Outsourcing is the practice of hiring an external individual or business to handle business processes on your behalf. This practice gives small and medium business access to skills and services they Read more
Outsourcing is the practice of hiring an external individual or business to handle business processes on your behalf. This practice gives small and medium business access to skills and services they may otherwise find hard to utilise, either due to lack or resources, lack of manpower or both. It is equally useful for complicated processes that are needed infrequently, like submitting BAS statements and tax returns, or fighting litigation. Outsourcing is generally not advisable for the core services of a business, as these impact the organisation’s reputation and require more careful oversight.
How does outsourcing work?
When a business requires a particular skillset, for example payroll processing, but does not need it consistently enough to hire a full or part time member of staff to perform the required tasks, they can look at hiring an outside professional or team to help. This makes financial sense for one off tasks, like branding or creating a marketing strategy, or for services only needed several times a year, like accounting and tax lawyers.
The experts you outsource services to don’t need any one client to provide a full time workload, as they have multiple clients who each need their expertise. This creates a win/win situation, as the business who is outsourcing gains access to valuable services, while the business providing that service can charge a higher hourly rate as relatively few hours are needed.
What sort of services and processes can be outsourced?
Depending on the type of business and the size of the organisation, almost any function can be outsourced. From virtual assistants who can take over general admin tasks, to intellectual property lawyers who will register and defend an organisation’s trademarks, almost any business area can be outsourced. Commonly outsourced services include:
When does it make sense to outsource?
When businesses are assessing the viability of outsourcing, they cannot merely consider the financial repercussions. While outsourcing is generally cheaper, it comes at the cost of relinquishing control and therefore risking diminished quality. Almost any process or service can be outsourced, but if any of the following are true, it probably will not be appropriate:
If none of these are the case, and it is cheaper to send it out rather than perform in-house, the business may choose to outsource. It is important for businesses to consider both the long and short term costs of both options, as while a strong long term option may lead to greater profitability overall, it may also impact cashflow.