RSS feedsOffshoring and outsourcing: perhaps it’s the fact the words sound similar that causes the two to be confused with each other. Offshoring, or relocating business processes to a lower-cost site overseas, is big business. However, when asked about outsourcing, most people have plenty to say, all of which usually relates to offshoring. Job losses in the UK, call centre staff unable to speak English and early morning calls are common offshoring complaints.
UK employees losing jobs due to cheap labour overseas and quality control issues naturally give offshoring a bad reputation. To reduce costs, accountants and their clients believe they have to offshore. However, there is a strong network of business process outsourcing firms (BPOs) across the UK that do all the work no one else needs to do. This is a beneficial and common way of improving business practice.
Accountancy firms have traditionally seen BPOs as a threat, and many are still wary of them, believing they will take away a large part of their business. In reality, BPOs provide an ideal tool for business growth, benefiting both firms and clients, allowing you to outsource unprofitable areas of work without offshoring.
All accountancy practices reach a point in their growth where workload begins to exceed current staff capabilities. These trigger points require either more staff or better use of current resources. Using a BPO is one way of maintaining staffing levels, while allowing growth in client numbers and fees.
Good outsourcing companies can turn these jobs around far more efficiently than a UK practice can.
Payroll and other functions can be carried out by a BPO on behalf of a practice and it is easy to arrange things so that the work is still branded as the work of the practice. BPOs can also work for the client, or any other company, directly.
One of the main problems for accountancy practices that have so far failed to outsource is related to training. Accountants invest a lot of time and money training staff to become better accountants. This, in turn, increases their hourly charge-out rate. Qualified accountants soon become too expensive to be handling routine bookkeeping tasks. The result is either higher charges to the client or a lack of continuity, with the client constantly being transferred to more junior members of staff.
Using a BPO specialist also means handing over back office work to a company that is always there, is accurate and timely, and provides all the information needed to run and manage the client relationship. This frees up managers and gives them the extra time to concentrate on core business activities.
Using a BPO can help to win business. In a recent case, a 25-partner firm was working on an MBO for a client, dealing with the succession planning of the original business and the development of the new company. The future directors were uncomfortable with the bookkeeping and management accounts costs quoted by the practice, even though they felt comfortable with the partnership overall.
The new board decided to outsource the bookkeeping, with plans to outsource other accounting functions at a later stage. This kept costs within the MBO’s budget. The outsourcing company went on to work on the buyout, providing year-end and management accounts to the accountancy practice, which then continued to act for the buyout team on audits and other areas where specialist knowledge was required.
So what stops people from doing the obvious? Usually, it is a fear of losing control. While a firm may feel loathe to hand over part of the practice’s business to an outsourcing specialist, the workflow is actually available in easily understandable language, at the end of a telephone line, email, or nearby, rather than on the other side of the world.
Main outsourcing processes
Accountants should concentrate on top-end services, which yield higher fees and expand the range of services offered, such as tax and other specialist knowledge-based advice.
The same goes for their clients: the small and medium-sized businesses, which should not be doing this type of compliance work, but instead getting on with the important business of running their company.
Outsourcing companies can sit in the middle of the relationship between the client and accountancy practice, acting for the benefit of both parties.
Accountants and their clients need to trust their BPO. Choosing a good BPO and creating a strong working relationship can achieve this trust and benefit.
Payroll is one of the most outsourced business processes. The cost is usually less when managed by outside specialists. You have access to a wealth of experience, with no need to worry about holiday or illness cover. Other accounting functions most commonly outsourced include: company secretarial work, company formation for UK or overseas companies, 24-hour online accounting, bookkeeping; employment contracts, credit control, budget control, cash flow forecasts, management accounts, bank account opening, VAT and HMRC compliance work.
Alfred Levy is managing director of business process outsourcing specialists Artaius
