You started your business because you were passionate about your trade. Perhaps you even foresaw a better way of servicing customers with your product or service. However, many business owners are regularly bogged down by endless paperwork and administrative tasks. These non-revenue generating tasks like bookkeeping, payroll, and human resources consume precious time that business owners or financial personnel could otherwise be spending on being strategic and growing the business.
Fortunately, business process outsourcing (BPO) is a proven method for helping entrepreneurs refocus on their core business purpose, and for getting them back to growing their organizations. BPO is hugely beneficial to companies of all sizes because it can help them reach levels of success that aren’t always possible while relying on limited resources.
Business process outsourcing frees up time to focus on what you're good at. It also allows your team to concentrate on servicing existing and prospective clients, gaining a competitive advantage in an increasingly competitive marketplace, and ultimately scaling up your business.
What is Business Process Outsourcing?
Business process outsourcing is a practice whereby companies outsource certain business functions to a third-party service provider. Unlike Knowledge Process Outsourcing (KPO), business process outsourcing focuses on services that are typically restricted to non-primary business processes - like payroll or tech support - that don’t directly contribute to a company’s core business function.
BPO has been gaining popularity in recent years mainly because it allows busy business owners to place critical operations in the hands of highly skilled experts with targeted resources. These outsourced business specialists work in various capacities to provide dedicated front-office and back-office solutions.
Whether your organization needs outside customer service support, or some accounts payable or accounts receivable assistance, working with the right BPO vendor can lead to:
- Cost efficiencies: Having an outsourced business function is typically less costly than bringing on a dedicated full-time employee.
- Reduced business risks: Working with a long-term outsourced partner will ensure you aren't in a jam if your employee is ill or decides to leave unexpectedly.
- Time savings: BPO can allow you to take certain business functions off your plate so you can focus on what's important for growing the business.
- Improved operational efficiency: BPO cuts down on repetitive, often manual tasks, creating more bandwidth and opportunity to focus on revenue-generating activities, thereby increasing operational efficiency.
Before engaging with an outsourcing company, however, it’s important to understand and weigh your organization’s needs against any potential risks or benefits.
Putting together a well-defined plan will help clarify exactly which processes you want to outsource, and the parameters that will need to be in place to measure the success of work being performed on your company’s behalf.
The Risks and Benefits of Business Process Outsourcing
What are the risks?
Like most business initiatives, there are certain risks and challenges associated with outsourcing your company’s non-core business functions. The most prominent of these include:
- becoming overly dependent on a third-party service provider,
- entrusting your sensitive data to outside sources, and
- encountering unexpected costs or growth restrictions
When you outsource activities that are critical to the success of your business – like call center duties, for example - it forces you to rely on organizations over whose internal processes you have no control. If something goes wrong, or services are not delivered as expected, the results could harm your workflow and your customer satisfaction levels.
Data security and privacy breaches are a concern any time you entrust an onshore outsourcing provider with sensitive business or customer information. But that risk is heightened when the provider happens to be located in a region where local security measures and regulations are more relaxed than they are in countries like Canada and the United States.
Other challenges you may experience with outsourced business services include:
- Budget: Business process outsourcing involves having a clear and realistic budget set aside for these activities.
- Cultural: Working with groups overseas could introduce potential language barriers that could complicate professional partnerships.
- Scalability: It's important to understand the flexibility of the provider to take on future tasks that might go beyond the complexity and scope of your initial requirements.
You should also recognize that business process outsourcing may require the development of a new model for organizing your business. Leveraging BPO successfully demands a certain amount of agility within your company in terms of adopting new processes and accommodating shifts in established roles and responsibilities. This could lead to a reduction in headcount, individual roles being redefined, or a reimagining of how your teams are structured.
Thankfully, the potential risks attached to BPO can easily be mitigated with the right amount of planning and proper due diligence. By outsourcing your non-core business processes, your organization can ultimately benefit from greater access to expertise and increased operational efficiency.
What are the Benefits?
One of the most attractive benefits of business process outsourcing is the potential cost savings that it could have on businesses. BPO provides an ideal opportunity to reduce your overhead, especially where hiring, dealing with staff turnover, and economizing front office and back office operations are concerned. A general rule of thumb is that a full-time employee's total cost to the business ranges from 1.4 to 1.6 times their annual salary. Considering BPO presents opportunities to reduce your spending on human capital.
Increased access to robotic process automation (rpa) can also result in cost savings, especially if your outsourced services provider uses modern technologies like Dext and Plooto to reduce manual processes in accounting and bookkeeping.
BPO vendors frequently work on a fee-for-service agreement, instead of a fixed package basis. This enables additional cost savings because such fee structures allow service providers to charge appropriately based on seasonal or unexpected fluctuations in your work volume.
Moreover, BPO vendors are often staffed with highly-trained professionals with the specific expertise required to tackle complex issues. For example, an in-house payroll employee might not be equipped with sufficient knowledge to deal with payroll and tax laws in a different province. As a result, you might have to look into hiring an accountant to access other resources, which of course comes at a cost. An outsourced payroll provider will have the expertise and knowledge required to tackle issues that arise throughout the year, and usually without any additional fees.
