Why Outsourcing Accounting Will Give Your Company a Competitive Edge
Since arriving in the information technology world almost four decades ago, outsourcing has evolved into a key business practice across many industries. It’s no longer the butt of jokes, like when EDS and IBM set wheels in motion in the 1980s for companies to hand off internal routine computer maintenance and administration to overseas work centers.
Today, companies of all sizes and scopes engage in the strategic deployment of routine, redundant in-house tasks to a third-party provider. Typically, the selling point is reducing labor costs and headcount.
The business practice has made noticeable strides in the finance, human resource, procurement and legal sectors where business analysts project solid future growth. One reason is that outsourcing is more about improving business health than just saving a few bucks.
Increasing the value of the asset through outsourcing
A recent study by global strategic consultant Hackett Group notes that outsourcing some business procedures delivers 25-50 percent savings of baseline cost levels across most back-office processes. But there is more value to shifting the day-to-day, repetitive work outside a company than just cost savings, especially in finance, says Alan James, senior vice president at RealPage, Inc.
RealPage offers its multifamily and commercial customers SmartSource Accounting, a service that provides the manpower for back-office accounting functions. The service is not only an opportunity for operators to save money but to embolden its workforce to drive a bigger return on investment, James said.
Money spent on mid-level accountants can be reallocated to hire players who drive revenue growth and better position a property or portfolio – no matter its size – among its competitors while a service takes care of basic accounting functions.
“At the end of the day you’re trying to increase the value of the asset either for yourself as an owner or as the management company,” James said. “Where do you invest your human capital?”
Finance expected to increase outsourcing
Business as a whole is now viewing outsourcing as a means to get more mileage out of its personnel, which often comes at a premium with wages and benefits for companies to stay competitive.
The Wall Street Journal recently reported that Carhartt, Inc., outsourced its routine application maintenance and support to International Business Machines Corp. and transferred about two dozen support employees to handle project-based work. The move enables the company to utilize staff for more involved work, thereby earning a greater return on its workforce investment.
Also, a 2016 survey by Deloitte Development, LLC, notes that outsourcing has an impact beyond lowering costs, one that enables core business functions and solves capacity issues that help improve business. Nearly 60 percent of respondents from $1 billion-plus companies across the globe said outsourcing enables leaders to focus on core business. Most respondents said a big takeaway is driving change management.
The business practice is expected to grow across all sectors – particularly in finance, human resources and IT. Many respondents said they planned to invest more into working with third-party finance providers.
Working with a third party becomes a competitive advantage
James says his company’s product offers multifamily and commercial owners and managers an option to get out of the business of back-office accounting and use capital dollars allocated to personnel resources more strategically.
The service handles accounts payable, accounts receivable, general ledger entry and other routine functions using accountants who are specially trained in property accounting
James says SmartSource Accounting allows operators to focus on more strategic pursuits, like searching for the next deal or improving the customer experience without being encumbered by fluctuating accounting capacity demand
And with today’s tight labor market, outsourcing makes more sense than it has in the past.
“Real estate is gaining traction,” he said. “The reason it’s gaining traction is it makes financial sense. And once you get over the perceived risk that it’s no longer my employee, and find out the quality of work and timeliness is as good or better, it becomes a competitive advantage.”
The question of where to invest a company’s human capital
While a third-party company handles the day-to-day accounting tasks, financial leaders can spend less time managing and more diving deeper into the numbers to better administer the health of the company, James says. Payroll dollars also can be shifted to job creation that has more of an impact on the company’s market position and performance.
Simply, he says, it’s a question that owners and operators of real estate need to consider in an increasingly competitive world.
“Am I better off protecting my human capital and investing in the personnel who can drive value of an asset for me or the owners I represent, or putting it into back office accounting personnel that are performing tactical type processing?”