‘Do what you do best and outsource the rest,’ says legendary management consultant Peter Drucker (1989). From Drucker’s perspective, a company should outsource functions in which it has no special ability and take advantage of a specialist provider’s knowledge and economies of scale to improve performance and achieve the service needed.
Approximately 4% of accounting practices outsource overseas at least part of their clients accounting, taxation and superannuation work. Some practices outsource a small percentage of their total client work, and other practices literally 100%. Outsourcing is growing year on year but to date has mainly been the domain of the larger practices.
The benefits of practices utilising outsourcing include:
- Allows focus on your core business – Outsourcing the ‘simple’ compliance type accounting and tax services frees up the practice principals to focus on the value adding business advisory services. Every practice has limited resources, and outsourcing can help a practice to shift its focus from low margin compliance services toward high value/high profit work that serves the client better.
- Increases efficiency – The overseas outsourcing companies have a much lower cost structure than the typical Australian firm so can perform the processing work for less than 50% of normal Australian rates.
- Reduce labour costs – Outsourcing lets you focus your human resources where you need them most.
- Levels the playing field – Outsourcing can help small firms act ‘big’ by giving them access to the same economies of scale, efficiency, and expertise that large companies enjoy.