Appetite for outsourcing on the up

The launch of the Making Tax Digital (MTD) consultations has raised the question whether there will be a role for accountants and bookkeepers or if the business owner can do it all themselves with the help of software providers.

The Bookkeepers Alliance recently carried out research with small business owners to establish appetite for outsourcing and any future impact. Mike Foster reveals the results and a growing trend for outsourcing.

From a sample of businesses, ranging from start-up to turnover of £5m, 82% said they would outsource a task in their business for which they did not have the skill within their existing team and for which they are able to justify investment.

The primary activities considered included IT support, marketing, financial recordkeeping and HR, and mostly on a part-time basis.

When asked if they would employ rather than outsource, should the resource requirement be nearer a full-time role, then surprisingly it was not a given choice of employment and other factors were important to them. This indicates a current lean towards outsourcing rather than employing people.

When asked specifically about recordkeeping, the percentage was lower at 58%. More business owners felt they could do some of the recordkeeping in comparison to needing a much more specialist knowledge in the other areas.

This could be a concern with MTD, if the business owners feel that HMRC and the software make it easy and achievable for them to do it themselves without consideration of the potential pitfalls. However, from the discussions about outsourcing, there was a feeling of not undertaking a specialist task that was outside their knowledge base.

Much will depend on the outcomes of the MTD consultations, how it will finally work in practice and how the software available will continue to develop. However, there will always be a role for the bookkeeper or accountant who positions their offering to support, educate and share an expertise of value. So how can your offering meet the need and not simply be a service that the business owner can do without?

As our research was not limited to ‘yes’ or ‘no’ answers, the responses to further questions indicated that many micro and smaller businesses would prefer to outsource than employ someone in-house.

So why would a business owner prefer to outsource such tasks and how can accountants or bookkeepers ensure that their offering meets expectations now and with the introduction of MTD.

Here are some of the common responses:

• The business’ finances and payroll are sensitive information to protect and not exposed to an employee’s knowledge
• It provides access to a specialist skill that can be added to the team
• The provider is likely to have a greater depth of knowledge. As an example, how to get the best from the bookkeeping software or the experience of how it may work with other software
• The external resource can often complete the task in a quicker time, even when considering a higher hourly rate compared to an employee
• It will free up someone’s time in the business, usually the business owner, who does not specialise in recordkeeping and can focus their time on other matters
• The financial considerations. Those especially mentioned were, no holiday pay and no pension contribution with auto enrolment. Additionally, other payroll cost savings such as employers NI contribution, sick pay and maternity/paternity pay contribute to this thought
• It can take away the worry and pain related to the responsibility of getting it right or meeting deadlines
• More easily replaced if not performing
• Less HR red tape to worry about
• Less cost of ongoing development and training, as this is usually the providers’ responsibility
• Office space, as using an external resource remotely can free up valuable desk space

So outsourcing currently continues to be a very real option for business, but of course there will be other considerations such as the relationship management, performance management and control factors.

Whether you are managing an employee or an outsourced resource, it is good practice to have some key performance measures to ensure that the investment has been the right decision. For example, how would you measure productivity? What would a satisfactory performance look like whether they were an employee or an outsourced resource?

With the introduction of MTD it could mean that the bookkeeper, accountant, software company and business owner work closer together with a respect for each role in supporting business success. After all that is what we all want.