Business outsourcing is booming: why are more firms seeking external support?

Demand for business outsourcing services is set to surge. Our recent survey of business owners underlines this¹ . When asked if they’re likely to outsource internal functions such as payroll over the next 12 months, 41% said they would. This is a substantial uplift from the 2% that are already using business outsourcing services.

What’s driving this?

In our experience, it isn’t just one thing. Instead, an interesting mix of factors are encouraging firms to outsource essential functions such as accounting and finance, payroll and company secretarial.

Here we talk you through these and, for those businesses considering a move to outsourcing, share our tips on how to make a success of it.

Among our clients, we’re seeing huge demand for outsourced services from businesses with shorter life cycles, for example tech firms. These businesses grow  quickly, and exit quickly, so prefer not to commit to the costs of building and running internal teams. Outsourcing is a simple way for fast-growing firms to stay focused on core business while also making sure that essential back-office functions are running both smoothly and professionally. They’re also highly scalable.

If you’ve got one eye on exit, outsourcing can also help you prepare for the rigours that come with this. Your business will be under the microscope during the due diligence and valuation process so professionalism is key. And remember, it’s historical not just recent financials that are under scrutiny so preparing well in advance is wise.

As long as you choose an outsourcing provider that is transparent about pricing, you’ll know what your costs are, giving you more control and peace of mind. Outsourced business services are usually more cost-efficient than running in-house teams so you’re likely to cut costs too.

The recent announcements in the budget over increased costs for employers may well encourage further businesses to consider outsourcing as an alternative.

Technology is transforming back-office functions, with automation tools, robotics and cloud-based services delivering significant benefits. But with this comes the need for specialist skills and, often, advanced kit. To reap the benefits, many firms are now choosing to outsource some or all aspects of back-office functions to specialist providers.

Complex operating environments, stricter regulations and often-changing legislation across everything from business tax to payroll services are also raising the stakes for firms. Outsourcing provides a simple way to ensure accuracy and compliance while also gaining peace of mind.

Whether it’s a fast-growing business struggling to scale internal functions, a firm dealing with peaks and troughs that require flexibility or a business struggling with service delivery because of parental leave, sickness or holidays, business outsourcing services can save the day.

We’re seeing a lot of businesses expanding globally and this is pushing up demand for outsourced services. Red tape and legislation are challenging enough at home but in different jurisdictions, the headaches and scope for mistakes increase. Outsourcing companies can help de-risk international expansion. 

Covid confirmed that remote working can be effective, and with many businesses now reducing office space, outsourcing offers a practical solution.

Firms are also telling us that finding skilled employees in areas such as finance is tricky, and a particular headache for those not familiar with finance themselves. An outsourced finance function solves this problem.

Good quality, specialist providers attract high-calibre candidates and invest heavily in training and development. They also have blended teams, ranging from juniors to the experienced so can match the right people to the task, whether that’s simple processes or advanced strategy. 

Despite advancing technology and continual drives for efficiency, time pressures rarely ease. To claw back valuable time, many firms turn to outsourcing. With less on your plate, you can play to your strengths and focus on developing and growing your business. 

These practical tips on outsourcing will help set you up for success.

• Make sure to choose a business outsourcing supplier with the right technical expertise for your sector and plans
• Opt for scalable and flexible services to give you room for manoeuvre 
• Look for services with a good mix of technology and people and think about any internal staff you’ll need too. For example, if you’re a smaller business, you may want to start by outsourcing your entire finance function but as your business grows, it can make sense to have an internal decision-maker
• Understand the fees and look carefully at whether the cost model is the right fit for your business and growth plans. Business outsourcing services are scalable so the fees will naturally change as the service requirement does
• Outsourcing companies come in all shapes and sizes, and they vary in quality. Look closely at a firm’s reputation and always ask for references 
• Think about chemistry too! Your outsourcing service will function as an extension of your team so choose people that are the right fit for your business