'Tis said, that the trouble with many accountants (and I am one, so I'm allowed to say it) is that they know the cost of everything but the value of nothing.

For example, their traditional thinking says, "do not outsource, because it will cost you more". And, of course, in one sense, they're right!

However, the major flaw in their argument lies in the unspoken implication that your Bottom Line Profits will suffer as a result.

What they fail to recognise is that outsourcing can actually be used as a very cost-effective tool to grow your Bottom Line Profits faster than keeping such processes in-house would do.

It all comes down to a question of math's, or what some economists call "bottleneck" theory.

The scarcest resource in any business is time (usually management time). The key to maximising Bottom Line Profits is to optimise the amount of time that the sales team is allowed to spend creating sales and Gross Margin. Management (overhead) will also be used far more profitably if it too is focussed on growing the Gross Profits and generating additional wealth.

There are two reasons for this. Firstly, it is because people work far, far more productively if they are focussed upon the area about which they feel most comfortable. A salesperson's psyche is selling, not tedious PAYE calculations or credit control monitoring. So get people to play to their strengths and then monitor the amount of EXTRA Gross Margin per hour that they can create if not distracted by tasks which are not central to their mindset or core skills.

The second reason is that most organisations are not good at "Back Office" tasks. They tend to be considered a "necessary evil" (at best!). They end up being either managed by non-specialists with a heavy reliance on the personal efforts of one or two individuals or worst still, taking up the valuable time of someone who would be far more productive, effective (and happy!) generating (or managing) sales and Gross Margin wealth.

The math's then become quite simple. Add up the EXTRA Gross Margin generated versus the additional marginal cost of outsourcing most of the Back Office tasks (payroll, invoicing, PAYE/NI & VAT administration, Bad Debt insurance, credit checking, credit control, bank funding etc etc).

If you really want to challenge your accountant, work out the "hidden costs" of doing it in-house like the :-
rent,
rates,
utilities,
telephones,
stationery,
computer equipment,
systems and software investment,
invoice discounting fees,
bank charges,
supervisory costs,
sickness and holiday cover,
insurance covers,
keeping up with the latest legislation changes,
professional services bills (including the accountants!)
and, of course, Management Time.

All costs of providing in-house support functions, and many of them "fixed", not variable costs that flex with your sales like outsourced costs do.

Finally, consider this. What is the cost to your organisation of not having Back Office specialists in terms of pay errors and invoicing queries caused by processes which are not core to where your business is focussed (ie sales). What do your temps and customers think of the paperwork they receive from you?

So, think the bigger picture. Play to your strengths, not your weaknesses. Think Outsourcing. Think Bottom Line Profit, not individual cost lines. And ask your Accountant for a refund!!

Ian Humphrey is the Managing Director of Back Office Support Services Ltd who are the authoritative voice in the recruitment back office outsourcing industry (see advertisement)