Outsourcing is not new. It derives from the economic principle of comparative advantage.
CPA Australia released several great checklists back in October 2016, with lead author by Odyssey’s David Carter.
The checklists in these series allow Australian accountants looking to use or provide outsourced services to cover many of the important aspects of outsourcing.
This week we look at the benefits of Outsourcing your Australian Accounting, Taxation and Bookkeeping Compliance.
While the generic benefits are well understood by most accountants, the below general benefits are detailed to allow for firm specific evaluation. Generic benefits include: wage arbitrage, labour consolidation efficiencies, process harmonization efficiencies, onshore wage elimination, and tax savings. Many Australian accountants have noted that outsourcing solves domestic/local skills/resource shortages, allows for extra capacity and hence increased speed, and because offshoring is accepted industry practice for Australian accountants.
The general benefits of outsourcing that are important to evaluate include:
Enabling new service offerings,
- The extent to which the outsourcing will allow focus on new revenue streams with higher profitability such as client advice / value add services
- Will outsourcing allow a wider range of services to be offered
- Whether the outsourced services allow access to a higher level of technical skills with larger service providers, or access skills not available in the business
- Allows smaller firms to “bat above their weight”. For firms late to the market in service offerings with limited internal resources, outsourcing offers the opportunity to catch up to the market through the use of service provider’s resources e.g. cloud bookkeeping
- Implementation of new technologies / new systems can be facilitated quicker as you have access to staff skilled in new technologies
- Profits from the use of outsourcing can be reinvested back into the business, perhaps into implementation of new technologies / new systems. The improved profitability results in underlying improvement in owner / shareholder value
- Additional services might include providing real time data for clients, or exploration of other opportunities to improve service levels to clients
Allowing a focus on core service offerings, or a better quality compliance offering
- Will the outsourcing enable a greater focus on core competencies
- Through outsourcing compliance, allows business owners time to re-engineer business process to best of practice, and allows time to implement new systems / new technologies
- A decent size Outsource Service Provider can identify efficiencies through knowledge of best practice, and bring best practice file notes and electronic working papers
Speed or cost to complete current work
- The extent to which outsourcing will improve processing speeds, and expedite delivery of services to clients
- Will outsourcing being considered enable cost savings through labour arbitrage, or is this about increased capacity
- The extent to which the firm can reassign lower value tasks to cheaper resources, and the extent to which these resources are more skilled in the specific area, and thus faster
- Is there the possibility to extend working hours when making use of time differences. This is especially important when the same piece of work is being processed by people in different time zones
Staff shortages, and resource allocation
- Outsourcing can provide a solution to long term staff shortages, especially in areas where staff are insufficient e.g. rural areas
- The extent to which outsourcing allows the reduction of capital expenditure required locally. This may also facilitate opportunities in areas previously seen as too risk for capital deployed
- Further on capital expenditure, outsourcing frequently resolves insufficient office space issues, and provides rental savings when office space is reduced.
- At the same time, previous fixed assets can now be budgeted as variable costs i.e. office space, computer investment etc.
Ad hoc services:
- Having flexibility of service use,
- Ability to only pay when you use the services,
- Having the ability to use only during peak periods,
- Having on demand availability, and
- Ability to utilise “part-time” resources