Outsourcing is the practice of hiring outside personnel or firms to perform certain tasks typically handled by the people within the company. This is a concept that has been utilized by so many entrepreneurs. For small companies, outsourcing certain work, such as accounting, payroll processing, distribution, and other functions is a necessity rather than a choice. On the other hand, most large companies turn to outsourcing as a way to cut costs. As a result, there are more and more industries evolving nowadays intended serve the different outsourcing needs of many companies.
Although many businesses eventually choose to outsource particular services, not all of them truly understand the advantages or benefits of doing this. While outsourcing is primarily for cost reduction, there are many other reasons why companies need it. This article aims to explain the different ways companies can benefit a lot from outsourcing.
1. More Time to Focus on Important Activities
As the company continues to experience rapid growth, the processes and operations at the back-office of a company will certainly expand and increase as well. No matter how much the increase of the work load is, there will definitely be an effect on the way the company consume resources, such as manpower and finances. The danger here is that focusing the company’s efforts on such additional activities will likely consume the time and attention on the company’s core activities. By outsourcing the additional tasks caused by the expansion, there is no way that the service or quality in the back office will be compromised.
Illustration: After landing a huge contract that could considerably increase the purchasing volume in a very limited time, outsourcing purchasing is recommended.
2. Efficiency and Cost Savings
Sometimes, small businesses or companies get a big break and then start to accept bigger and more complicated services. In cases like this, it is possible that the small size of the company would prevent it from providing and performing the new services consistently and affordably. This is another benefit of outsourcing because there will be no need for the business or company to increase the size of its office. Outsourcing is enough to address the immediate needs of the business.
Illustration: A small physician’s clinic that is looking to accept several different insurance plans. Letting just one staff to keep up with all the rules of the different insurance providers is not efficient and reasonable. The better option is to outsource a medical billing firm.
3. Less Overhead Cost
One of the biggest benefits of outsourcing is that it helps reduce the overhead cost of undertaking certain back office functions. This is especially recommended for certain activities that can be moved easily.
Illustration: As a company grows, it is likely that they will need a bigger office space. However, the present location is costly and there is virtually not enough room for expansion. In this case, outsourcing simple operations can eliminate the need to have a bigger space. This is the reason for the growing demand for telemarketing as well as Louisiana payroll service providers.
4. Control over Operations
There will always be a part of a company that will have the worst performance, and are better off outsourced. Those departments that have grown to be poorly supervised or out of control are the best candidates for outsourcing. What’s more, outsourcing companies have the ability to provide you with more effective management skills.
Illustration: An IT department handling way too many projects but without enough manpower to handle all the tasks. Contracting an outside management team will focus on the operations in the said department and will eventually have it under control.
5. Flexibility of Hiring Staff
By outsourcing, you will be able to bring in and pay for resources only when the tasks need to be done and performed. These outsourced services also may be released when you don’t need them anymore.
Illustration: An accounting department that is short of manpower during auditing periods and tax season. Outsourcing accounting services only for a certain period of time is a more practical option.
6. Risk Management and Continuity
One of the biggest problems of company owners is high employee turnover. This can potentially add inconsistency and uncertainty to the overall business operations. But through outsourcing, there will be a higher level of continuity in the company.
Illustration: The HR head is on an indefinite medical leave and two other administrative staff decided to resign and look for new employment. Outsourcing the functions of the human resources department will allow the company to keeps its smooth operation.
7. Skills Development of Your Own Staff
There may be a certain project the company decides to embark on but nobody in the staff is qualified to do it. By outsourcing the tasks needed to be performed to complete the project, the internal staff will have the chance to work alongside the outsourcing company, and will eventually acquire new skills from the experts.
Cedric Loiselle is an experienced writer who enjoys imparting useful information to many readers. The topics he usually writes about include business and finance, home improvement, and health.
