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Outsourcing – The Trump Card of the Growing SME for Those Who Do It Right

The growing phenomenon of outsourcing within accounting firms continues to gain traction, presenting substantial advantages when executed correctly.

Initiating the discourse with some crucial statistics, Thomas L. Friedman’s profound book “The World is Flat” reveals that in 2003 approximately 25,000 American tax returns were processed in India. The subsequent year saw a significant increase as this figure quadrupled to an astonishing 100,000 and then escalated exponentially to roughly 400,000 by the end of 2005.

Friedman further prognosticates that by the year 2014, it will be commonplace for accounting firms to seek international assistance for basic tax return preparation tasks – if not more broad-ranging financial functions. In corroboration of this trend at present day scenario, Ernst and Young – one of the world’s largest professional services networks – processes around one million U.S tax returns annually on Indian soil alone.

Numerous accounting firms across Australia are adopting outsourcing strategies to leverage the myriad of advantages they offer. For instance, PwC Australia delegates a range of accounting tasks – such as auditing functions, to their proficient team based in Mumbai and maintains a substantial tax squad in Calcutta. This strategic allocation not only enhances productivity but also assures seamless business operations.

The esteemed PwC report, “Outsourcing Comes of Age” (published 23rd March 2009), was meticulously constructed upon the comprehensive interviews of 226 global company executives. This report categorises Australia as a “medium mature” market in terms of outsourcing, indicating that numerous enterprises are capitalising on this resource.

The report indicates that a significant 71% of the surveyed entities outsource core operations, suggesting it is widely acknowledged and accepted practice within the industry. Intriguingly, an apparent lag has been identified within SME accounting sectors regarding their adaptability to this trend – posing questions as to why such delay exists in adoption. Notably, with over one million tax returns being processed offshore for U.S firms, this method of operation evidently presents an easily accessible solution.

In a series of interviews conducted with partners from various SME businesses, it was confirmed that the principal deterrents to employing external resources for compliance or audit tasks surround apprehensions about work quality, taxation competence, information safety and privacy. These issues are unquestionably significant and warrant serious contemplation. However, one should also consider the potential benefits an outsourcing company could afford your establishment: notably increased profit margins; the freedom to concentrate on high-fee value-add activities; as well as making growth or flexibility more feasibly attainable – a logistical impossibility when solely reliant on hiring in-house. This essentially provides high ROI human resource at your disposition, effectively empowering you to achieve vastly improved business results.

The PwC report affirms this viewpoint based on their findings — 87% of surveyed businesses using outsourced services asserted they experienced the predicted benefits outlined in their original use cases. The leading motivations cited for opting to outsource were cost reduction strategies; access opportunities provided towards specialised talent; and enhancement of overall business model adaptability—with each factor contributing significantly toward operational efficiency and strategic goals’ attainment.

The findings additionally exhibit a distinct pattern among companies who reap substantial benefits from outsourcing: collaboration. The results from PwC demonstrated that executives perceive an explicit connection between improved performance and the enhancement of collaborative structures with their outsourcing associates. It is observed that successful clients of outsourcing exemplify proficient cooperation with service providers, typifying effective outsourcers as a result. Such collaboration underlies exceptional practices in both capabilities and procedural aspects inherent to outsourcing itself.

Not all outsourcing is created equal. In essence two main business models are:

  • A transactional service whereby the client jobs are sent externally to a service provider and the work is completed by an anonymous person or persons.
  • A collaborative service where the client engages an employee of the service provider on a full or part-time basis. The client can choose the individual that works for them. That person is then dedicated to the client effectively becoming one of their staff (although the individual doesn’t actually work in the clients’ office). This arrangement gives the client the same benefits of hiring their own in-house staff without the drawbacks.

A transactional service can get the work done but clearly expert outsourcers have found that there are many limitations to that business model. So how do you capitalise on the significant outsourcing resources? It’s easier than you think, just choose carefully and do your research. A few guidelines are:

  • Choose a specialist in the field of Australian accounting
  • Opt for a collaborative partnership to get the best results
  • Talk to existing clients of the service provider to learn about their experiences using the provider
  • Get organised – setting up for outsourcing is easy but if you’re disorganised it will fail
  • If you are not getting the service you expected you may not be with a high-calibre provider

Outsourcing is being done successfully everywhere, so much so that international investment consultancy firm McKinsey & Company predicts that the demand for outsourcing services will reach $180 billion in 2010. There is no doubt that outsourcing is growing and that can only mean one thing – it works.

For twenty years since 2004 BOSS has been providing specialist accounting outsourcing services to Australian firms. With BOSS it is just like having your own dedicated staff member, they are just working in a separate office.

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