Business Process Outsourcing

The Outsourcing market is estimated to grow tremendously in the coming few years with an increasing number of companies planning to outsource both low-end and high-end jobs to offshore destinations. Also the number of companies providing outsourcing services is on the rise, thus resulting in larger variety. Due to the fact that more and more companies are outsourcing, the risks are getting smaller as businesses have more experience and clearer objectives.

Outsourcing in the world today is seen as a strategic management option rather than just a cost cutting operation. It aids companies to achieve their business objectives through operational excellence and a better market position. In order for companies to focus on their core competencies, all companies today outsource one or more of their operations. In order to compete in the global economy companies need to focus their resources on their core operations.

Very simply business process outsourcing can be seen as a process in which a company delegates some of its in-house operations/processes to a third party. Thus business process outsourcing is a transaction through which one company acquires services from another while maintaining ownership and ultimate responsibility for the processes. The company then informs its provider what it wants and how it wants the work performed. So the company can authorize the provider to operate as well as redesign basic processes in order to ensure even greater cost and efficiency benefits.

The main motive for business process outsourcing is to allow the company to invest more time, money and human resources into core activities and building strategies, which fuel company growth.

In today’s business environment outsourcing is often not a decision that needs to be justified. In fact some work that is handled internally but could be outsourced can be seriously questioned as a bad business decision.

The global market today is highly competitive and continuously changing. A company must thus focus on improving productivity and at the same time cut down costs. Therefore, a lot of processes that take up precious time and resources are being outsourced. Business process outsourcing companies are often considered to provide more flexible, faster, cheaper and effective services.

Business process outsourcing helps free up a company’s capital and reduce costs. The operations or processes being outsourced vary from manufacturing to customer service to software development and much more. Most of the companies that are looking to outsource are multinationals, or companies from western countries and most of the BPO units are in countries such as India, China, Malaysia and even Russia.

One way of looking at it is that business process outsourcing is just a name for already existing practices. Services such as, bureau services, contract programming and project management have been outsourced for a long time. In its present meaning, however, business process outsourcing refers to a greater level of handing over ownership and/or managerial control than has before been the case.

Companies turn to resources outside their organizational structure, usually to save money and/or make use of the skilled professionals. For instance, a company might outsource its IT management because it is cheaper to contract a third-party to do so than it would be to build its own in-house IT management team. Or a company could outsource all of its data storage needs because it is easier and cheaper than buying and maintaining its own data storage devices. A business might also outsource its human resource tasks to another enterprise instead of having its own dedicated human resources staff.

Accounts Payable Outsourcing

Many companies in the UK and US today are outsourcing their accounts payable jobs to offshore destinations. This trend of accounts payable outsourcing has several advantages for the company in terms of cheaper labor and quicker work. Studies show that accounts payable is the most widely outsourced finance and accounting function. It is stated that the finance and accounting BPO opportunity is one of the largest and fastest growing BPO segments.

It is estimated that Europe, the Middle East and Africa will the fastest growing areas in the account payables outsourcing market, although the US is predicted to remain the largest player finance and accounting BPO market. As with almost all outsourcing cutting costs is one of the biggest reasons for companies to outsource their accounts payable processes, although strategic business decisions play an important role nowadays.

A company can outsource all or a part of its account payables business functions. The functions may include any of the following:

• Accounts Payable Invoice Scan
• Accounts Payable Workflow
• Accounts Payable Invoice Entry
• Accounts Payable Payment Disbursement
• Accounts Payable Invoice Online Repository
• Travel and Expenses

Outsourcing accounts payable can have several benefits:

• Up to 25% to 50% annual A/P processing cost savings without capital investment
• Greater, centralized control over payables across the enterprise, despite of the actual physical location
• World-class quality and accuracy ensuring accurate matching and elimination of duplicate and payments with errors
• Real-time tracking and reporting of all payables from the time they are received from the vendor
• Automated routing of payables for approval irrespective of location, enhancing control and manager productivity
• Elimination of the headache of recruiting, hiring and managing clerical staff
• The ability to focus on strategic, core business operations

Thanks to accounts payable outsourcing companies can now focus on developing their core competencies, knowing that a critical part of their business, Accounts payable process, is professional hands at a substantially low cost.