Does Outsourcing Accounting Save Money? How Much Can We Reduce Costs?
Does Outsourcing Accounting Save Money? Choosing to outsource a business function is often done for the anticipated cost savings to the contracting company. Additional value is gained that contributes towards savings when improvements in a process minimize potential losses by addressing risks through effective controls.
Outsourcing of accounting processes, for example, generally saves between 30% and 75% of current costs, while improving quality and timeliness.
The Argument for Outsourcing Accounting Processes – A PC Analogy
Would you build your own PCs from scratch or buy them? If you buy them, you are simply outsourcing their production. This is true for other goods and services purchased by companies and is why companies are advised to keep their core competencies (what differentiates them from their competitors) and outsource everything else.
Does Outsourcing Accounting Save Money? A Closer Look at Business Process Outsourcing
Business Process Outsourcers (BPO’s) can provide services less expensively because they specialize in the service they are providing and have invested in the expertise and automation that enables them to perform these services more efficiently. Conceptually, outsourcing a business function leads to cost advantages according to the economies of scale principle. That is, the anticipated increase in productivity — via improvements in operational efficiencies – will, naturally, reduce both per-unit fixed costs as well as average variable costs. In many cases, the BPO’s investments in technology and experienced resources allow them to perform these activities more effectively, with better quality, timeliness, and customer service.
So, Does Outsourcing Accounting Save Money, and Does It Make Sense For You?
A cost-benefit analysis is necessary to measure the value that a company could gain. A thorough analysis should account for not just employee wages but other Human Resource costs (hiring, training, and management oversight of the employees), operating overhead (office space, computers, etc.) but also the value of time others in the company must spend addresses exceptions or inefficiencies in the process. Naturally, the ideal outcome would be to have the costs associated be reduced substantially enough to cover the total fees paid to the outsourcing provider.
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