Back-office bonanza

Written by Ron Truman

Keeping on top of paperwork and mundane yet essential administrative tasks is a challenge for most companies. For entrepreneurs whose businesses often grow faster than they can hire staff or purchase technology to manage the ever-increasing workload, it can seem impossible. Thankfully, help has arrived, and growing numbers of entrepreneurial businesses are taking advantage of it: outsourcing.

Once the domain of big business, which could afford to farm out enough work to make a supplier’s efforts worthwhile, administrative outsourcing is now feasible for smaller companies. And the range of functions you can outsource has grown from basic bookkeeping to include database storage, transaction processing and billing, collections payroll and even the management of worker’s compensation. No matter what your size or specific need, outsourcing back-office functions is an opportunity worth investigating by any company that wants to focus its energy on business-building.

“Our clients want to spend every available minute focusing on growing their business, not on administrative functions,” says Colin Chisholm, vice president at ADP Canada, a provider of outsourced administrative services. Last February, ADP introduced its comprehensive outsourcing services for companies with one employee to many thousands. These services go beyond basic administrative and human-resource functions to offerings that include a call centre that answers employee questions about payroll or benefits.

Why not keep such tasks in-house? Most obvious are the fixed costs attached to every permanent employee. Also, outside providers are generally more responsive than small internal departments (e.g., they don’t take vacations) and, due to their specialization, often provide richer services. For example, smaller entrepreneurial companies that warehouse and manage their databases and transactions in-house are often ill-equipped to deal with security breaches or natural-disasters. Conversely, outside providers have the capacity to implement top-of-the-line security and disaster recovery plans because they are responsible for data from many firms.

Such specialization also means the supplier can spot areas for improvement and prescribe solutions. Ron Ford of Thornhill, Ont.-based R&D BackOffice Solutions, a provider of enterprise systems, transaction processing and accounting solutions for small and medium-sized businesses, offers the example of one of his clients, a retirement home that charged a flat monthly fee to residents for rent and 50% of meals, because its software couldn’t track and bill each individual’s meals. Ford created an application in QuickBooks that allowed the home to charge for extra meals.

Most outsourcers have a basic monthly fee, then charge for each transaction above a preset number. The cost? It varies depending on which functions you outsource. Ford estimates a company with 10 employees could expect to pay $750 monthly for processing all transactions that deal with payroll, payables and receivables, bank reconciliations and monthly financial statements. The price rises as your staff and transaction counts grow.

If you decide to outsource, Ford recommends interviewing a prospective supplier’s current clients about costs, service levels and customer satisfaction. Most importantly, ask them about the value the service provider adds to their business.

“You are taking on a partner who should make a commitment to adding value to your business,” says Ford. “In my case, I add value by giving my clients more control over the financial side of their business. I meet regularly with them to update them, make suggestions and evaluate our partnership. I want to play a role in the success of their company. If I’m not adding value, they shouldn’t be using my services.”

Originally appeared on PROFITguide.com