Advantages of Business Process Outsourcing
You may have never considered the advantages of outsourcing, thinking I can do that why would I get someone else to do it?! Well, outsourcing is a lot more advanced than it ever has been and it is possible to outsource many different functions or tasks of your business. For example, management accounting & reporting, invoice creation & debt chasing, supplier management and payments, payroll, stock control and inventory management and much more. The advantages of outsourcing could lead to big improvements to your business and are highlighted below:
Business Focus – The business is able to focus its efforts on its core activities and outsource non-core business activities to experts making the most of its resources. Effective business strategy is essential to help a business reach the top and by outsourcing critical but non-core activities the management team can focus on achieving their goals.
Flexibility – A business that is unable to employ the right expertise in certain areas due to the cost suddenly becomes a lot more flexible and skilled due to using an outsourcing partner. Business Process outsources tend to offer a continuous service as well so there is no loss of expertise or a need to get cover like there would be if an employee was taking a holiday.
Reduced HR/Recruitment Costs – If you don’t have to employ people to carry out certain functions then it will result in reduced recruitment and training costs. Other costs that would also be saved in this area would be national insurance, pension and holiday cover.
Improved Performance – Outsourcing specialists tend to be the experts in their field and businesses are unlikely to find themselves with a team full of experts in every area due to the costs involved. The use of the correct outsourcing partners is likely to improve performance due to their expertise. Business process outsourcing can also be attributed to improved performance due to the outsourcing partners vested interest in providing you a quality service so that your business succeeds. If an outsourcing partner can improve your business you’re more likely to outsource more services to them and their enhanced reputation will get them more business. Sometimes employees can see their role as ‘just a job’ so our less likely to have the passion for improvement that an expert outsourcer would have.
Successfully Manage Projects – Projects require variable labour, it may be difficult and costly to hire the staff that are required to meet the demands of the project. A good outsourcing company will have the resources needed to ensure that the project is completed on time, within scope and to the budget requirements.
Converts fixed costs into variable costs – This has a number of different advantages, the first of which being that you only pay for the work that is done. This means you save the cost of idle labour. Also, by converting fixed to variable costs it makes it easier to do more accurate direct product or service costing. It is really important for a business to understand it’s direct costs when developing a pricing strategy or when pricing for individual products or services. This can improve long term profitability.
Enhanced Controls - There can often be risks in accounting and other systems in organisations with small numbers of employees due to their inability to segregate duties effectively. Outsourcing can be used to negate this risks. An appropriate outsourcing partner should be able to develop suitable processes which segregate functions and they can be used as a management oversight to ensure the right controls are in place.