In the business world, success comes from focusing on your field and working your way to the top. But that takes time and dedication. So if you are just going into business or expanding, it is wise to think about what sorts of support services are worth outsourcing – what happens if your accountant or computer person is not sitting in the next room but works for an external service provider?
There is no universal formula for when it is worth outsourcing accounting, IT service, HR, financial management, marketing and the like and when to hire people yourself. So first one should ask why some services can be considered outsourcing candidates and what the intended result is: is the goal to rid oneself of an undesired chore or something one does not have the skills to do, or is the main goal to hedge risks? The size of the company does not play a particular role here; what is important is that companies need different services at different stages in their life cycle and the volumes needed vary as well.
Cost-effectiveness, but not only
For example, if you do not have full-time work to give your accountant or lawyer, it is more reasonable to outsource these positions, as it is more cost-effective. If the amount of work increases, then you can consider whether to continue with your service provider or hire your own staff member. And if you opt for hiring, will you hire a chief financial officer or outsource basic services, or the opposite – the service provider provides competent financial management service while the company’s own staff handles the more elementary work such as data entry.
When weighing the merits of ‘do it yourself’ versus outsourcing, it is certainly worth thinking about hedging risks – if the company employs a top specialist such a chief accountant or head of IT who leaves for some reason, it is hard to replace that person. Service providers on the other hand have the duty to ensure faultless operation of service even if there are personnel changes at a company. Hedging risks also means the sense of assurance that all jobs – tax returns and employment contracts, for instance – are handled correctly, and this is even more important than cost effectiveness.
Transferwise’s chief accountant Andrei Klevtsov says that mitigating risks is sometimes the main factor that leads a company to opt for outsourcing a service. This is understandable, because Transferwise, which operates on four continents, has to know the particularities of each of their markets. “It’s hard to find people with the right competencies, as we don’t know the conditions on the ground and don’t know what knowledge and skills are needed. If we buy service from a well-known consultancy, we’re buying quality and assurance that everything necessary has been done the right way,” says Klevtsov.
Transferwise outsources specific services
In its business strategy, Transferwise follows the policy of handling key areas itself and outsourcing services that are not very high risk but which require specific knowledge about local conditions in a county. “We have a centralised financial department that handles global issues: general financial management, group accounting, financial control. We outsource services that require specific knowledge about the local market: for instance, payroll and tax advisory services – and this goes for our biggest markets – the UK, US and Estonia. We have some other regions where we outsource all financial services,” Klevtsov adds.
He says that for a company operating in many countries, it is vital to outsource certain services, because it is not possible to hire one person who knows how to do payroll according to the rules in Australia, Singapore, UK and Estonia. “It’s a question of competency and effectiveness: can I hire a person who knows how to do this work and who I have enough work for, so they don’t have to sit idle,” Klevtsov sums up.
What to ask service providers?
When comparing different service providers, price is naturally an asking point. I recommend looking beyond the numbers and asking what you will get for that money? What exactly does the accounting or payroll service include? Today an accountant is not just a bookkeeper who arranges numbers but a consultant who can give a company valuable advice on the basis of those figures. It is also worth asking the service provider how continuity of service is guaranteed if the person who handles your company’s account takes ill or leaves their position? How is knowledge transferred from one person to another? It would also be good to know what the internal quality control procedures are.
In addition to the work process and quality, human relationships are important. One should set out one’s expectations as to the person who will start handling your company’s accounts. Yes, it is clear they have to be a good specialist, but personality traits also count. Grant Thornton Baltic has clients who want the service provider to be a very open communicator, cheerful with a good sense of humour. There are also clients who do not care about the softer values. But certainly there has to be good compatibility between people, because being on the same wavelength is important if things are going to succeed. If cooperation is not working at the interpersonal level, this should be discussed; then the service provider can find another specialist to take over working with you.
And thus it can be said that companies based their choice on arguments like efficiency, cost optimisation and minimising risks, achieving a good personal rapport is at least as important. Business – it comes down to relations. That is especially the case in the services sector.