Why Do Companies Outsource? The Top 3 Reasons to Engage a Provider

February 7, 2024 Mimi Torrington

why do companies outsource?

Why do companies outsource? Companies choose to outsource for a number of reasons, but for most of those who go with an outsourcing provider, the journey to starts with a need to cut costs, increase production or scale faster -- sometimes all at the same time.

Outsourcing allows companies to focus on their current priorities and leave the back-office work to the professionals without wasting time on admin responsibilities (like accounts payable, accounts receivable and general accounting, etc.). But most of all, outsourcing paves the way to reaching goals, getting new clients and growing your business.

Because when you aren't busy with an endless list of to-dos, you can finally get things done. Here are the top reasons companies turn to an outsourcing provider.

  1. Save Money on Back-Office Tasks Is a Reason Why Companies Outsource

    This one might seem obvious but saving money is one of the top reasons that outsourcing clients choose to go with a provider, especially one offshore in India or the Philippines. Lowering budgets has never been more relevant to today and right now, outsourcing is a way to save money without losing people or lowering production.

    Also key in the cost-saving discussion is what clients do with the savings. Many clients choose to reinvest that money back into their business. Whether it’s to build a new program, hire a key player or invest in new technology, outsourcing gives clients the opportunity to use the 50-70% savings into something that will actually grow the business, instead of putting it into non-growth areas like accounting, back-office or admin tasks.

    Looking at Cost Savings? Get the Full White Paper That Explains Everything There is to Know About FAO

    But how do these cost savings you keep hearing about actually work? Let's take for example accounts payable outsourcing. In our home base of Austin, Texas, an Accounts Payable Specialist would cost you about $66,844 each year, when you take into account salary, estimated benefits cost and separated hire's salary. When choosing an outsourcing provider that allows for a team of just one AP Specialists offshore (see how Personiv has revolutionized this approach here) you end up paying just $2,250/month or $27,000 per year. With a cost savings of nearly $40K (and a cost reduction of almost 60 percent), it is easy to see why companies choose to outsource something like accounts payable.

    top reasons to engage a bpo

  2. Gain Time to Focus on What Matters Most

    cfo reviewing outsourcing contract so he can focus on what matters

    With so many priorities, company leaders often feel pulled in a million different directions. This can lead to not only lost time but low efficiency and muddled focus as well. By choosing an outsourcing partner dedicated to non-core tasks, companies are able to spend time on strategy, execution and growth, rather than putting out fires. Nothing could be truer in the finance departments of mid-size organizations right now, where being in growth-mode means needing more hours in a day.

    Listen for More: [CFO Weekly PODCAST] Episode 4: Earning a Seat at the Strategic Table

    For CFOs and Controllers, this often takes the form of the monthly fire drill to close the books: the dreaded month-end close. We hear from financial leaders all the time that they find themselves working as a player-coach, sometimes closing the books one minute while making strategic decisions the next. This is such a problem in fact, that in our Finance & Accounting Talent Outlook Survey, we found that 88 percent of CFOs wish they had more time for strategic work.

    Another time-consuming task that pops up for finance & accounting teams is how long it takes to invoice clients. While companies need to get paid and desire to lower invoicing time, their smaller staff may take days to do so, causing delays in payment and large lag in data used to make important decisions. Many companies use outsourcing so they can invoice and get paid faster (something that our teams have proven can be lowered by 60 percent with an offshore team as small as one). Whatever business leaders are spending their time on, one thing is certain: they need more of it and outsourcing can help.

  3. Companies Outsource Because They Can Scale Quickly by Hiring Quality, Offshore Talent

    company scaling up quickly after learning why other companies outsource

    For small- to mid-size companies, building your business and growing your client base are likely two of your top priorities. The thing about admin tasks is that they take a lot of time and money, but don't directly contribute to these goals. Fast growth is typically a driver and one of the "why's" of outsourcing clients and also one of the main benefits to starting an outsourcing relationship. Many desire scale, but don’t want to wait and this is where outsourcing comes in.

    An outsourcing provider can put a dedicated team as small as one on necessary tasks so that companies don’t have to worry about hiring, training and retaining top talent. Scaling fast requires talent and one of the things that can cause issues, especially in the accounting world is the current lack of talent. In our survey, for example, we found that 89% of CFOs agree with the AICPA that the majority of CPAs will retire within the next 15 years. In our same talent survey, we also found that only 19 percent of CFOs could find the talent they need to fill the gaps left by a slowing market.

    outsourcing decision map

    The traditional way of hiring takes time and effort only for turnover to start the process once again. Luckily in countries like the Philippines accounting talent is on the rise with accounting being a top degree of university graduates. In fact, there are 8,325 CPAs in their capital city of Manila alone with thousands joining their PICPA each year. You can take a look at a few of our very own CPAs in Manila, all of whom follow U.S. GAAP accounting standards, by clicking the link below.

    Find Out More About Outsourcing in the Philippines: Get the Special Report

    No matter the reasons for outsourcing, whether to cut costs, grow the business, hire better talent or get your time back, the benefits of outsourcing are perfect for middle-market companies looking to expand.

Interested in how outsourcing can work for your team? Download the Definitive F&A Decision Matrix Worksheet to find out what to outsource and what to keep in-house.

Ready to talk with an expert? Contact us today.

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