What is Outsourcing?

More and more frequently, businesses are expected to do more with fewer employees. The trend of outsourcing makes this possible and manageable.

Outsourcing defined

Outsourcing is the hiring of people outside of your company’s staff to handle an aspect of your business. It is like subcontracting, where a general contractor may hire out a specialist to take care of an aspect of a job that they cannot do, or that would be too time consuming for them to take on.

Some examples of outsourcing include hiring call center employees to handle customer service, orders, troubleshooting, or contracting a company to handle your business’ billing.

Advantages

The great advantage of outsourcing is that it may free up your employees to focus on more profitable tasks, especially in small business. It may not make financial sense for your firm to have a bookkeeper on staff who needs to be paid salary and benefits when you can outsource to a bookkeeping company. It is likely that they will be able to do the work in a shorter amount of time for a flat fee. And because it suits their business model to serve as many clients as they can take on, they are likely to be both experienced and efficient.

Best practices when looking to outsource

If you’re considering outsourcing an aspect of your business to a company or individual, the most important thing you can do is check their references. Make sure they have a good reputation for understanding their field and hitting deadlines.

It’s also important that you understand their workflow, and clearly establish the channels of communication. Who is your point person when a new task develops? Who do you contact if issues arise? What is the preferred means of communication and process? Equally important, the individual you hire to outsource (or your contact at the company you hire) must be someone you feel comfortable working with. 

Areas of concern

Beyond having a good working relationship with an outsourced company or individual, you must be very clear about their status. If they are an independent contractor, be sure to establish this in writing, and educate yourself in the IRS definitions or independent contractors versus employees. Failure to do so may put your company on the hook for social security and other benefits.

Outsourcing can be a great way for a company to be more efficient while helping their bottom line. The trick is establishing a great working relationship with the company or person who will be taking on the outsourced work. 

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