Outsourcing is not a new concept. In fact, according to survey data, 37% of small businesses outsource at least one business process already. More technical tasks like accounting, IT services, and digital marketing are the most likely to be outsourced, but any business process can be handled by a third-party.
With less than 15% of business owners and managers reporting that they “feel like they are spending their time on the right activities,” outsourcing provides a huge opportunity to reprioritize your activities and drive the business forward. As Matthew Grattan explains, “As costs and competition increase, it’s time to ditch the ‘I can do it all myself’ mentality and offload those onerous back-office tasks.”
While outsourcing can certainly be used to offload tedious activities, it can also be used strategically to obtain professional expertise in critical areas. Outsourcing frees up more time for selling and merchandising, which is especially important during times of significant growth. Many companies rely heavily on outsourced activities to scale up operations as new business opportunities become available.
But what should small businesses outsource exactly?
The best candidates for outsourcing are processes that are part of a larger job function and require an expert (whether full-time or part-time) but have an element of repetition as well. Outsource tasks that you do not want to do or cannot do well yourself. The Entrepreneur Team advises business leaders to, “Look at your team, your processes, and the work you have to do on a regular basis. Consider outsourcing those areas where you and your team struggle.” Lean on a third-party in any area where your business needs more expertise than it can get internally but where it does not make financial sense to hire in-house. Consider outsourcing these 10 essential activities:
Financial tasks like bookkeeping and accounting are the most commonly outsourced business activities, and with good reason. Keeping the books correctly informs key decision-making regarding cash flow, which can make or break a small business. Using a professional to record expenses, approve reimbursements, submit payroll, invoice customers, provide financial reporting, and file taxes is critically important. While many business owners try to handle these tasks themselves, a lack of financial acumen or time to re-check their work can lead to costly errors, resulting in fines, and even criminal charges. The IRS reports that more than a third of small businesses pay roughly $845 in penalties every year for incorrect or late filings.
IT is another commonly outsourced activity. With an ever-increasing push towards remote work, IT services have become even more challenging to manage for employers of all sizes, making them an even more attractive candidate for outsourcing. Integrating systems and apps across different platforms is where outsourced IT can pay dividends, especially for businesses that rely heavily on online selling to generate revenue.
Whether it is online or offline marketing, utilizing a marketing agency instead of hiring in-house is a great way to gain access to creative strategies that would not typically be available to a small business. Executing on these strategies usually also requires staff hours that just cannot be devoted to marketing activities inside most small businesses.
Anita Campbell explains,
When it’s time to grow your business, an outside marketing firm can help you do it quickly. They can take the ad design, content creation or social media posting off your plate so you can focus on the internal functions of your business. Additionally, these firms are usually filled with professionals who can help you come up with creative ideas and helpful strategies you may not have otherwise had access to.
Whether it is product research or market research, R&D is very costly and time-consuming to do in-house, even if you know how to do it correctly. Since most small businesses do not have the kind of experience needed to conduct R&D effectively on their own, hiring a company that specializes in this area improves not only efficiency but also yields more helpful insights.
Dedicated manufacturing facilities are incredibly expensive to set up and manage on an ongoing basis, which is why most small businesses outsource their manufacturing. Analyze your domestic and international manufacturing options to find something that fits not only your budget but also your goals for the business (for example, control over the process, quality standards, or supporting your local economy).
Shipping & Business Logistics
Companies are more likely than ever to outsource fulfillment, warehousing, and delivery because of the incredible complexity of options available these days. Drop shippers, in particular, can benefit from using third-party logistics to manage their various integrations.
In small businesses, salespeople are often tasked with handling customer service roles as well. Unfortunately, dividing their duties takes time away from selling, stymieing growth. Instead of asking your salespeople to own this part of the customer journey, use a call center or chat scheduler to provide essential customer service support.
Many small businesses outsource recruiting, hiring, onboarding, and training activities. However, these are not the only HR functions that can (and should) be outsourced. Benefits administration and payroll are complicated and time-consuming roles that make sense to outsource as well, although they remain largely underutilized. Despite the plethora of available options, 60% of small businesses reportedly still handle their payroll functions in-house, hurting efficiency and costing them 18% more than businesses that outsource this activity.
Accounts receivable (AR) is the lifeblood of any business, especially a small business. As the CFO Selections Team explains, “The longer an invoice goes without being paid, the less likely it is to get paid at all. On average, 26% of invoices are uncollectable at the three-month mark. Still, that number rises to 70% at six months and 90% at 12 months, respectively,” making timely invoice collection vital for small businesses. Unfortunately, as Michael Kurko explains,
The average small business in the United States has $84,000 in unpaid invoices. It often takes 21 to 30 days for an invoice to get paid; and, because many businesses only have a 27-day cash reserve, delinquent customers can push a small business into the red. Debt collection agencies have the training and resources to collect past-due accounts after most businesses have given up… Agencies have about a 20% success rate. While this may seem low, these are funds that would otherwise have gone completely unrecovered.
Outsourcing outstanding AR to a collection agency is crucial for effective small business cash flow management.
Small tasks eat up a lot of your time every day. (Probably more than you even realize!) Using a virtual assistant (VA) or software program can take many day-to-day administrative tasks off your plate like inbox management, appointment booking, and employee scheduling. With both human and automated options available, there is a wide range of VA services available for every budget.
Are you looking to outsource your bookkeeping functions? Find out if the bookkeeping company you hire needs to have small business experience to serve your needs effectively.
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