October 1, 2018
By: Marcelo Ocampo | Operations Improvement Advisor
Outsourcing, also known as Business Process Outsourcing or BPO, is a hot topic these days, with companies large and small looking into how it can add value to their business.
It consists of hiring an external provider to carry out select functions instead of doing them in-house. But just how can it increase efficiency?
The premises are actually rather simple. Imagine an AP department in a medium-size property management company. There might be an output of about 1000 units per AP employee, but if the company began outsourcing these functions, the capacity could increase to over 5000 units. This increase in capacity is just one way outsourcing increases efficiency, but it has numerous additional benefits.
Improved results in non-core functions
Outsourcing allows you to contract a company with expertise in the services it provides. Often the outsourcing company has invested in the research, technology and staff necessary to carry out these functions with excellence. So instead of having to recruit and develop a dream team on your end, you can depend on specialists to get the job done, with better results.
These improved results can also be measured in the savings from the quality of the work, and late fees in property management are a great example. If not managed correctly, with proper three-day notices, etc., you could be losing thousands per month and risking lack of legal paperwork when a full eviction is required. An outsourced expert in rent collection and legal notices can reduce late fees and virtually eliminate errors in the invoicing and legal process. It’s a great way to avoid weak management and inefficiencies in the process.
Time to focus on your own core functions
Companies that outsource time and resource-consuming functions don’t have to monitor, for example, the performance of their accounts payable team.
As they say, time is money. Without the hassle of recruiting, training and managing the day to day activities of a complete and functional back office, staff and executives have space in their agendas to create a much more strategic view of operations and invest their time in tasks that generate more value and growth for the company. Over time, this leads to increased client satisfaction and better revenue.
Scaling of staff size
Instead of employing numerous people in various departments, outsourcing allows you to consolidate your existing in-house staff and implement a more strategic team.
It gives you the freedom to scale down to a strategic team size consisting of your
best personnel, or scale up with your current team size and only worry about hiring
when another decision maker is needed. This cuts payroll, legal benefits and all recruitment and retention costs.
Lower costs in general
Outsourcing not only reduces staff-related costs, it helps the company’s bottom line overall. Not only to do you not have to provide office space for employees, you can save money on the actual services themselves. Outsourcing companies may utilize lower-cost labor, and can even allow you to offer your services in a different way.
Which companies can take advantage of outsourcing?
In today’s market, companies large and small can take advantage of outsourcing as a strategic decision to reduce costs and save time. Smaller business may be unable to implement entire departments and develop the expertise to cover their needs, making outsourcing a viable alternative, while larger businesses may be experiencing stagnation due to the cumbersome management of non-core functions.
In both cases outsourcing can help streamline processes and increase efficiency. It’s an option that’s no longer reserved a select few, but one that’s available to companies in various stages of growth who wish to improve results, cut costs and free up management’s time to drive advancement.
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