Outsourcing (or contracting out) is often defined as the delegation of non-core operations or jobs from internal production to an external entity (such as a subcontractor) that specializes in that operation. Outsourcing is a business decision that can be made for quality or financial reasons. A subset of the term (offshoring) also implies transfering jobs to another country, either by hiring local subcontractors or building a facility in an area where labor is cheap. It became a popular buzzword in business and management in the 1990s.
Outsourcing is defined as the management and/or day-to-day execution of an entire business function by a third party service provider. Outsourcing and out-tasking involve transferring a significant amount of management control to the supplier. Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Likewise, buying services from a provider is not necessarily outsourcing or out-tasking. Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust. Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Outsourcing business is characterized by expertise not inherent to the core of the client organization.
The international context
With the rise of globalization, many companies are turning to offshoring, offshore outsourcing or Global Sourcing.
CPA firms and Small Businesses are discovering that outsourcing your bookkeeping saves payroll, overhead cost and it's a giant step in freeing up valuable time.
As a business owner your time is best spent doing what you do well - working with customers. Time spent on bookkeeping problems add little or no value to your customer relationship. To remain competitive, it is imperative that a company rethinks its strategies, take a hard look at where they are creating value for their customers, then focus on those processes.
35% of America's largest businesses outsource their bookkeeping. Because of new technology advances you now have the same alternative as Fortune 500 firms, no matter how small or large you are.
The most successful businesses of today have gone to outsourcing and now have time and money to spend on differentiating themselves in the marketplace. If you are looking for ways to reduce overhead and focus on your core business, now is the perfect time to make the switch to outsourced accounting.
This allows the customer's key financial staff to focus on higher value finance functions focused on controls and decision support. It also allows the company to variablise its back-office cost, save on back-office investment and allows it access to strong back office administrative talent.