You Work Hard
The emails never stop. You are pressed to make consequential decisions every day. You are answering emails early in the morning and into the evening. You always seem to have a full plate of tasks in front of you. Stress levels can be high. So you wonder whether it makes sense to outsource your back office operations. Will it just add to you’re already hectic life or can it deliver the support you need to take your business to the next level?
What is Outsourcing?
Outsourcing is the practice of hiring outside—virtual/remote specialists or generalists—to perform specifically delineated tasks traditionally handled within a team or organization.
Whether you know it or not, you’re probably already outsourcing. Whether you are utilizing a 3PL for warehousing, work with an outside accountant, or use a payroll service, most wholesalers are already engaged in some form of outsourcing.
But what if you took outsourcing to a different level? Could it let you focus your attention on your core business areas like production, design, and sales? Or will it just be more work that lands on your already full plate.
Before addressing back office operations specifically it makes sense to visit company motivations around outsourcing. According to the MicroSourcing Ultimate List of Outsourcing, there were a number of reasons companies undertook outsourcing:
- Cost cutting tool: 59%
- Focus on core business: 57%
- Solves capacity issues: 47%
- Enhances service quality: 31%
- Critical to business needs: 28%
- Access to intellectual capital: 28%
- Manages business environment: 17%
- Drives broader transformational change: 17%
When it comes to back office, outsourcing has a number of significant benefits like real estate and infrastructure savings realized from moving your back office operations off-site. It’s almost always cheaper, more efficient, and more flexible than hiring in-house staff. You can also use outsourcing to tap into expertise and experience not available in-house or to identify and reduce the costs of support services.
If you’re thinking about outsourcing your back office, here are 7 potential benefits:
1. Greater Focus On Your Core Business
Wholesalers don’t typically get rich by mastering back office operations. Successful wholesalers grow when they focus on core areas that separate them from their competitors like designing the latest, most desirable or innovative products. Wholesalers grow when they cultivate relationships with key buyers and retailers and improve their sales strategies and presentations. Wholesalers grow by improving quality and timely production. By outsourcing your back office operations you will have more time to focus on those higher level tasks in production, design, and sales.
2. Improved Cash Flow
Businesses fluctuate seasonally. During the peaks outsourcing allows you to keep up with increased demand without making long term commitments. When your selling cycle ebbs, your personnel expense declines in tandem and stays more in line with your overall revenue. As a result your cash flow improves. It releases capital for investment elsewhere in your business, and allows you to avoid large expenditures. Increased cash flow allows you to capitalize on other opportunities that can help you grow your business.
3. Keep Your Factor Happy
If you borrow from a factor, that relationship is critical. Outsourcing can result in faster invoicing and assignments and easy access to supporting documents like BOLs. With the right back office partner you can deliver financials to your factor in a timely fashion. By keeping up on reporting requirements you can keep the borrowing formula on track and factor cash flowing.
4. Reduced and variable overhead
Your expenses come under scrutiny, especially at the end of your fiscal year. These expenses include salaries, insurance, rent, utilities, and maintenance needs. You can benefit from outsourcing work to contractors who can take care of your day-to-day back office operations and save in all of those areas. These reduced expenses flow straight to your bottom line or even into your pocket as executive compensation.
Critically, with the right partner, you can shift these expenses from fixed costs to variable costs. The less fixed costs you have the more reliable are your net profit projections.
5. Cash Applications and Chargeback Disputes
Cash applications in and of themselves are not complex. Yet tracking deductions, researching chargebacks, and disputing chargebacks require lots of time, consistent effort, specialized software, and expertise. The right back office service providers should have accumulated knowledge and enough resources to tackle all of those areas.
6. No Need for an ERP
The right back office partner may include a superior software solution as part of their services. Instead of struggling to master an ERP, a back office company can handle the tasks of implementation and training, keep up with the latest releases, and deliver improved reporting on an ongoing basis. In the best case scenario they will have their own proprietary software and on staff developers that can improve reporting and other processes on an ongoing basis.
7. Experts in Alignment With Your Interests
Growth is everything. When your business stops growing, it starts dying. The key to growth is surrounding yourself with experts that can handle critical operations. If you structure your outsourcing contract right, your back office’s interests can be aligned with yours. When you succeed they succeed.
Outsourcing: Are the advantages worth the effort of switching?
The takeaway? Outsourcing has many potential advantages. It can provide you with services that can help you ride through the ups and downs of your business. It is true that transitioning to an outside back office operations takes time and effort, though it may not be as difficult as you may have thought. Although atypical, in some cases the transition can take just a week to be up and running. Done right, it is a long term investment that can provide you with savings by moving operations off-site, improve your cash flow, and provide you the expertise to help grow your business. It can help you focus on your core business and improve relationships with Factors, enabling you to capitalize on new opportunities.
Wholesale Executive Insider is a publication dedicated to helping owners of wholesale companies stay up to date with the latest industry insights to improve their operations and increase their bottom line.
Our team has deep industry knowledge, and a network of solution providers that help wholesaler’s optimizing back office operations to cut costs. If you’d like to get free advice and recommendations, feel free to book a time to speak 1-on-1 with one of our knowledgeable industry advisors!