As an accounting major, hearing about outsourcing is a regular
part of class. Outsourcing is defined as, obtaining goods or a service
from an outside or foreign supplier (Investopedia). There are many
advantages as well as many drawbacks of outsourcing to a foreign
supplier. It could be as far as having an in-house accountant or sending
financial records to a different accounting provider. From an
accounting stand point, we must question whether the advantages of
outsourcing outweigh the drawbacks.
The advantages of outsourcing to a foreign supplier can be summarized as financial savings, time savings, expert services, and contractual obligation (Gramigna). In terms of financial saving, a company would have no need to hire a full-time employee thus cutting the amount of money they would be spending on payroll. The company would also be saving money on different expenses that come with hiring a full-time employee such as benefits, insurance, taxes, paid time-off and so on (Gramigna). Eliminating the need for another full-time employee also allows you to downsize your company in terms or work space, furniture, computer, etc. Along with the financial savings the company would also be saving a lot of time. As we already discussed they would be saving the amount of time employees are working. Outsourcing would cut back on weekly hours that would be spent on bookkeeping. The time spent on bookkeeping often takes away from activities and business directly related to the company's mission and needs (Gramigna). This allows a company to focus their resources and the true needs of the company. Outsourcing also allows for expertise service. When hiring outside of the company, it is often that a third-party service provider is being hired. The third-party service provider specializes specifically in the work they do. From the companies perspective the need to hire someone and train them to get the job done right is no longer a worry. This allows for pristine record-keeping, which sets a company ahead of their competition. One final advantage of outsourcing is a contractual obligation between a company and the source. Often times dealing with in-house staff becomes a bit of hassle regarding negotiations, management, and human resources (Gramigna). When outsourcing a contract or agreement is set up to meet the needs of both the company and provider, allowing both parties to understand their responsibilities to one another.
While there are many advantages of outsourcing there are a few drawbacks such as distance and time, language barriers, loss of control, and security risks. Distance and time being a drawback is not to be confused with the advantage previously talked about, time savings. Distance becomes an issue because you do not physically have someone in the office to answer any questions that may come up, leaving you with having to communicate electronically which can become a problem if it is a time sensitive matter. Another issue regarding time is time zones. If you are outsourcing to a foreign country you must be aware and account for the differences in time that the supplier may be providing, again becoming an issue for a time sensitive matter. Language barriers become an issue when trying to explain and clearly communicate the needs of the company. Often time's things are not directly translatable between different languages which could create a problem of miscommunication. The loss of control comes to play in terms of training and processes from day-to-day (Gramigna). This becomes an issue if your company wants things to be done a specific way according to their own personal needs. The final and most important drawback of outsourcing is the security risk. When outsourcing, you are giving up the right to inside knowledge and allowing others to now know the operations and financial information of your company.
After looking at the advantages and drawbacks associated with outsourcing to a foreign supplier, it seems that the answer lies within the company. A company must look at what their mission and needs are and weigh them against the advantages and drawbacks. If a company understands the advantages and takes into consideration the drawbacks, they could create an action plan to handle such drawbacks. This would allow the company to fully take advantage of outsourcing. However, if a company does not consider the drawbacks they could find themselves struggling to keep up with the needs of the company.
Gramigna, K. (2012, October 10). Pros and Cons of Outsourcing Your Accounting Needs.B2B Insights Blog. Retrieved April 15, 2014.
Mullich, J. (2013, July 12). The Benefits Of Outsourcing Finance And Accounting. Forbes. Retrieved April 15, 2014.
Outsourcing Definition. (2014, January 1). Investopedia. Retrieved April 15, 2014
The advantages of outsourcing to a foreign supplier can be summarized as financial savings, time savings, expert services, and contractual obligation (Gramigna). In terms of financial saving, a company would have no need to hire a full-time employee thus cutting the amount of money they would be spending on payroll. The company would also be saving money on different expenses that come with hiring a full-time employee such as benefits, insurance, taxes, paid time-off and so on (Gramigna). Eliminating the need for another full-time employee also allows you to downsize your company in terms or work space, furniture, computer, etc. Along with the financial savings the company would also be saving a lot of time. As we already discussed they would be saving the amount of time employees are working. Outsourcing would cut back on weekly hours that would be spent on bookkeeping. The time spent on bookkeeping often takes away from activities and business directly related to the company's mission and needs (Gramigna). This allows a company to focus their resources and the true needs of the company. Outsourcing also allows for expertise service. When hiring outside of the company, it is often that a third-party service provider is being hired. The third-party service provider specializes specifically in the work they do. From the companies perspective the need to hire someone and train them to get the job done right is no longer a worry. This allows for pristine record-keeping, which sets a company ahead of their competition. One final advantage of outsourcing is a contractual obligation between a company and the source. Often times dealing with in-house staff becomes a bit of hassle regarding negotiations, management, and human resources (Gramigna). When outsourcing a contract or agreement is set up to meet the needs of both the company and provider, allowing both parties to understand their responsibilities to one another.
While there are many advantages of outsourcing there are a few drawbacks such as distance and time, language barriers, loss of control, and security risks. Distance and time being a drawback is not to be confused with the advantage previously talked about, time savings. Distance becomes an issue because you do not physically have someone in the office to answer any questions that may come up, leaving you with having to communicate electronically which can become a problem if it is a time sensitive matter. Another issue regarding time is time zones. If you are outsourcing to a foreign country you must be aware and account for the differences in time that the supplier may be providing, again becoming an issue for a time sensitive matter. Language barriers become an issue when trying to explain and clearly communicate the needs of the company. Often time's things are not directly translatable between different languages which could create a problem of miscommunication. The loss of control comes to play in terms of training and processes from day-to-day (Gramigna). This becomes an issue if your company wants things to be done a specific way according to their own personal needs. The final and most important drawback of outsourcing is the security risk. When outsourcing, you are giving up the right to inside knowledge and allowing others to now know the operations and financial information of your company.
After looking at the advantages and drawbacks associated with outsourcing to a foreign supplier, it seems that the answer lies within the company. A company must look at what their mission and needs are and weigh them against the advantages and drawbacks. If a company understands the advantages and takes into consideration the drawbacks, they could create an action plan to handle such drawbacks. This would allow the company to fully take advantage of outsourcing. However, if a company does not consider the drawbacks they could find themselves struggling to keep up with the needs of the company.
Gramigna, K. (2012, October 10). Pros and Cons of Outsourcing Your Accounting Needs.B2B Insights Blog. Retrieved April 15, 2014.
Mullich, J. (2013, July 12). The Benefits Of Outsourcing Finance And Accounting. Forbes. Retrieved April 15, 2014.
Outsourcing Definition. (2014, January 1). Investopedia. Retrieved April 15, 2014
