The best business advice, opinion, news and expertise in Greater Manchester and further afield.

Friday, 4 December 2009

Friday Guest Blog: Outsourcing? A solution for SMEs

by Maurice Scott, Regional Director - e-Financial Management Limited

The business environment is constantly inundated with countless dilemmas that challenge most business owners and in the current economic climate the issues facing most companies, regardless of size, are more daunting than ever.

For smaller companies, changes in economic activity are especially unwelcome as SMEs are more susceptible and have less control over their business environment than do bigger enterprises. Every action the company, its customers or suppliers take in an uncertain situation may create a risk to the very survival of its business.

In an economic climate such as our current one, the pressure on companies to reduce staff costs is overwhelming, especially as more companies face extinction. The first cutback business owners and managers tend to make will involve reducing payroll as that seems to have a more immediate effect than other measures. The danger however, is that in desperation, companies will make rash permanent decisions to save costs even when this results in such an unfortunate situation as under-resourcing. The consequence of this is that business opportunities from prospects or existing clients may be missed; administration gets behind, reporting gets delayed- all resulting in further unwelcome pressures on the business.

So why isn’t under-resourcing an option - or technically, not an acceptable option? There are many risks to having insufficient capacity to deal with current orders or potential increase in demand. The business opportunity that may be lost might well have provided the cashflow needed to eradicate the cut back in the first place. Also additional costs often arise through fines, penalties, uncollected debts and other results of not having enough manpower.

With this in mind, most businesses are in favor of an option that has become acceptable in today’s business world. Outsourcing and insourcing - entrusting another company with your finances and other strategic assets has become a viable lifeline, even an essential business model. The advantage is that companies can afford to plug the gap in staffing as and when required, usually on a flexible payment platform, and often at a lower cost than full time employment.

Many companies deciding to tread this path for the first time are faced with issues of trust, security of information and level of expertise and service. The main question remains ‘How do you know which companies you can trust?’ – and here trust encompasses every single element of the relationship, including reliability, flexibility, pricing and a true commitment to provide value.

How does one find the right partner or supplier? How do you vet a vetting company- if you decide to use one? Do references really give a true picture?

The truth is that there is nothing as effective as a personal, independent search; especially for high volume, long term contracts. Visit websites, speak with representatives from the company, get references and referrals from personal or professional networks, as well as the Chamber.

You should explore as many sources as possible until you are satisfied. Admittedly, you may well discover subjective information but it at least tells you something about the people you are thinking of trusting with your business. Find out who your competitors are using and that’s quite easy these days with close supplier networks and the internet. The most important point is not to depend on one single source, but when you decide to, make it subject to an ongoing review.

Maurice Scott is Regional Director, e-Financial Management Limited, the financial management outsourcing company that offers a wide range of expert financial management solutions on a pay – as – use basis.

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