Monday, December 2, 2013

Knowing What to Outsource

Image by 401(K) 2012
To save time and money, many companies try to do more things in house. This is particularly true of small businesses, who often have limited funds. The problem is that doing it wrong can often cost a lot more than cost of outsourcing and having it done right. There are three business functions that can, or should, be outsourced by small business owners, and one that should be outsourced even by larger businesses.

Payroll - Employee works = Employee pay. Sounds easy right? It's not. There is a lot more to managing payroll than simply paying the employee at the end of the day or week. There are Federal and State laws concerning taxes, unemployment benefits, wage garnishing (where applicable) and W-2 forms. In order to avoid hefty fines and potential jail time for non-compliance, I always recommend using a well established and trusted company or accountant to manage business payroll. 

Accounting - This is one of those topics that often trips up new business owners. Accounting is more than just recording the day to day business transactions (bookkeeping). A good accountant will ensure taxes are paid on time, advise on investments and help the business owner to clearly understand their finances. They will also be able to help set up the businesses bookkeeping system so that reports can be easily generated and verified. Often the bookkeeping duties can be handled by the business owner or an employee with a financial background, but the actual accounting should be outsourced to a professional. For more on the differences between Accounting and Bookkeeping see Miss. CPA's article.

Training - This seems to be more of an issue for larger companies than smaller ones. In small companies training is usually more product related and has to be taught in house. Larger companies, specifically ones with a large and aging employee base, have a need to train employees as technology, software, and other aspects of the business change. In some cases the training is product related but in most it's more general than that. Many companies try to have in-house training academies or partner with online learning programs. These can be good solutions however they do have their drawbacks.
  • In-house Training - This is great for something that is routinely taught over and over again,  like customer service standards, or for company specific procedures, as in how to request time off for a vacation or medical leave. It can, however, be expensive or unreliable when it comes to software upgrades or technology changes within a department or company. 
  • Online Learning - This option is often less expensive as it saves the cost of hiring employees to train the staff and allows the employees to learn at their own pace. Employees who are not computer literate or who have trouble with the "read and learn" learning style may struggle to understand the steps. Employees with no motivation, or other motives, will simply not do it and blame the software for "not working". 
Let me share an example. A company upgrades all of their computers from MS Office 98 to MS Office 2010. This is a steep learning curve because Microsoft made significant changes to the basic functionality of the programs. The in-house learning center received their upgrade at the same time as the rest of the company and did not have a chance to learn MS 2010 prior to the upgrade. This made them unable to have training classes available for the staff. In a few weeks, when they did have the class put together they would need several months to train all of the various departments. This is not practical from a business stand point. In an effort to get people trained the company then partnered with an online learning program so that employees could learn at their pace. While this was fine for those who were good with computers, others struggled with finding the time to review the courses or with understanding the material. The computer savvy employees found other, easier to understand, tutorials that were free in order to learn the program. Eventually most of the employees were trained in how to use the new software. 

Now that the program has been installed for a while these two options, which continue to the cost the company money, are still in service so that they can train the one or two new hires that does not already have experience with MS Office 2010. 

If the company had outsourced the training they could have started hands on classes prior to the install to help alleviate frustrations during the transition. It would also allow employees to ask questions and feel that they really understand the software before having to use it everyday in the workplace. Once the majority of the staff was trained then the company would further save money by having the trainer come in only when needed. 

Outsourcing can save a company money but only if it's used wisely. Things that can be done by the business owner, or staff, should not be outsourced. The real key is understanding when, and what, to outsource.