Jennifer Barnes, an Entrepreneurs' Organization (EO) member in San Diego, is founder and CEO of Optima Office, offering outsourced accounting services with a flexible, scalable approach to support businesses of every size―from providing entire accounting departments to filling gaps on existing teams. We asked Jennifer about the benefits of outsourcing business functions. Here's what she shared:
Outsourcing is a hot topic, widely touted as a go-to growth strategy for small to medium-sized businesses. But while some still think of outsourcing as relocating entire functional areas overseas, fractional business services are likely available in your own virtual backyard.
Fractional business services are thriving because they feed growing businesses. Early adopters of outsourcing achieve greater efficiencies and increase their bottom lines.
Many entrepreneurs think they can manage every aspect of their company themselves. As a result, growth potential and efficiency suffer and expansion stalls. However, when CEOs apply an outsourced approach in select areas, it enables them to channel their energy into developing the company and generating revenue. If there's an area in your organization that needs support, but not 40 hours of help per week, outsourcing may be the answer.
Determine what functions to outsource
What functions can you outsource? Accounting, finance, human resources, marketing, information technology and legal--and that's just for starters. Technology has transformed outsourcing capabilities and gives professionals the ability to work from virtually any location. This benefits business owners by increasing the pool of available talent, lowering costs associated with travel and occupancy, and providing the flexibility to add―or reduce―resources on demand without the costs of hiring and turnover.
Let's look at accounting, for example. While specific degrees or experience are must-haves for certain aspects of accounting, there's always a need for data entry and other lower level work. However, it would be inefficient for a CFO to enter data and most bookkeepers couldn't generate the high-level analysis a CFO provides. In this scenario, it's clear that one person can't do it all.
What if you could have a team of people all doing exactly what they do best for between 20 and 40 hours per week, and it cost the same as one in-house hire? That's the beauty of outsourcing, which brings increased operational efficiencies, better checks and balances, and less room for errors or fraud. Putting people in positions where they are most effective for your business saves you money and allows you to focus on driving the business forward.
Honestly assess current capabilities and risks
Be honest and ask tough questions as you determine which departments require immediate help. In an up-front assessment, examine what's directly impacting your profit margin. Ask, "Is the company getting maximum return on investment from both our internal processes and external business interactions?" If the answer is no, your business could probably benefit from outsourcing.
Step one for entrepreneurs is to take an objective look at your organization and decide where you might benefit from additional expertise and which processes could use streamlining.
Think about the risks you may face without the right expertise: breach of security, data loss, fraud, embezzlement, IRS or other agency audits, violation of federal or state laws, and even lawsuits. Outside professionals can mitigate these risks without the expense of employing a full-time expert in each area.
Other benefits of outsourcing include:
- Greater efficiency. Outsourcing service providers face pressure to develop strategies and technologies to satisfy clients, so they tend toward an overall higher level of efficiency and output.
- Experienced workforce. Outsourcing firms offer a talented pool of experienced professionals, which is especially beneficial for startups that may not have the bandwidth to hire and train appropriate resources.
- Scalability and flexibility. A small startup may require only a few hours per month for a given service, but this need will grow with the company. Outsourcing provides the flexibility to scale.
- Timely turnaround. Outsourced services offer the required levels of resources to streamline projects for rapid turnaround to meet deadlines.
Best practices for hiring an outside services company
- Interview multiple companies. While it's tempting to hire the lowest-priced firm, don't make cost your only consideration. Do they offer resources at the required level of expertise? Can they start quickly and meet critical deadlines? Extremely low estimates could signal that the firm doesn't comprehend your requirements or may provide less-qualified individuals.
- Check references, including Yelp and the Better Business Bureau, and seek recommendations from business associates you trust.
- Establish in writing what each party is responsible for at the outset to avoid misunderstandings later. Communicate your budget and make sure your service provider remains accountable to it.
- Schedule periodic reviews to ensure that original goals are being met and determine whether changes are warranted. As your organization grows in size or complexity, it may merit a different mix of services than initially contracted.
- Think long-term and be proactive. At the point when individual providers approach full-time status and that service becomes a permanent need, analyze the cost-effectiveness of hiring a full-time employee to replace the outsourced function.