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Should you consider outsourcing your finance function?

The term ‘outsourcing’ can have both positive and negative connotations, depending on who you ask. However, outsourcing the right part of your business to the right partner can be highly beneficial. It enables you and your team to spend more time focusing on your core competencies, meaning the people in the business are happier and more effective because they have a more focused remit. Outsourcing also allows you to dedicate more resource towards servicing your existing clients, helping to bolster business growth. (Whilst business development is very important, the most successful businesses are very good at servicing – and therefore keeping – their existing clients.)

Here are seven key questions to ask when considering outsourcing:

  1. What are the core business functions that we do better than anyone, and therefore should not outsource?

  2. What are the other crucial areas of the business that aren’t within our core competencies?

  3. Are there companies who are experts in these areas, who can perform these functions better than we can (and have the track record to prove it)?

  4. What resources will be required to manage the relationship with our partners as successfully as possible?

  5. How will we measure success?

  6. How will the relationship work on an ongoing basis?

  7. What are the cost implications of outsourcing vs. bringing the expertise in-house?

Any business owner who has grown their internal team by hiring full-time staff will tell you that there are many additional costs associated with hiring even one new staff member, particularly if their remit is outside your business’s core competencies (e.g. hiring a bookkeeper for the first time). These additional costs include: recruitment and hiring, training, the creation of new business processes, National Insurance contributions, pensions, company benefits, consumables, administrative costs, holiday pay, sick leave…the list goes on! Salary is just one part of the overall cost.

Should you outsource your finance function?

Time and cost savings are normally the main reason companies outsource their finance function. It’s unlikely you get terribly excited about the prospect of bookkeeping or accounting, but it’s undoubtedly one area you want to get right. Having accurate, timely and insightful information for your business is key in making effective decisions.

The advantages of outsourcing aren’t limited to time and cost savings.

Other benefits to be had include:

  • Access to top talent without having to pay full time – creates a more effective and efficient business.

  • Better quality of work. An outsourcing partner will have their team focussed on doing what they’re trained and good at. This may not be the case with an in-house team.

  • Access to technology. When you outsource, you gain access to leading edge software and tools. Additionally these systems automatically keep organised books and daily backups to ensure you are fully prepared come audit time.

  • Scale. Employing staff in-house can make it difficult to scale up or down and respond quickly to changes. However, through outsourcing, you can have a reliable team that will help manage these peaks and troughs in resourcing needs.

  • Razor sharp focus will often deliver results more quickly than might otherwise be possible. By outsourcing non-core functions you should be able to maintain focus on your core business and grow sales, profitability and cash more quickly.

What types of businesses are most likely to outsource their finance function?

  • Companies setting up an operation in a new country. Having a partner that knows the local laws and practices will always help. These will often be sales led operations and so do not want to employ a finance team in-house.

  • Business owner/managers who want regular management reports but do not have the capability to create these internally.

  • Business owner/managers who want the expertise of a finance team whilst managing costs and internal resources.

  • Well paid consultants with limited companies that want to reduce the amount of time they spend on accounting and bookkeeping.

Regardless of whether you operate a UK subsidiary, overseas parent company or UK owner managed business, a firm that specialises in outsourced accounting can offer a tailored, effective solution to meet your specific needs. This solution can include: bookkeeping, payroll, VAT Returns, management reporting and year end compliance. A highly effective outsourced accounting solution allows you to focus on your core business competencies and manage your costs, confident that your accounts are being handled by experts.

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