Outsource Definition

Outsource Definition

See Also:
Administration Expenses

Outsource Definition

The outsource definition is the practice of transferring business activities to an external organization instead of performing the activities internally.

Outsourcing Criteria

Companies may outsource business activities if they feel an external organization can perform the activities better or at a lower cast than if the company were to perform the activities itself. Outsourcing typically involves a contract between the company and the external organization that stipulates the costs, quality standards, and other conditions regarding the performance of the business activity.


Click here to download: The Guide to Outsourcing Your Bookkeeping & Accounting for SMBs


Insourcing

The decision to outsource instead of insource depends on the nature of the business. Typically, companies want to focus on their core business activities and outsource peripheral activities. Value chain analysis may help a company discover which activities to perform internally and which to consider outsourcing.
Activities that are commonly outsourced include bookkeeping, legal services, transportation, security, and other business activities. When deciding whether to outsource an activity or perform the activity internally, it is necessary to consider the advantages and disadvantages of outsourcing.

Outsourcing vs Insourcing

It may be advantageous to outsource an activity if doing so is cheaper than performing the activity internally. It may also be useful if the external organization has superior expertise in the activity. Outsourcing also allows a company to focus its attention on its core business activities.
There are also disadvantages to outsourcing. Outsourcing customer service operations may cause customers to feel disaffected when they find out they are not dealing with the company they are trying to reach. Also, if the external organization has access to sensitive information, then there may be a risk of information leaking to competitors or other parties. Outsourcing certain operational activities may cause the company to give up valuable customer data used for marketing purposes. And finally, outsourcing may require the company to incur the costs of monitoring and auditing the performance of the external organization.

Outsourcing Overseas

In today’s global economy, more and more companies are outsourcing business activities to external operations in other countries. Labor and operational costs may be significantly lower than in the company’s home country.
Guide to Outsourcing Your Business's Bookkeeping and Accounting


Before you decide to outsource, determine what your core competencies are. Check out our free Internal Analysis whitepaper to assist your leadership decisions and create the roadmap for your company’s success!

Outsource Definition
[box] Strategic CFO Lab Member Extra
Access your Exit Strategy Checklist Execution Plan in SCFO Lab. The step-by-step plan to put together your exit strategy and maximize the amount of value you get.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
Outsource Definition
Originally posted by Jim Wilkinson on July 24, 2013. 
ARTICLES YOU MIGHT LIKE

The Struggles of Private Company Accounting

Hiring the right accountant  When I meet a business owner operating at a successful $10 million in revenue, they often mention, “My CPA”… I immediately know that CEO/Entrepreneur is referring to their Tax CPA.  That is because one thing that all Entrepreneurs have in common is that they must file a tax return.  So, from

Read More »

Financial Ratios

See also:Quick Ratio AnalysisPrice to Book Value AnalysisPrice Earnings Growth Ratio AnalysisTime Interest Earned Ratio Analysis Use of Financial Ratios Financial Ratios are used to measure financial performance against standards. Analysts compare financial ratios to industry averages (benchmarking), industry standards or rules of thumbs and against internal trends (trends analysis). The most useful comparison when

Read More »

CPA’s are Specialized

The Difference in CPAs Looking back at my career I don’t know how many times I have introduced myself to someone and they ask, “Are you a CPA?” and I say yes. Then they tell me “you must be very busy with tax season” and I look at them with a bit of awe and

Read More »

JOIN OUR NEXT SERIES

Financial Leadership Workshop

MARCH 28TH-31ST 2022

THE ART OF THE CFO®

Financial Leadership Workshop

Days
Hours
Min

September 12-15th 2022

Days
Hours
Min
SHARE THIS ARTICLE

JOIN THE NEXT STRATEGIC CFO™ WORKSHOP SERIES

Strategic CFO™ Financial Leadership Workshop
The Art Of The CFO®

Days
Hours
Min

December 5-8th, 2022