• COVID-19
  • Insights
  • Who We Help
    •   Industrial Automation
    •   Manufacturing & Distribution
    •   A&E Professional Services
    •   International Businesses
      • ◦   Expanding Outside the U.S.
      • ◦   Expanding to the U.S.
  • Services
    •   COVID-19
      • ◦   Cash Flow Confidence Assessment
      • ◦   Maximize Your Loan Forgiveness
      • ◦   5 Key Focus Areas
      • ◦   COVID-19 Resource Center
    •   Client Accounting
      • ◦   Software Solutions
      • ◦   Accounting Support
      • ◦   Reporting
    •   Tax
      • ◦   R&D Tax Credit
      • ◦   Tax Credits & Incentives
      • ◦   Tax Structure
      • ◦   Federal Tax
      • ◦   State & Local Tax
      • ◦   Personal Tax
      • ◦   Other Tax Filings
    •   Advisory & Assurance
      • ◦   Assurance Levels
      • ◦   Reporting
      • ◦   Employee Benefit Plan Audits
      • ◦   Technical Accounting & Reporting
    •   Consulting
      • ◦   Data Analytics
      • ◦   Transaction Services
      • ◦   Business Planning
      • ◦   Succession & Exit Strategies
    •   International
      • ◦   International Tax
      • ◦   Foreign Direct Investment
      • ◦   Global Expansion
      • ◦   International Accounting
  • Events
  • Careers
    •   Why C&M
    •   Students
      • ◦   Campus Events
      • ◦   Internships
      • ◦   Reach Beyond Program
    •   Experienced Professionals
      • ◦   Team member profile videos
    •   Opportunities
    •   Employee Journals
    •   Office Tour
  • About Us
    •   How We Help
      • ◦   Service Approach
      • ◦   Affiliations
      • ◦   Communications & Technology
    •   Meet Our Team
    •   Testimonials
    •   Our Videos
    •   Our Story
  • Contact Us
  • Subscribe
CHANGE COUNTRY:
  • United States
  • 中国
  • Client Login
Clayton & McKervey Logo
  • COVID-19
  • Insights
  • Who We Help
  • Services
  • Events
  • Careers
  • About Us
  • Contact Us
  • Subscribe
    • Most Recent Insights
  1. Home
  2. Insights
  3. Outsourcing Non-Core Functions

Outsourcing Non-Core Functions

Posted by Clayton & McKervey on October 15, 2010

Clayton & McKervey Clayton & McKervey

At our June 10, 2010 CFO/Controller roundtable, we discussed outsourcing non-core functions. Summarized below are key points of the conversation.

Outsourcing is typically viewed as: the contracting of a business function to an external provider.

Common benefits of outsourcing

  • Cost savings
  • Administrative efficiencies allow you to focus onyour core business
  • The move from a fixed to variable cost structure (paying for what you need, especially when your need is changing throughout time)
  • Improved quality
  • Access to specialized knowledge or operational expertise
  • Enhanced capacity for innovation
  • Reduced time getting a product or service to market
  • Scalability (ability to increase or decrease services as needed)

Hidden benefits of outsourcing

  • Security benefits
  • Frequent technological updates are real time as apposed to when you update your system
  • Training of your staff by the outsourcing firm is often more fluid
  • Concerns related to outsourcing
  • Quality risks
  • Accountability
  • Failure to deliver business transformation
  • Security
  • Perception of employees and outside stakeholders
  • Loss, or perceived loss, of control

The culture and morale of the company can also be affected when an area is outsourced, and could potentially harm a company’s image or lead to employees being concerned for their own employment within the company.

There are many functions companies are outsourcing, including operations, sales and marketing, financial and administrative, and telecommunications services. The list below is by no means all-inclusive.

Operations outsourcing

  • Component manufacturing
  • Contracted services
  • Warehousing
  • Freight

Sales & Marketing outsourcing

  • Outside sales representatives
  • Marketing
  • Advertising
  • Public relations
  • Market research

Financial and Administrative outsourcing

  • CPAs
  • Attorneys
  • Payroll processing
  • Insurance brokers
  • Employee benefit advisors
  • Investment advisors

IT consulting

  • Credit and collection firms
  • Telecommunication outsourcing
  • Web conferencing
  • Call centers
  • IT help desks
  • Customer service departments

Additional areas for outsourcing

  • Human resources
  • Professional employer organizations (PEOs)
  • Expanded accounting services
  • Cloud computing

The outsourcing of human resources and these other functions are increasing because of the changes in today’s environment, such as the new W2 and 1099 requirements resulting from health care reform and other legislation.

