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Thursday, 17 September 2015

7 Myths On Outsourcing Your Accounts

 
In modern time, outsourcing accounts and related procedures have become not only efficient and complementary but to some extent downright vital for organizational growth. Problem is most individuals and institutions seem to take it otherwise due to some dominating myths about outsourcing accounts. In fact, a study report published in 2014 shows that only a mere 16% of all international organizations reap the benefits of outsourcing their accounts and related procedures. Some seem to think it’s inefficient while others think they’re not eligible for outsourcing. A whole lot of myths are actively keeping individuals and organizations from accepting this service and it’s the aim of this article to bust the 7 best (or worst) of these in addition to a quick look at the benefits of outsourcing.



Myth#1: It depends on the size of the company
There seems to be two groups living under this delusion, one group thinks “we’re too small” while the other thinks the opposite. Frankly speaking, size doesn’t matter. Regardless of size when a company outsources its accounts and accounting procedures to a professional (known as outsourcer), they organize and focus based on the preset formal requirements. They do not handle anything “extra” that isn’t included in the agreement even if it’s related. They specialize in handling only this kind of procedures so big companies shouldn’t think that an outsourcer isn’t capable of handling their immense workload. On the other hand small companies should remember they aren’t the outsourcer’s only client and the “pool” is actually a collection of many small and big organizations.

Myth#2: Outsourcing accounts result in an overall reduction of control
In reality it’s the exact opposite. When you decide to outsource your accounts, you only “hand out” the processing procedure and not the approval power. Outsourcing requires identifying and codifying rules in a formal written agreement that otherwise would’ve stayed just inside an accountant’s head. Outsourced workloads are handled by following this formal procedure in a rigorous manner otherwise the outsourcer is discredited. And since the process is handled by a separate sector, the whole process becomes more transparent and efficient. This way, control becomes easier and more applicable. And since everything we know of is connected through the internet, you can always keep track of things personally.

Myth#3: It’s not secure enough
Since outsourcing can sometimes mean transferring accounts and accounting procedures overseas, people often feel the outsourcer is incapable of ensuring the needed safety. First, this isn’t accurate for the outsourcer’s own sake. Their security MUST match the service-level agreement (SLA) otherwise their key performance indicators (KPI) suffer. Breach of security agreements simply means going out of business for the outsourcer. The security procedure is their top priority and thus it’s reviewed and governed monthly (at least). Simply put, the security they provide is no less rigorous than an institution that you trust most.

Myth#4: Outsourcer doesn’t really understand the owner’s business
People tend to think that since their accounts are connected with multiple businesses, the outsourcer will not be able to keep track of the many systems involved. This idea dominates because most of us think that each organization follows a unique system of conducting business, which is not true. They might seem so due to the different methods of “execution” but in reality the core remains somewhat standard. Business hierarchy and related concerns always remain the same regardless of industry so the outsourcer doesn’t need to familiarize itself with a new system every time it take on a new venture. However, this could happen if the connected business IS actually completely unique in which case, the business persons themselves would face complexities before even considering outsourcing.



Myth#5: It’s too expensive
Sometimes outsourcing accounts is avoided for a completely different reason than trust, it’s considered too expensive to handle. It’s not necessarily true. All you need to do is to check the in-house, or the current, expenses you are paying right now and compare them with a potential outsourcer’s charges. It can be said with almost certainty that your current budget and invested resources will always surpass the expenses you have to bare for receiving the services of an outsourcer.

Myth#6: Outsourcers carry a lot of hidden costs
This idea comes into play because of the advantage mentioned in the previous myth. Since the outsourcer would always charge less to do more, many people think that in reality they include a lot of hidden costs to earn profit. That is actually the opposite of an outsourcer’s principle of execution. The main way they ensure this “less-costly” service is by providing economies of scale through process efficiency and labor arbitrage. And all this is ensured through rigorous organizational governance (as mentioned earlier). Also, keep in mind that the labor arbitrage allows the outsourcer to seek out professionals who’d willingly work for comparatively less payments. This is a major way in which outsourcers ensure their profit as well.

Myth#7: Outsourcing accounts is only good for reducing the number of staffs
If that is the only goal then yes, outsourcing would do that for you without compromising the related productivity and capacity. But it’s simply childish to think that we just want to reduce the headcount by outsourcing our accounts and accounting procedures. A few empirical observations of worldwide studies have shown that there is a significant demand for accounting professionals that CAN be met by employing multiple layers of client requirements to each professional. However, the availability of professionals also means that someone is always willing to ask less for doing the same amount of works without compromising quality. So an outsourcer will not only reduce headcounts but also makes the overall staff more efficient.

Now that we’ve busted these myths, let’s take a brief look at the benefits more clearly.
· It’s time efficient. Less amount of time is employed to do the same amount of work.
· Increases earning by saving money on professional handling of your accounts and accounting procedures.
· You get the services of better experts at lower rates.
· Reduces distractions by moving most of “active” processes to the outsourcer.
· You get access to better account-keeping tools that otherwise remain “unreachable” due to their expensive nature.
· Lastly, your account is handled by a bigger group of experts which ensures more reliability and performance.

Knowing the facts from the myths is the first step toward successful outsourcing of accounts.

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