Business Process Outsourcing (BPO) is a practice whereby organizations outsource a portion of their back office operations to a third-party solution provider in a way that is seamless to the organization’s client. Back office operations ideally suited for BPO services include accounting, invoicing and billing, data entry, data scanning, account reconciliation, collections and more.
There are several methods of outsourcing. One option involves offshoring; outsourcing to vendors located outside of the contracting business’ home country – whether halfway around the world or in a neighboring country. Another option is contracting with companies located in the same country. A related option is the practice of insourcing, where a third-party’s resources are housed inside the contracting organization’s facilities. Regardless of where the contracted company is located, it is the practice of outsourcing that provides the key benefits.
While using a BPO has often been viewed as contracting with a provider in another country and, therefore, taking jobs away from American workers, that no longer has to be the case. There are many BPOs within the United States that act as third-party services for other U.S.-based businesses.
Using BPOs for accounts receivable processes can bring about efficiency, cost savings and the ability to access expertise and technology in areas that might otherwise be out of reach for the client company.
Following are seven ways that BPOs can help streamline your company’s back office operations, increase efficiency and improve the bottom line.
- They can do the work faster than your company can
Since BPOs can focus on one thing (or specific things) for your company, they can devote the necessary time and energy to complete those tasks very efficiently. They have the capacity to handle many clients simultaneously and have therefore refined their processes around the work that needs to be done. Using technology and cost-effective staffing, BPOs can handle large volumes of invoicing and collections for their clients without the need to focus on other unrelated tasks. This allows the client company to focus on value-added tasks and enhanced client engagement without getting bogged down in back office work.
- They can do the work for less money than your company can
Because BPOs can do their work efficiently and can scale quickly, regardless of how much volume they receive, they can do it for less than most of their client companies can. They are also skilled at managing lower labor costs, which ultimately is reflected in cost savings for the client.
- They can supplement your operation
A client company can enhance its operation by contracting work to a BPO that is not part of their core business. For example, if there are 5 related steps to a client company’s back office process, they can contract out some or all of those steps to the BPO. If configured properly, the steps can be seamlessly integrated in a way that allows the client company to oversee the entire process, but only devote internal staff to 1 or 2 of the steps while they focus most of their attention on value-added work.
- They can allow your company to protect staff
By outsourcing some practices, the client company’s staff are not impacted when parts of the operation contracts or expands seasonally or during economic downturns. If it’s a busy quarter (or year), the company can outsource more work to the BPO. If it’s a lean or slow time, the company can cut back on some of the BPO work in a way that does not negatively impact full-time staff.
- They allow for cost savings/cost reductions
One of the main reasons companies outsource to third parties is to save money. Essentially, a company saves on in-house costs by better controlling labor costs as well as expenses related to equipment and office space. This also allows for those resources to be used in other parts of the business, such as customer service or customer acquisition.
- They provide access to expertise
Another important way a BPO can bring value to a company is that third-party contractors are often the best in their field. In short, the client company is renting expertise without having to buy it and devote other resources, such as office space and benefits, to it. Rather than foregoing the expertise because there may be resistance to bringing on more full-time staff, companies can access as much or as little knowledge as they need without long-term commitments.
Accessing BPO expertise also allows companies to leverage global talent that has a narrow skillset and can focus on very specific or specialized work. That means contractors will often be well-versed and exhibit best practices related to their field whether in accounting, billing, account reconciliation or other areas. This expertise can also include knowledge of legal processes or other languages that can positively impact your business processes.
- They provide access to the latest technology
In the same way that BPOs can provide access to expertise, they can also provide access to the latest technology that client company’s may not have internally.
Technology can be an expensive investment. Many companies resist purchasing software that may provide significant benefit but is unrelated to their core business. BPOs can provide access to that technology for a set period or indefinitely. This gives greater flexibility to the client company and allows them to receive the benefit of the technology without buying it.
Given today’s ever-changing marketplace, outsourcing back office functions to BPOs can mean greater flexibility to handle the changing landscape. Companies can realize greater efficiency, cost savings, and increased access to expertise and technology without making cost-prohibitive investments. In addition, the flexibility of using BPOs allows companies to position internal staff in a way that allows them to focus on more valuable tasks related to customer engagement. Ultimately, this leads to happier customers, greater revenue and a more sustainable path to growth.
Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. His resume also boasts time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific as well as a number of years as an independent consultant.