When you think about outsourcing,
some of the typical functions that
probably come to mind include payroll, benefits administration and information technology. But have you considered outsourcing your accounting, tax or
CFO functions?
“Outsourcing these areas is not as publicized, but doing so can save you time and
money, give you access to highly trained
experts and transfer risk,” says Maureen A.
Nulty, CPA/ABV, CVA, Cendrowski Selecky
PC, Bloomfield Hills. “All companies can
outsource. Small companies outsource
because they don’t have the internal
resources. Large companies outsource to
better allocate their internal resources and
they typically find it more cost effective
than hiring additional staff.”
Nulty defines outsourcing as the transferring of complete responsibility for a function, division or task within a company to an
independent third party that has expertise in
that particular function, division or task.
Smart Business spoke with Nulty about
the numerous ways companies can benefit
by outsourcing.
How can outsourcing save money?
The cost to recruit, hire, train and retain
people is enormous, not to mention the
additional high costs of turnover. If you
outsource, you’ll probably pay more when
compared to an annual salary, but add in all
the other costs and most companies typically save a great deal by outsourcing. With
an outsourcing arrangement, you’re generally on a fixed fee, so you know what the
costs are going to be. You turn a variable
(personnel) cost to a fixed cost, so it’s easier to plan. You also eliminate the time and
costs involved with dealing with absences
and illnesses.
How does outsourcing enable a company to
better allocate its resources?
Consider the tax function — a typically
seasonal or noncontinuous type of activity.
When you outsource this function, you
don’t have to divert internal resources and
disrupt other operations.
How does outsourcing provide a higher quality product/service?
Outsourcing gives you access to highly
skilled experts at less cost than you would
typically incur to employ these types of
professionals, or to develop the resources
internally. By outsourcing, you can even
eliminate the need to develop and maintain
entire departments of people, provide for
their ongoing training, maintain reference
libraries, research capabilities or support
resources. The outsourcing firm provides
for the continuing education of its employees, provides access to the latest technologies, ensures that licenses are kept up to
date, provides benefits and support personnel, etc. Outsourced personnel have
strong support behind them and can draw
upon the expertise of other colleagues at
their firm whenever the need arises.
How does outsourcing reduce the risk to an
organization?
When you outsource, you transfer the
risk to the independent third party. Again,
let’s use the example of tax. The outsourcing firm ensures that all taxes will be filed
correctly on a timely basis. You eliminate
the risk of taxes not filed, filed late or filed incorrectly, which can be extremely costly.
Is CFO outsourcing a new trend and why
would a company want to outsource this
function?
This is a newer type of outsourcing activity. It’s not as common yet, but is growing
in popularity. Some common scenarios
might include:
- A small company that is experiencing
growing pains and doesn’t know how to
structure the accounting and financial
reporting areas. An outsourcing firm can
assess the situation and the direction the
company is headed in and design a CFO
position. - A larger company that has to replace a
resigning CFO with a new CFO. A resigning CFO might give one month’s notice.
Typically, it would take two to six months
to identify the right candidate and train
them to fill the position. An outsourcing
firm can manage the responsibilities during
the interim period and help the company
identify and hire the right person to fill the
position. - A company in transition and experiencing a tremendous period of growth
might consider hiring a CFO, but after analyzing the costs and requirements in terms
of resource allocation, decide to outsource
the function permanently.
What are some of the perceived downsides
of outsourcing?
Some companies perceive that by outsourcing they will lose control, or that control is diminished. In reality, control and certainty is increased because you have moved
a variable cost to a fixed cost. From a dayto-day standpoint, the obligations are clearly spelled out in the engagement letter.
Performance is evaluated frequently and
communication is often highly effective.
MAUREEN A. NULTY, CPA/ABV, CVA, is an officer of
Cendrowski Selecky PC, Bloomfield Hills, Mich. Reach her at
(248) 540-5760 or [email protected].
