Stephen King is President & CEO of vigorthe leading outsourced accounting and bookkeeping services provider for businesses.
Inflation rose to 8.6% in May, the highest increase since December 1981. For consumers, this means higher prices at the gas station and supermarket, as well as just about everywhere people spend money. With rates this high, people are already feeling the crisis. In fact, a December 2021 Gallup poll found that: 45% of US households already had financial problems due to inflation.
The consequences are also worrying for companies. Inflation means that your customers have less free money to spend on your services or products. It also means that your costs of doing business are likely to increase. In addition, your employees who don’t receive a pay increase that keeps pace with inflation are actually getting pay cuts, and this can lead to decreased employee satisfaction, engagement, retention and productivity.
What is inflation?
Inflation refers to the rate at which the purchasing power of a particular currency decreases over a period of time and how this leads to rising costs.
When a currency loses its value, prices rise because the dollar no longer has the purchasing power it used to have. Several factors contribute to inflation, but in general inflation is caused by a country’s money supply growing faster than the economy or by imbalances between supply and demand, where demand is strong and supply is scarce.
How outsourcing can help tackle rising costs
Understanding inflation, how it works and how it affects your purchasing power is important to help you make better strategic decisions on behalf of your company. One way to protect your business from the effects of inflation is through outsourcing.
Outsourcing is contracting professional business service providers to manage the non-core functions of your business. Turning to outsourced services, especially as a survival strategy against inflation, can strengthen your business in several ways.
Lower overhead costs
One of the most immediate benefits of outsourcing is the reduction in overhead costs. For many companies, especially service companies, labor is by far the largest cost item. The cost of internal employees includes not only wages, but also benefits such as paid time off, matching of pension contributions and insurance.
In addition, there is a cost associated with having an employee who works in your office and takes up space. If those employees aren’t directly contributing to monetization through your company’s core functions, you should seriously consider the cost-benefit of carrying them.
Like any big decision, it starts with weighing your options. For entrepreneurs, it can sometimes feel uncomfortable to hand over control of part of your business. It is important to ensure that your outsourced partner is thoroughly vetted before proceeding.
Access to experts in every department
Outsourcing offers benefits other than cost savings. It also gives you access to industry experts in every department. When you hire in-house, you probably won’t be able to provide the advancement opportunities or rewards that would attract top talent in industries that aren’t core to your company’s primary business. However, outsourcing allows you to take advantage of these brilliant minds, their education, and their years of experience working with companies like yours.
Choosing the right provider is essential. When interviewing potential partners, be sure to ask questions like: Do they have experience with my industry? What level of experience and training does your team have? How do you communicate with your team?
More efficient operations focused on your most valuable tasks
Outsourcing can potentially free you and your employees and give you more time to focus on the highest value tasks in your business – tasks directly related to your company’s core function and value proposition.
One of the best ways for companies to make the most of their limited resources is to outsource non-core competencies. This revolves around outsourcing core functions such as IT, marketing, accounting, etc.
Automation across multiple departments
Modern technology and cloud computing have made it possible to streamline operations with outsourced automation solutions for just about every department in your company.
From workflow automation and virtual accounting to digital mailrooms, almost every aspect of your company’s non-core functions can be automated with smart technology solutions. Before going ahead with an outsourced provider, make sure their tech stack is up to date.
Reduced risk of fraud
Outsourcing with reputable suppliers can also protect your business from financial losses and reputational damage associated with fraud, both internal and external. In addition, outsourcing shifts the burden of fraud prevention from your company to your outsourced provider.
Make sure to choose high-quality outsourced service providers to ensure that your business’s non-core functions are safe in their hands. For example, when hiring an outsourced financial partner, look for a service provider with teams of three, which helps strengthen internal controls.
Only pay for what you need
Small and medium businesses often don’t need full-time bookkeepers, accountants, marketers, and legal teams. When SMB leaders choose to hire these professionals in-house, their companies end up paying far more than what their company actually demands from these professionals.
When choosing to outsource, it can be smart to start with a professional service with customizable and à la carte services so you can pay for what you need and scale the services as your business grows.
An optimized and outsourced back office
Areas such as accounting can be expensive to handle completely in-house and make it more difficult to maintain efficient, secure and accurate back office processes. An outsourced service provider may be able to help your business access a full-service team at a lower cost.
For example, in addition to the potential to save money, a quality outsourced accounting service provider can provide your business with valuable financial insights that can help you identify strategic ways not only to weather these inflationary times, but also to improve operations in every facet of your business. streamline business. . Be sure to research, do your due diligence, and follow best practices when taking advantage of outsourcing opportunities.