Outsourcing is typically considered after a specific event occurs or for a specific need the company is unable to fulfill. Ideally, you would be thinking ahead and being proactive instead of reacting.

When contemplating outsourcing, think about the future. For example, when outsourcing a staff position, in addition to considering the savings from hiring the employee directly, such as wages and benefits, also consider the savings that would result from no longer having to pay the training expenses to update the employee’s skills for new developments. This employee’s training would now be a firm expense.

A payroll situation was discussed, in which a company had one person performing all of the payroll processing functions. The company is now outsourcing the functions as a result thinking ahead. They chose to outsource the functions to reduce the risk of the payroll not being processed, to manage growth by anticipating the increased payroll responsibilities that will be required as the firm grows and hires more employees, and to keep up with technology, such as pay cards and direct deposit.

When considering an outsourcing company, a plan to evaluate such company needs to be in place. The stability of the outsourced firm needs to be researched and understood before making a decision. The financials and z-score could be an indicator of the growth or decline of the company. In addition, asking how they could respond in an emergency situation could also be vital to your business.

To answer the question “What not to outsource?”, responses included: a company can outsource any function as long as they were comfortable, but it was also mentioned that areas including technical secrets, intellectual property, what brands the company – the know how, idea or product, and potentially R&Damp;, should not be outsourced. You should always maintain your company’s uniqueness.

Another question posed was “Does the outsourcing have to save money?” Other factors besides saving money were discussed, such as if the outsourcing company could do the function better and add protection from compliance risk and improve the process. The oil spill in the Gulf and BP were given as an example. BP used various companies for different purposes, and now the blame game is anticipated.

In summary, there are many considerations in regards to outsourcing, including the benefits, concerns or potential drawbacks, and how you would evaluate the outsourcing company you hire. But clearly our attendees are outsourcing many areas of their operations.

Our team is always ready to help.

Please contact us for more information.

Clayton & McKervey

Clayton & McKervey

Contact Clayton & McKervey

related news

IRS Issues New Guidance on PPP and Employee Retention Credit Eligibility

The IRS issued highly anticipated guidance regarding the employee retention credit (ERC) on Monday, March 1. We have previously outlined how the Consolidated Appropriations Act, passed in December, permitted employers…

Read full story

Honoring International Women’s Day

In honor of International Women’s Day, I’d like to take a moment to recognize the talented women who have helped build our outstanding reputation within the business community – both…

Read full story

How to Calculate R&D Tax Credits

As we’ve seen in the first two installments of this series, business owners often miss out on the R&D tax credit opportunity and the bottom-line infusion it can provide. Many…

Read full story

Doing Business in Mexico: What to Expect this Year

Without a doubt, this year will be interesting for Mexico. To start, it’s an election year and we all know what that means…a lot of uncertainty. As the global pandemic…

Read full story

What Expenses Qualify for R&D Tax Credits?

The R&D tax credit is one of the most overlooked opportunities to boost your bottom line. Many business owners fail to claim it under the mistaken belief that they’re not…

Read full story

Categories

Jump directly to the topics that matter to you most.

  • A&E Professional Services
  • About Us
  • Advisory & Assurance
  • Business Owners
  • C&M Press Releases
  • Careers
  • China Consulting
  • Clayton & McKervey
  • Client Accounting Services
  • Consulting
  • COVID-19
  • Data Analytics
  • Estate Planning
  • Expanding Outside the U.S.
  • Expanding to the U.S.
  • From the President
  • Industrial Automation
  • International
  • Manufacturing & Distribution
  • Mexico Consulting
  • Podcasts
  • Private Client Services
  • Tax & Tax Credits
  • Transaction Services
  • Videos

Authors

Read news direct from our managers and stakeholders.

