Recruitment companies that have outsourced their non-core business activities to third parties should take the time to evaluate what they are really paying for, and determine whether they are really getting value for money.
I have been travelling the country as part of the Recruitment Yarns roadshow, where owners of recruitment businesses have the opportunity to spend a couple of hours with industry leaders addressing some burning questions relating to their business. Most business owners he has met who have outsourced their payroll and accounting requirements to a third party appear to have everything under control. However, some business owners are paying a premium when they are outsourcing only part of their payroll and accounting processes.
All too often I see business owners paying an exorbitant amount of money, sometimes up to 4 % of payroll, for a mere data-processing service for their payroll and invoicing.
Some outsourcing companies market themselves to appear as though there is no need to have an in-house resource for payroll and invoicing, but this is simply not true. With certain outsourced providers, the business owner is left with the cost of employing someone in-house to manage the system. A lot of the time, the business owner is left with the problem they started with. Instead of reduced costs and more free time, they still find themselves spending time working IN the business rather than ON it. This takes valuable time away from building relationships with potential clients and candidates.
Some of the observations I have made from my discussions with business owners at Recruitment Yarns about the common problems business owners are facing include:
- Not getting access to the data they require from their outsourcing provider, meaning they are unable to correctly calculate their margins.
- Not knowing what level of reporting they should be demanding from their outsourcing provider, eg. Profitability by job or by location
- Spending precious time liaising back and forth with their outsourcing provider to resolve queries
- Not knowing how to hold the outsourcing provider accountable to ensure their business is not put at risk
To ensure you are getting value for money from your outsourced provider, you as the business owner should ask yourself these key questions
- Are they saving me time? - are you and/or your in-house team spending less time managing the payroll and invoicing, or do you find yourselves spending hours resolving queries with your current provider?
- Are they delivering a sufficient level of reporting? - are you able to quickly and easily access a report that shows you profitability by job or by location? Do you have access to the data you need in order to make profitable business decisions?
- Are they specialists in my industry? - do they really understand the end-to-end timesheet to invoice process and do they understand the implications this has on my cashflow?
- Are they putting my business at risk? - does the provider take extra care to process and pay my superannuation on time? Do they understand my payroll tax and workers compensation obligations in each state I operate in?
- Are my employees being paid and invoices raised and collected as quickly as possible? - your people are your biggest asset. It is crucial that they are kept happy by being paid correctly, on-time, every time. Your invoices provide the cash that is the lifeblood of your business. Given the tight margins that you operate within, it is vital that invoices are raised, sent to customers and collected efficiently.
There are alternative options available for business owners who are willing to invest in long-term scalable solutions that will grow with their business. There are turnkey solutions that not only provide business owners with enterprise level systems that will grow as they grow, but also the expertise, that is, the people behind the systems who become part of your team.
If you outsource your back office requirements to the right provider, it is possible to have it all. It is definitely possible to outsource non-core business activities such as resourcing, payroll and invoicing to a team of industry specialists, and it is possible to reduce costs and gain added value at the same time.
A full service accounting department with a team of specialists is what every business owner needs looking after them to survive today’s complex business environment and also achieve rapid growth. Owners should barely even notice the efficient and effortless running of their business finances, so they can focus on developing the enterprise into all it can be.