If I were to ask Small and Medium Businesses (SMBs) what is the biggest challenge faced by them, the answer would probably be the same.
Shortage of Resources…
Back Office (BO) functions encompass the entire gamut of administrative, operational and financial tasks that support the organization and ensure its smooth functioning. To name a few, these activities include Payroll & Accounting, Logistics & Operations, HR, Finance etc.
These tasks required specialized resources which the SMBs either do not have access to or are not in a position to afford.
Thus the growing need for outsourcing back office support functions.
In this article we are going to talk about how outsourcing BO functions benefits businesses and how to ensure that the outsourcing project pays off well in the long run. However first let us understand some of the BO functions that can be outsourced.
Human Resources – Human Resources cover a wide range of functions from recruitment, employee management, compensation, performance management etc. Companies can choose to either outsource the entire department or just certain functions like recruitment etc which require time and effort.
HR operations require specialized skill, knowledge and experience which small businesses may not have access to considering their limited resources. Outsourcing these services can save a lot of time, effort which can then be channeled into core areas of the business.
Customer Support – As your business grows, you will see an increase in the number of customer queries, complaints, feedback etc. Very soon you will realize that handling customer’s calls and attending to their queries is a full time job in itself.
This is one activity which is best outsourced so you and your team can focus on activities that drive revenue for the business. Little wonder then that giants like Amazon, Walmart choose to outsource these services.
IT Support – Another area which requires specialized skills and expertise. Technology today is the backbone of any enterprise. Keeping up with technology is essential to thrive in today’s competitive environment
Activities like software management, Hardware maintenance, tech support etc can easily be outsourced to an organization with necessary skills to handle such projects.
Payroll and Accounting – Now you can simply forget worrying about committing costly errors and miscalculations. Outsourcing to a specialized team of accounting professionals and be rest assured about such critical functions.
Marketing – Many small businesses prefer to retain marketing functions. After all, nobody understands your brand better than you. Right?
Marketing and PR activities require strategic effort and careful planning to promote your product/brand across various platforms. Also different mediums like digital, print etc require distinct approach like careful planning of content, images etc.
A lot of companies decide to go ahead with marketing themselves but end up either failing or not getting significant results.
Thus it would be wise to chalk out a marketing plan for your company and hire a PR or a marketing firm to carry out the necessary promotional activities.
Reasons to Outsource
Whether you a budding entrepreneur or a business owner, you must have entertained the thought of outsourcing some of your business functions. The benefits are many and have been cited by industry experts world over.
So much so that it even seems possible that you could run an entire organization without actually hiring a single employee in-house. But there is more to outsourcing than just asking a third person or company to carry out a set of activities. There are ramifications that affect the functioning of the entire business.
Let us first look at some of reasons why should consider outsourcing back office functions:-
- Reduced Operational Costs – One of the obvious and biggest driver behind outsourcing is reduction in costs.The idea is to get skilled resources to carry out specific function.The cost is much less as compared to hiring a full time employee in-house and paying them compensation and all other benefits entitled to a full-time employee and then spend time and effort on training and supervising them.Outsourcing certain functions to third party organization in return for a fixed fee takes the worry off your plate. Most outsourcing companies are BPOs who have adequate skilled resources and prior experience of having executed similar functions.
- Access to World Class Resources – With outsourcing you can simply forget training and supervising employees to ensure desired output. Once you decide to outsource all you need to worry about is a good organization with a track record of past projects, their areas of expertise etc.For instance a U.S based organization can decide to outsource its IT support services to a company in India at fraction of cost in US and get access to skilled manpower to carry out the required functions efficiently.
- Greater ROI – Outsourcing companies have the necessary expertise to carry out tasks efficiently and smoothly in a short period of time at much less cost than a full-time employee in-house.The result is greater return on investment which is after all something every business thrives for!
- Improved Focus – If you are a small business owner or a start-up, I am sure you have battled the temptation of doing it all yourself. After all, you business is not that big to have separate IT, Accounting and HR functions.Moreover who understands your business and its objectives better than YOU!
The fact is that you couldn’t be more wrong!
If you wear too many hats you will end up being the jack of all trades but master of none.
As a result you will lose focus and your core functions will suffer.
Outsourcing on the other hand will free up your time and energy so you can completely relax and focus on business growth and strategy.
- No Worrying About Unavailability of Resources – No more stressing over unavailability of skilled resources or spending time and effort on training them to perform the required tasks. Now you can simply choose a good organization as your outsourcing partner and leave the rest to them. You need not worry about employees, their expertise, qualification etc.
- Saves Time – BPO (Business Process Outsourcing) companies generally have high handling of projects and therefore they have the expertise to carry out such tasks quickly. They have a high TAT (Turnaround Time). Also outsourcing companies operate round the clock to get the work done.
While outsourcing comes with many rewards, it is not without risks. After all, you are giving somebody else the responsibility of handling the entire aspect of your business and it’s natural to feel jittery about it. There are certain risks involved and it is important to assess all factors and then come to a decision.
- Control – When you outsource a department or a particular task to a third party, there are always chances that you may not be able to dictate your terms to the vendor who will have their own way of handling things.
It is suggested that you clarify things right at the start and keep things transparent so as to avoid any miscommunications later on.
- Contract may keep you Locked In – Normally all third party service providers will ask you to sign a contract. Read all terms and conditions thoroughly for both parties and make sure it allows you to terminate the contract in case you are unhappy with the services.
Certain contracts do not allow you to terminate the contract mid-way and you may not have the flexibility to voice your complaints or concerns. Discuss all terms and conditions mutually with your vendor before signing any document.
- Communicate and monitor regularly – Fair enough, you have outsourced some of your back office functions to a third party. But it’s equally important that you communicate with them regularly.
You could probably ask them to share progress in the form of reports etc which will help you track the progress of tasks and exercise necessary control.
- Know When and What To Outsource – Outsourcing may not be for everybody. It is important to assess your conditions, business needs, work etc thoroughly and then decide rather than jump in to the bandwagon.
Analyze all tasks thoroughly and then decide what are the tasks that you feel you should outsource. All non-core tasks that you do not have the means to accomplish in-house can be outsourced.
It is true that Outsourcing is a strategy adopted by a lot of companies to cut down on operational costs, however it has its own risks and companies need to tread the path cautiously.
Decide on the tasks that you wish to outsource and then go about choosing the Outsourcing partner. Choose carefully after thorough evaluation. Just keep the above mentioned points in mind while working with your partner and you should begin to see benefits over time.
Confused about choosing a good Outsourcing partner? Fret not, reach us with your queries and we’re sure to have a solution for you!