What is Outsourcing?

Outsourcing is the process by which companies get the best team for the best price with the least overhead and hassle.


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Why do companies outsource?

Companies outsource because it reduces their overhead, increases their profit margins, saves training time, onboarding time, new hire costs and HR hassles. The COVID related economic downturn has significantly reduced the size of many organizations.  Outsourcing is one way to keep operations moving while staying lean.

According to Brandon Gaille, 46% of companies have cited their top reason for outsourcing was to reduce operating costs, with 12% desiring to access world-class capabilities.

Reasons to Outsource:

  1.  Reduce or control costs
  2. Gain access to IT resources unavailable internally
  3. Free up internal resources
  4.  Improve business or customer focus
  5. Accelerate company reorganization/transformation
  6. Accelerate project
  7.  Gain access to management expertise unavailable internally
  8. Reduce time to market
  9. Improve fraud protections internally

Is outsourcing new? How proven is it?

Outsourcing began as a business strategy in the late 1980’s and became widely accepted in the subsequent decade. Some opponents argue that it causes the loss of local jobs.  Outsourcing’s proponents argue that it allows companies to allocate resources where they are most effective while keeping overhead low and ensuring the most skilled labor does the job.

Many companies use outsourcing to cut costs on new hires, recruiting, benefits packages and technology.

Outsourcing is effective to support core teams internally, such as outsourced accounting support and to spin off non-critical elements such as marketing or IT services.

How do I find the right outsourced business partner?

Communication and value match are key to outsourcing’s success.

Skill and price are often the first things a company looks at in an outsourced partner.  While these are essential to a good choice in an outsourced company, consider the following:

  • Time zone: Your outsourced team will need to communicate and if they are reversed or even 6 – 8 hour off in time zone, communication in real-time will not be easy.
  • Value match: Ensure that the values you hold close are similar to your outsourced team’s values.  Do you need timely communication? Do you value transparency, efficiency, speed, cost-savings?  Be clear in your goals to ensure that your team understands what you value and you understand what they value.
  • Language skills: If you offshore, be sure that the tasks your team will perform are within their language ability.  A Swedish team writing your social media content may not be the best match.

Outsourcing Pros and Cons:

Pros to outsourcing: 

  • Scale up and down cost and scope of work as your needs dictate
  • Access to a  team of experts as opposed to just one person
  • Reduced costs: Employee benefits, hiring costs associated with onboarding and training, taxes, Workers Comp.
  • More detailed reporting based on the TGG Way™ and our proven systems of financial accuracy.
  • Reduce risk of fraud. Outsourcing offers external checks on existing systems.

Cons to outsourcing: 

  • Your team is not in-house or on-site
  • Timing for communications can be difficult, especially if you off-shore
  • Culture fit can be a challenge.  There is very little culture interaction with traditional off-shore outsourcing.  Same-city outsourcing does not fall into this problem area.
  • Role/ job description must encompass all of the responsibilities you will need. Hiring internally takes on much more weight.

Internal hiring Pros and Cons:

Pros to hiring internally:

  • Dedicated person focused on your business alone, full-time
  • Employees are able to interact more directly with internal leadership and staff
  • Culture benefits when you get the right hire!
  • Train people in your way

Cons to hiring internally:

  • Can you find somebody to fill the position at your desired salary range?
  • Time spent onboarding and training  takes away from time performing tasks.
  • Hiring an employee means a fixed cost, not giving you the ability to adjust and scale down hours/salary if needed and conversely if the business grows, you don’t have the ability to scale up as easily/quickly either
  • If a new hire does not work out, you are back at ground zero
  • Additional costs/taxes that come with hiring an employee
  • Gaps during vacation or sick time without back-up

In Conclusion:

In general, outsourcing is able to accomplish a lot in a shorter period of time while providing insights and skills across a variety of expertises. For outsourced accounting, trained teams offer the ability to hit the ground running with forecasting, budgeting and planning for the future of the business. TGG’s reporting focuses on proactive information and key metrics covering the range of deliverables from staff accounting through CFO though leadership and encompassing managerial accounting and Controller level oversight.

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