accountants to help them compete effectively by providing them with a range of added value services. In many respects, the accountancy profession has become the commercial world's first port of call when looking for help with outsourcing.

Unfortunately, the accountancy profession has not got to grips with the opportunities that outsourcing provides. Firms should be looking to generate business for themselves, both in an advisory capacity and as the recipients of outsourced work from clients. Practitioners should be well aware of the benefits to their clients of outsourcing non-core functions and should know them well enough to be able to identify those who should be taking this route. Of course, only the largest firms have the expertise to offer a wide range of outsourced services, but whether it is HR or IT, they should be able to recommend the right specialist.

As for the services that firms themselves can offer: management accounts, VAT preparation and payroll are prime examples. All these service are easy to provide, but can be extremely lucrative if the firm is well organised and geared up with a processing system to handle the work in the UK, or whether they outsource the work overseas.

When it comes to generating new business, there are also opportunities to acquire new clients who only require outsourced services. Where large practices face conflicts of interest they may be happy for their client to outsource work to a smaller firm that is not seen as a competitor. Some of the more progressive independent practices have housed their payroll facilities under a separate identity which they can then market to companies that do not use any of the firm's other services.