Sep 2016

The secret cost of the $9 labour hour

By: Odyssey Outsourcing
Tags: Offshoring, Outsourcing, Quality

Just recently we had a conversation with an Australian accountant. They’d been using a provider overseas with poor results.

By way of background, this Australian accounting firm is one of the what we would term newer firms, i.e. without legacy systems and legacy employee issues.

This is a Xero only firm, with a homogeneous and process driven approach, where there is a need for strict adherence to their processing approach and client guidelines along with a thorough knowledge of English and Australian accounting and tax requirements. In short, they are after high quality with timely processing.

Whilst they initially identified at the front end they were looking for cheap, timely and high quality AP processing, they identified a secondary need for good value, high quality review. After working with another provider working at $9 hourly, they experienced some shortfalls in the provider.

So what happened that made the accounting firm move away from the great deal?

As the story goes, the provider didn’t really understand Australian culture enough, and were mis-coding expenses like Bunnings.

So the local Australian staff were spending their time reviewing work to a detailed level, instead of a higher level. This meant not only overruns due to poor efficiencies (i.e. review time to accounting/bookkeeping time), but the Australian staff could not move to higher value-add such as new client take-on. At the same time the Australian staff needed to un-post transactions, and continue to “train” the overseas staff through explaining the errors.

And despite a lot of time investment and training by the Australian firm, the offshoring firm just couldn’t pick up the quality sufficiently.

This rapidly turned into one of these frequently heard stories. Having invested so much time and money into making this work, the Australian firm continued to invest further, partly due to the massive investment made already, and partly in the belief that the results were only just around the corner.

Those shortfalls then pushed them to re-evaluating their greatest needs in this order: Quality, Timeliness, Consistency and Value.

Hence the discussion with Odyssey.

Our take on this is that you can ask for Quality, Timeliness, Consistency and Value. But you better be sure you carefully prioritise these attributes, seek a solution provider with the right culture and strengths to work with your attributes, and manage the relationship in an ongoing manner.