Time savings and improved efficiencies are some of the other benefits you can expect to gain through business process outsourcing. Taking important, time-consuming, and often manual processes off your plate will give you more capacity to focus on what you do best.
The fact is that, whether your expertise lies in baking, brewing, construction, or retail, customers come to you because they trust your dedication to your product or service. But that doesn’t necessarily mean your core competencies extend to payroll, bookkeeping, and other back-office tasks!
Outsourcing these types of non-core activities to an expert provider allows you to:
- Enhance the speed and efficiency of your business processes,
- Do away with the need to hire and manage additional staff, and
- Work with a professional who, like yourself, is focused on providing the best possible service around a single business function
By taking advantage of business process outsourcing, the non-revenue generating activities will be better managed, while your company benefits from the improved quality and greater accuracy in terms of the work being produced. Benefits like these, in turn, make it possible for you and your team to invest more time in core business strategies designed to boost revenue and enhance product value.
Steps to choosing the Right BPO Partner
So, how do you go about choosing the right partner for your business process outsourcing needs? It isn’t much of a stretch to compare finding the right BPO vendor with finding the right marriage partner! BPO is best viewed as a long-term partnership, with all the commitment, collaboration, and trust that is involved.
To find success with your BPO project, it’s extremely important that you first determine whether business process outsourcing is the right move for your company. Only then should you carefully consider your service provider options before moving forward.
Consider following these 4 steps to find the best BPO fit for your organization:
1) Assess Your Business Processes
Take the time to understand which business processes your company will benefit from outsourcing, and which tasks are best kept in-house. You’ll want to be very specific in terms of the type of work that is required, how long it should take, how much it will cost, and the criteria for success. The more clarity you establish around what you need, the easier it will be to narrow down the list of potential providers. Business functions that lend themselves well to outsourcing include:
- Human resources
- Information technology
- Marketing
- Outbound sales or customer service
- Financial operations: bookkeeping, AP, AR, payroll, and controllership
2) Shortlist Your Partner Candidates
Now that you’re clear on your requirements, you can move on to identifying the right business process outsourcing partner. There are usually 3 key factors that come into play when it comes to choosing an outsourced service provider:
- Pricing: Get clarity on whether the BPO partner charges a fixed fee for monthly services, hourly rates, or more of an a-la-carte model.
- Services: Make sure the partner does everything you need them to do. Also, be open to learning about complementary services they may offer which could be added to the scope of the engagement.
- Reputation: It's recommended to seek our client testimonials or ask for a reference before committing to a BPO partner.
Though important, you should not base your decision solely on the pricing of the service. Like many things in life, the cheapest option often turns out to be the most expensive in the long run.
Once you've shortlisted the potential service providers for the business activity that you would like outsourced, you should look into their track record and experience of serving businesses similar to your organization. You can read up on case studies on their website or speak with their existing clients if they're willing to provide contact details for you.
Other aspects to consider could be the service provider's ability to scale the process as you grow your business. A good outsourced service provider should be able to provide you with broader services and support to fit your changing business needs.
3) Set up a Contract
Once you’ve chosen your business process outsourcing provider, you’ll need to draft, negotiate, and finalize a contract to put specific terms, KPIs, and service-level agreements in place. It’s important to make sure that the terms of the contract are feasible, actionable, and that they actually add value to your company instead of creating more work for your employees. At this stage you may consider having a legal professional review the contract to make sure it's mutually beneficial for both parties and that you're comfortable with the terms.
4) Get Ready to Go Live
After the papers have been signed, all that’s left to do is agree on a project “Go-Live” date and begin the transitioning process. The timeframe involved in executing your BPO project and effectively handing over the reins will vary depending on the size and complexity of the business functions being outsourced.
Managing Your BPO Engagement in the Long Term
When it comes to managing your BPO engagement well, a certain amount of monitoring will be required on your part. Taking a proactive approach to your business process outsourcing is the only way to ensure the goals you’ve set for your initiative are met.
Your level of supervision may decrease over time as you become more comfortable with the quality and punctuality of the tasks being performed. However, you should still continue to compare your outsourced services against the predefined KPIs and service level agreements to verify your targets are being consistently met.
You should also take steps to monitor improvements in your business processes with respect to speed, accuracy, and efficiency. Ultimately, as time goes by, it is in your best interest to make sure your BPO engagement is adding value to your business.
Conclusion
When researched, planned, executed, and managed well, business process outsourcing can be a game-changer for any small-to-midsized organization. BPO has the built-in potential to catapult your business to greater levels of success in a shorter amount of time.
At Enkel, we provide outsourced accounting and back-office services such as accounts payable, accounts receivables, payroll and bookkeeping. We can help your business improve its accounting processes by through our team of experts and cloud-based technologies. Chat with us to learn more about how we can help you achieve your business goals!
