Which model of outsourcing is right for you?

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Discover the pros and cons of the different models of outsourcing so you can choose the best one for your accounting or bookkeeping firm’s business needs.

To help you figure out which model of outsourcing is right for your accounting firm, we dive into four of them here, and reveal the pros and cons of each: freelance, project-style work, business process outsourcing and the build-to-operate transfer model.

What’s great about these models is that they apply to many other industries, as well.

Models of outsourcing and business needs

Out of all the models of outsourcing, the best one for you is the one that best meets your bookkeeping or accounting firm’s business needs. We recommend taking the time to clearly identify those needs, because once you follow a model, it can be difficult to change course and adopt another model.

At its core, outsourcing is a strategic partnership between you and your outsourced accounting service, and getting that partnership right requires preparation, Network World advises. You can start that preparation by learning more about the various models of outsourcing and how a particular model works. Let’s go!

With the freelance model, as implied in the name, you assign work to a freelance worker. This work can be long-term, short-term, part-time or full-time.

1. Freelance

In this model, you post a task or a project you need completed on a site such as Upwork, and individuals or companies around the world bid on your job. You can then choose who you want to hire to complete the job. This model provides a quick and easy way to get a one-off project that requires special skills completed, or to obtain extra help during busy periods, such as tax season.

Pros

  • In terms of saving money, it’s cost effective in most cases because different people and companies will be bidding for your work with different prices.
  • The time it takes for a job to be completed can be quick and seamless.
  • You can get the right skill set for the task at hand.

Cons

  • You could encounter a freelancer who acts like an agency: he or she will win jobs only to outsource them to other local companies to complete.
  • Some companies and/or individuals may fabricate or oversell their previous work and skills, meaning it will be a challenge to know if you’ll get what you paid for until the job is done.
  • It can be difficult to brief the freelancer in detail on what is required, so there’s a risk the work isn’t always completed as requested due to a misunderstanding or miscommunication of what it is you really need.

The takeaway: The freelance model offers a quick, easy and cost-effective way to get jobs done. Check reviews of freelancers’ previous work, as well as references.

2. Project-style work

Just like the name implies, project-style work is project-based. It involves outsourcing an entire project to a specialized outsourcing center. You provide the project requirements, and then the provider will carry out the development work, project management and quality control through to the project’s completion.

Pros

  • It takes a large portion of work off your hands.
  • The project can be completed cost effectively and in a timely manner.
  • You don’t have to hire new staff.
  • You have a fixed cost for the work.

Cons

  • Often these outsourcing centers are set up by offshore companies with no local tax knowledge; it has all been learned remotely. With this lack of local knowledge, team members risk producing work of a lower quality that needs significant and detailed reviews.
  • The time zone and language differences may present challenges.

The takeaway: The marketing of specialized outsourcing centers can be convincing, but obviously, don’t let that be your only determining factor. Do your research before handing over a project. Contact the center and ask questions about their knowledge of local taxation.

With the BPO model, a service provider sets up and operates an offshore office for you and hands it over to you when you’re ready.

3. Business Process Outsourcing (BPO)

BPOs are a labor hire and service office all in one. The provider has the facilities, setup, office environment and management required for your global team members to work. They also recruit those team members and present you with candidates, so you can interview and choose who you would like to add to your global team. What’s more, a BPO will manage the HR, payroll, and all other employee-related matters.

All you need to manage is the workflow and the training your new team members require to carry out their roles.

Pros

  • Specialized BPOs will understand your business and are set up to specifically meet your needs, whether that’s financial reporting, preparing financial statements, finishing tax returns or completing any other accounting function.
  • You get peace of mind, because you don’t have to worry about recruitment, staff management, HR and sick leave or the security of your financial data or accounting information. The BPO handles these responsibilities.
  • It’s inexpensive, simple and easy to implement, and an easy way to grow your team.

Cons

  • Once your team grows beyond 25 people, it can become expensive in relation to operating your own BPO/office.
  • If you partner with a BPO that doesn’t understand your industry or business, it can be difficult to communicate your needs and wants.

The takeaway: BPO offers improved productivity, increased capacity, time back to work on your business instead of in your business, and the ability to quickly reassign resources when necessary.

4. Build-Operate-Transfer Model

This model is a way to build a separate office outside your home country. At first, a provider will provide the workspace and office equipment, and will hire employees, much like in the BPO model. Then once you, the client, is ready to operate on your own, the provider transfers the entire operation over to you.

This model suits accounting or bookkeeping firms that want to grow their global team beyond 25 people. It becomes viable once you have 15 team members.

Pros

  • You can create your own work culture and environment, and control the whole process.
  • The costs are often less expensive than BPO once you have more than 15 team members.

Cons

  • It often looks easier than it is, and setup can be costly.
  • There’s a big learning curve involving a foreign culture and how it works. Without this knowledge, you will often pay “Western prices” rather than local prices, and staff retention will be low if you don’t understand how to best manage your team.
  • It requires a time investment. We recommend you or a senior member of your team visits at least twice a year (if possible) to manage owners’ tasks and interact with your global team members in person.

The takeaway: The time investment is worth it when it comes to building and maintaining a good work culture among your global team members. Going to visit them shows them you value them and it helps make them feel like they’re a part of your team, even though they’re miles away.

Conclusion

When it comes to outsourcing bookkeeping and accounting, firm owners have a few models of outsourcing they can consider: freelance, project-style work, business process outsourcing and the build-to-operate transfer models.

One approach to choosing the best model to serve your business needs is to build your offshore strategy and then find an outsourced services partner who can help you execute your plans.

This may include partnering with a specialized BPO who can work with you and help you transition to your own facility, if and when the time is right.

When you’re ready to learn more, sign up to receive the free checklist, 88 Time-Consuming Tasks That Are Most Easily Outsourced. We can then help you tailor a strategy especially for your firm.

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