Farming Out Your Financials

Survey reveals benefits of outsourcing internal corporate functions; how to find the right company for the job.

Tweet

Why did you decide Percentage of
to outsource? respondents
Outside providers are more efficient 70%

To keep focus on our own product and growth 45

To save costs of benefits and administration 42

There's less overhead investment or debt 41

To ease regulatory-compliance burden 21

It's difficult to find skilled employees 18

Source: "Trendsetter Barometer," Coopers & Lybrand, 1993.

Two-thirds of company builders rely on outsourcing to handle one or more internal corporate functions, according to a survey of 400 CEOs of fast-growth businesses conducted by Coopers & Lybrand. The most popular outsourced services are financial: payroll (68% of respondents); tax compliance (48%); and employee benefits and claims administration (46%). That's no surprise, given the weaknesses in the financial staffing and budgets of many small businesses.

But it is surprising to find that outsourcing (which isn't a function of the number of employees a company has) plays a key role in the ability of many of those companies to generate fast growth. Coopers & Lybrand found that compared with businesses that do everything in-house, those that outsource have revenues 22% higher and sales prospects for the coming 12 months that are better by about 25%.

Here's the main point: if done well, outsourcing can free your company to concentrate on what staffers and management know best. It can also ensure that vital internal financial systems function smoothly and efficiently -- not always the case when those jobs are handled internally. If you're interested in using the technique, talk to your customers, suppliers, financial advisers, and even competitors about which services might be farmed out. Then before you farm out a service to an outsider, consider the three C's: cost, credentials, and client recommendations.