Out-sourcing has become a buzz word for all kinds of services performed by someone not on the business payroll—rather—a contractor. From time to time, we have been requested to handle client internal work—often referred to as “back-office” work—when an emergency arose such as an employee suddenly leaving without notice. Almost always, we have found the work was behind and in disarray—we have come to believe that this is a major reason for a sudden employee departure.
The task at hand was not simply filling in for a few days—it involved a major “clean-up” as well as a catch-up of the client’s records. As we straightened up the records and corrected the many errors, the records suddenly were in great shape with all of the up-to-date information management had been trying to get "for ages."
Management was somewhat in disbelief that everything they needed was readily available at any time and was up-to-date, as well as accurate. We found ourselves being requested to make our temporary engagement permanent. We were specifically requested to continue the outsourcing and come up with a long-term plan to take the “back-office” work over in its entirety.
We were aware that outsourcing was being promoted in trade publications for all industries as the wave of the future—but we thought that it was only for larger business—not for businesses with revenues as small as $ 500,000. We were really off base in our initial assessment of the outsourcing environment.
The answer as to why outsourcing has become so viable—as we see it—is that there is an acute shortage of competent accounting personnel. This shortage has created somewhat of a “bidding war” for the available personnel and, secondarily, has created an environment of “no loyalty.” The staff you do have—if they are reasonably competent—can rather easily get a better paying job and off they go.
With this in mind, a very viable option that is becoming commonplace is to outsource the “back-office” and eliminate the entire expense package with its related benefit costs and human resources issues—and replace it with a flat, monthly fee that eliminates staff, benefits and human resource issues. We have often been told by management that the elimination of benefits and human resource issues—by itself—is almost a good enough reason to seriously consider outsourcing.
THE OUTSOURCING SET UP
We view outsourcing as a “tailor-made” service designed and fitted to the specific client’s needs and management style. We believe that many basic procedures are required for any business—but we know that each business and its management have unique needs and preferences that must be built into our engagement structure to give management the best possible combination of service and task completion possible.
Included in the basic procedures that we build into an outsourcing engagement for each client are:
Up-to-date records for:
Cash Balances
Accounts Receivable
Accounts Payable
A method of obtaining basic documents to enter into the system
Document storage and filing
Balanced and properly coded general ledger
Bank Reconciliations immediately after the bank statements arrive—or—online banking
The availability of properly prepared GAAP Financial Statements, usually within 24 hours, as needed for loans, etc.
Basic schedules and analysis of revenues, expenses, assets, etc.
We realize that the management of each business has its own unique reporting requirements that we address—up front—then we design these custom reports—based upon the detailed input of each manager.
This initial phase of the engagement is not complete until we have assessed the needs of the client and we have a clear understanding of the client0s unique needs and requirements. We review this with the client and refine it until we have a working agreement as to the range of services to be performed under this engagement.
After we are in agreement with the client as to the client needs, we prepare an engagement letter that spells out everything we have covered above and states our flat fee. What this means is that we will do everything we have agreed to do for an agreed upon fixed, monthly fee. There are no extras under the terms of the agreement. Certain things are not covered—such as IRS representation—and most of these are also detailed in the engagement letter. It is our stated intent to make the outsourcing engagement pleasant and low stress to allow management to pursue the growth of the business by removing the “back-office” problems from its agenda.
THE ACTUAL ENGAGEMENT
The specifics of each engagement are, of course, unique to each client. That is why we spend a substantial amount of time, up-front, determining as much of the client needs as possible. This also enables us to have a very minimal start-up time once we start the actual work.
Our experience has taught us that the transition period can be smooth and relatively painless if the up-front planning is well conceived and properly documented. Therefore, we have every reason to believe that our actual take over of the “back-office” function can be accomplished both rapidly and with minimal disruption of the on-going work.
THE WRAP UP
We encourage you to contact us and let us show you how we can assist you in outsourcing what may be your biggest headache—the “back-office.” We have adequate and competent staff that will be selected and assigned to your specific engagement, based upon your specific requirements. You will be able to count on continuing service by the same person--you will have a contact that does not change every day—someone who becomes very familiar with you and your unique requirements.
Finally—when we help you compare the costs of staff, benefits, human resource issues, etc., we believe that you will find the pricing to be very attractive and a very viable alternative to your current in-house staff.
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rhochman@rhochamncpa.com
