When businesses start up, most management teams have to do everything from cleaning the office to repairing faulty products. This is often deemed necessary at the start. However, as businesses grow they have to focus on the areas of the business that drive profit and generate cash.
Colin Mills – Founder and CEO of The FD Centre says “Skillful management teams can recognise those activities in the business that drive profit and those that merely have to be done. It is important for management teams, especially in a business’s early phase of growth, to appreciate the false economy of trying to do everything themselves without considering the management time that would be saved if they outsourced those functions that were not core to the business or required specialist skills”.
A classic example of outsourcing non-core processes would be insurance companies that focus their efforts on underwriting and investment activities whilst outsourcing sales generation and claims processing to companies like Capita.
Smaller companies typically outsource their bookkeeping functions, legal and accountancy and sub-contract manufacturing. However, other areas that could be outsourced would include human resource management, premises management, IT support, insurance, pension’s management and finance director skills.
To determine what the business should outsource, the management should identify all the activities required to carry out the business and then set a priority attached to this in relation to driving profit or being an essential support and the management time and skill required. The management will then easily be able to see what should be outsourced and what they do themselves. The next task is to find an outsource partner that will deliver what you need at a price you can afford.
For an assessment of your business requirements and whether outsourcing could form part of your financial objectives, contact the FD Centre for more information.