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When Does Outsourcing Make Sense?

As a manager or owner, have you ever struggled with the question of when to outsource a particular task? It’s a common problem facing supervisors and management-level decision-makers in every industry. Fortunately, there are several ways to decide when and what to outsource. Keep in mind that the decision is not always about money. In many cases, outsourcing is a matter of necessity, expedience, and even a condition of local laws and regulations. There are many advantages to outsourcing when it comes to chores like accounting, fleet management, legal services, marketing, and inventory management. But it’s important to spend time analyzing the situation before opting to hire a third party to do the work. Here’s a logical way to decide in each of those five essential areas of business operations.

Accounting Functions

Unless you or one of your staff members has experience in accounting and can use tax preparation software, it’s usually a good idea to outsource key functions like tax-return preparation, internal audits, payroll preparation, and financial planning. Many new companies use independent CPA (certified public accounting) firms for a few years and then transition to hiring in-house accounting professionals.

If your business is expanding into a new country with completely different practices and principles, like China, for example, you may want to outsource the service to a local partner who knows more about accounting in China.

Management of Vehicle Fleets

If you own a transport company or manage one, you can usually deal effectively with fleet-related tasks via a good software program. The trick is finding one that comes with comprehensive training from the seller. The advantages of these versatile systems cannot be overstated. For instance, managers can utilize real-time fleet telematics to communicate directly with drivers and collect vast amounts of data about vehicles, cargo, routes, on-time status, and more. If you are a startup and prefer to outsource the fleet management function, there are companies that will do it for you, but they often charge much more than the cost of reliable, efficient software systems.

Legal Services

Most small and medium-sized companies outsource their legal department. That’s mainly because only the largest organizations can afford to maintain in-house legal staff on a full-time basis. Fortunately, numerous law firms accept outsourced tasks for businesses in every industry sector. Search for a firm that knows your industry well and comes with excellent references. Avoid signing a contract until you’ve had at least one year to evaluate the efficiency and expertise of the lawyers you work with.

Marketing and Promotion

About half of startups outsource their entire marketing effort, everything from building SEO strategies to creating customer loyalty programs, while medium and larger organizations tend to have at least one in-house professional who oversees this vital function when it is on a much smaller scale. Ironically, sole practitioners often do their own marketing and slowly build up a client base on their own. Later, when they can afford it and when business is booming, these same owners choose to outsource promotional duties and focus on long-term planning, product development, and other chores.

Inventory Management

Merchants who sell large amounts of items online or in traditional retail outlets simply don’t have the space to hold all their for-sale goods. Plus, they often prefer to hire an independent inventory agency to deal with not only storage but record keeping and related tasks. This is especially true for businesses that do high-volume business selling household appliances, computers, and office equipment.

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