    • Ben Smith
    • Beth Butchart
    • Bryan Powrozek
    • Carlos Calderon
    • Casey Haggerty
    • Clayton & McKervey
    • Dave Van Damme
    • Denise Asker
    • Eric Lin
    • Jim Biehl
    • Julie Killian
    • Kevin Johns
    • Margaret Amsden
    • Miroslav Georgiev
    • Nina Wang
    • Rob Dutkiewicz
    • Ruben Ramirez
    • Sarah Russell
    • Sue Tuson
    • Tarah Ablett
    • Teresa Gordon
    • Tim Finerty
    • Tim Hilligoss
    • Wendy Reedy

Additional Resources

Additional news from Clayton & McKervey can be found below.

  • Subscribe to our email newsletter
  • View upcoming events
  • Contact us to let us know how we can help you
  • Main Content
  • Related Insights

Outsourcing Non-Core Functions

Posted by Clayton & McKervey on October 15, 2010

Clayton & McKervey

At our June 10, 2010 CFO/Controller roundtable, we discussed outsourcing non-core functions. Summarized below are key points of the conversation.

Outsourcing is typically viewed as: the contracting of a business function to an external provider.

Common benefits of outsourcing

  • Cost savings
  • Administrative efficiencies allow you to focus onyour core business
  • The move from a fixed to variable cost structure (paying for what you need, especially when your need is changing throughout time)
  • Improved quality
  • Access to specialized knowledge or operational expertise
  • Enhanced capacity for innovation
  • Reduced time getting a product or service to market
  • Scalability (ability to increase or decrease services as needed)

Hidden benefits of outsourcing

  • Security benefits
  • Frequent technological updates are real time as apposed to when you update your system
  • Training of your staff by the outsourcing firm is often more fluid
  • Concerns related to outsourcing
  • Quality risks
  • Accountability
  • Failure to deliver business transformation
  • Security
  • Perception of employees and outside stakeholders
  • Loss, or perceived loss, of control

The culture and morale of the company can also be affected when an area is outsourced, and could potentially harm a company’s image or lead to employees being concerned for their own employment within the company.

There are many functions companies are outsourcing, including operations, sales and marketing, financial and administrative, and telecommunications services. The list below is by no means all-inclusive.

Operations outsourcing

  • Component manufacturing
  • Contracted services
  • Warehousing
  • Freight

Sales & Marketing outsourcing

  • Outside sales representatives
  • Marketing
  • Advertising
  • Public relations
  • Market research

Financial and Administrative outsourcing

  • CPAs
  • Attorneys
  • Payroll processing
  • Insurance brokers
  • Employee benefit advisors
  • Investment advisors

IT consulting

  • Credit and collection firms
  • Telecommunication outsourcing
  • Web conferencing
  • Call centers
  • IT help desks
  • Customer service departments

Additional areas for outsourcing

  • Human resources
  • Professional employer organizations (PEOs)
  • Expanded accounting services
  • Cloud computing

The outsourcing of human resources and these other functions are increasing because of the changes in today’s environment, such as the new W2 and 1099 requirements resulting from health care reform and other legislation.

Outsourcing is typically considered after a specific event occurs or for a specific need the company is unable to fulfill. Ideally, you would be thinking ahead and being proactive instead of reacting.

When contemplating outsourcing, think about the future. For example, when outsourcing a staff position, in addition to considering the savings from hiring the employee directly, such as wages and benefits, also consider the savings that would result from no longer having to pay the training expenses to update the employee’s skills for new developments. This employee’s training would now be a firm expense.

A payroll situation was discussed, in which a company had one person performing all of the payroll processing functions. The company is now outsourcing the functions as a result thinking ahead. They chose to outsource the functions to reduce the risk of the payroll not being processed, to manage growth by anticipating the increased payroll responsibilities that will be required as the firm grows and hires more employees, and to keep up with technology, such as pay cards and direct deposit.

When considering an outsourcing company, a plan to evaluate such company needs to be in place. The stability of the outsourced firm needs to be researched and understood before making a decision. The financials and z-score could be an indicator of the growth or decline of the company. In addition, asking how they could respond in an emergency situation could also be vital to your business.

