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Outsourced Accounting: Cutting Business Overhead Costs

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outsourced_accounting

Outsourcing Benefits And Small Business Growth


Leveraging your available resources is working smarter, not harder. However, it can be draining both in time and energy to find those resources.  Many small businesses that are adapting to technology are finding it easier to be more productive with less overhead. This is due in large part to technology and is a trend being reported on the incline.


“Small businesses are in recovery. And, in a trend we’ve been following for more than a year, they’re growing without hiring, thanks in large part to the adoption of technology.

The July results of the SurePayroll Small Business Scorecard further confirm this trend, showing small business hiring down slightly (0.1 percent), but optimism high at 72 percent. When asked if they’ve changed their strategies to adapt to an increasingly technology-based economy, 76 percent of small businesses said they have.”

What is outsourcing?

Some of the first title suggestions that come up in an internet search are things like “off shoring, IT outsourcing, and using outsourcing to grow your business”.Wikepedia defines outsourcing as “… the contracting out of a business process to a third-party. The term “outsourcing” became popular in the United States near the turn of the 21st century. Outsourcing sometimes involves transferring employees and assets from one firm to another, but not always.[1] Outsourcing is also used to describe the practice of handing over control of public services to for-profit corporations.[2]

Investopedia describes it as “A practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally.” 

What outsourced accounting is not

Outsourcing is not a fix for a permanent solution. If you foresee your business generating volume levels that are sufficient enough for a full time experienced accountant you may be making the right decision in staffing. Outsourcing is not a staffing solution as much as it is a resource solution. Think of outsourcing benefits as a requirement in production levels more than a staffing role. You are going to utilize the outsourcing experience and diversity to handle your resource allocations without the need to train on company culture and policies.

Developing your outsourcing plan using SOW

The statement of work (sometimes, scope of work), is a document that sets out what you expect your new partner to do, when it will be completed, and how much it’s going to cost.

Basically, you need to get agreement on six things:

  1. Specifications, or, on a high level, exactly what you’re asking your partner to accomplish for you

  2. Timeline, or when certain pieces of the project will be completed

  3. Milestones, or what goals need to be achieved before a portion of the product is considered finished.

  4. Deliverables, or the chunks of work your vendor will provide you with. You need to pay particular attention to these, because this is where arguments over money frequently begin.

  5. Frequency of regular meetings, or how you’ll keep things on track. This is extremely important. If you have a weekly call scheduled with your vendor, it makes it easier for them to let you know when there’s a problem. They don’t have to worry about whether or not it’s big enough to bother you with–they can just tell you on your regular call. Engineers, especially, tend to go quiet when things head south, Smoliar says. Sometimes there’s a technical problem. But maybe they just took a full-time job, and they thought they could do your job and the day job, but it’s not working out and they don’t know what to say. A regularly-scheduled call makes it more likely that they’ll tell you what’s up.

Payment terms, or when and how you need to pay

Generally, there are two ways you can pay contractors:

  1. Fixed bid for a given project

  2. “Time and materials,” which is an hourly rate plus expenses

Time and materials is often best for initial exploratory work, but can balloon if not managed carefully. Mostly, Smoliar prefers fixed bid payments, especially if you’re managing work outside of your area of expertise. A fixed bid is also more likely to force the difficult-but-necessary conversations about milestones and deliverables. Even with a fixed bid, costs can shift. Sometimes there will be situations in which you’ll need to sit down the contractor and negotiate a change to the SOW. It often makes sense not to negotiate too hard on price, because you probably won’t save that much, and what you really need are iterations. Instead of trying to knock the price down 10 percent, ask for five iterations rather than three.

A lot of entrepreneurs want to skip these steps and get straight to work, says Smoliar. Bad idea. If you can’t get through this process, it’s a huge red flag. Leveraging your relationship with an outsource accounting group can save you frustration and money. 

Sources:

http://www.inc.com/stephanie-meyers/small-business-report-growth-hiring-technology.html

http://www.inc.com/kimberly-weisul/how-to-outsource-without-going-broke-or-insane.html

 
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