To answer the question “What not to outsource?”, responses included: a company can outsource any function as long as they were comfortable, but it was also mentioned that areas including technical secrets, intellectual property, what brands the company – the know how, idea or product, and potentially R&Damp;, should not be outsourced. You should always maintain your company’s uniqueness.

Another question posed was “Does the outsourcing have to save money?” Other factors besides saving money were discussed, such as if the outsourcing company could do the function better and add protection from compliance risk and improve the process. The oil spill in the Gulf and BP were given as an example. BP used various companies for different purposes, and now the blame game is anticipated.

In summary, there are many considerations in regards to outsourcing, including the benefits, concerns or potential drawbacks, and how you would evaluate the outsourcing company you hire. But clearly our attendees are outsourcing many areas of their operations.

Our team is always ready to help.

Please contact us for more information.

Clayton & McKervey

Contact Clayton & McKervey

related news

IRS Issues New Guidance on PPP and Employee Retention Credit Eligibility

The IRS issued highly anticipated guidance regarding the employee retention credit (ERC) on Monday, March 1. We have previously outlined how the Consolidated Appropriations Act, passed in December, permitted employers…

Read full story

Honoring International Women’s Day

In honor of International Women’s Day, I’d like to take a moment to recognize the talented women who have helped build our outstanding reputation within the business community – both…

Read full story

How to Calculate R&D Tax Credits

As we’ve seen in the first two installments of this series, business owners often miss out on the R&D tax credit opportunity and the bottom-line infusion it can provide. Many…

Read full story

Doing Business in Mexico: What to Expect this Year

Without a doubt, this year will be interesting for Mexico. To start, it’s an election year and we all know what that means…a lot of uncertainty. As the global pandemic…

Read full story

What Expenses Qualify for R&D Tax Credits?

The R&D tax credit is one of the most overlooked opportunities to boost your bottom line. Many business owners fail to claim it under the mistaken belief that they’re not…

Read full story

Categories

Jump directly to the topics that matter to you most.

  • A&E Professional Services
  • About Us
  • Advisory & Assurance
  • Business Owners
  • C&M Press Releases
  • Careers
  • China Consulting
  • Clayton & McKervey
  • Client Accounting Services
  • Consulting
  • COVID-19
  • Data Analytics
  • Estate Planning
  • Expanding Outside the U.S.
  • Expanding to the U.S.
  • From the President
  • Industrial Automation
  • International
  • Manufacturing & Distribution
  • Mexico Consulting
  • Podcasts
  • Private Client Services
  • Tax & Tax Credits
  • Transaction Services
  • Videos

Authors

Read news direct from our managers and stakeholders.

  • Ben Smith
  • Beth Butchart
  • Bryan Powrozek
  • Carlos Calderon
  • Casey Haggerty
  • Clayton & McKervey
  • Dave Van Damme
  • Denise Asker
  • Eric Lin
  • Jim Biehl
  • Julie Killian
  • Kevin Johns
  • Margaret Amsden
  • Miroslav Georgiev
  • Nina Wang
  • Rob Dutkiewicz
  • Ruben Ramirez
  • Sarah Russell
  • Sue Tuson
  • Tarah Ablett
  • Teresa Gordon
  • Tim Finerty
  • Tim Hilligoss
  • Wendy Reedy

Additional Resources

Additional news from Clayton & McKervey can be found below.

  • Subscribe to our email newsletter
  • View upcoming events
  • Contact us to let us know how we can help you

Website

  • COVID-19
  • Insights
  • Who We Help
  • Services
  • Events
  • Careers
  • About Us
  • Contact Us
  • Subscribe

Location

+1 248.208.8860
2000 Town Center
Suite 1800
Southfield, MI
48075 | USA

Connect

  • Events
  • Newsletter
  • Client Login

Social

  • LinkedIn
  • Facebook
  • Twitter
  • Glassdoor
  • YouTube
  • Instagram

Awards

DFP Top Work Places Best & Brightest
Prime Global

Tax | Accounting | Assurance | Consulting | Highly technical and accessible team of CPAs helping growth driven, closely held, middle market companies compete in the global marketplace. Michigan-based accountants and advisors focused on helping business owners in the United States and throughout Europe and China.

Privacy Policy Disclaimer

© 2021 Clayton & McKervey