Billing Solutions: Is Outsourcing Your Invoice Processing Service A Good Thing?
By Clint Waite
Outsourcing your bill printing can alleviate many headaches and is generally less expensive than doing the printing yourselves. However, there are many reasons why companies outsource this function.
According to information pulled from the Best Practice Systems' website the top five reasons that companies outsource are to improve company focus, resources are not available internally, free up resources for other purposes, make capital funds available, and reduce and control operating costs.
Improve Company Focus
Outsourcing lets the company focus on broader business issues while having operational details assumed by an outside expert. Outsourcing is an organization-shaping management tool which can lead to a clearer more effective focus on meeting the customers' needs. For many companies, the single most compelling reason for outsourcing is that several of the "how" type of issues are siphoning off huge amounts of management's time and attention. Too often, the resolution of these issues are stuck in middle management "decision gridlock". This creates financial and opportunity costs that affect the organization's future.
Outsourcing can enable an organization to accelerate its growth and success through expanded investment in the areas which offer it the greatest competitive advantage.
Resources Not Available Internally
Companies outsource because they do not have access to the required resources within the company. For example, if an organization is expanding its customer base and does not have the equipment or personnel to continue mailing customer billing statements in a timely basis, cash flow is effected. In addition, recent postal changes providing discounts to qualifying companies using automated mailing systems further impacts on that company's operational costs in that area because of limited resources.
Quite simply put, rapid growth or expansion of operations is often a strong indicator that outsourcing may be right for a company.
Free Resources For Other Purposes
Every organization has limits on the resources available to it. The constant challenge is to ensure that its limited resources are expended in the most valuable areas.
Outsourcing permits an organization to redirect its resources from non-core activities toward activities that have the greater return in serving the customer.
Most often, the resources redirected through outsourcing are people resources. By outsourcing non-core functions, the organization can redirect these people, or at least the staff slots they represent, onto greater value-adding activities. People whose energies are currently focused internally can not be focused externally - on the customer.
Make Capital Funds Available
Outsourcing is a way to reduce the need to invest capital funds in non-core business functions. Instead of acquiring the resources through capital expenditures, they are contracted for an "as used" operational expense basis. Outsourcing makes capital funds more available for core areas. It can also improve certain financial measurements of the firm by eliminating the need to show return on equity from capital investments in non-core areas.
There is tremendous competition with most organizations for capital funds. Deciding where to invest the funds is probably one of the most important decisions that an organization's senior management is called upon to make.
For example, when a firm outsources its statement, invoice or debtor letter printing, the equipment and personnel in that area no longer compete for the company's capital. Often, these types of investments and their constantly escalating demands have been difficult to justify when compared to areas more directly related to producing product or serving the customer.
Reduce and Control Operating Costs
The single most important tactical reason for outsourcing is to reduce and control operating costs. Access to the outside provider's lower cost structure, which may be the result of greater economy of scale or some other advantage based on specialization, is clearly and simply one of the most compelling tactical reasons for outsourcing.
In addition, companies that try to do everything themselves may incur vastly higher research, development, marketing, production and employment expenses - expenses that have to be passed onto the ultimate customer. Today's customers are too sophisticated to accept the costs associated with an organization's attempts to maintain singular control over all its resources.
Clint Waite is a billing industry expert with years of experience in business process outsourcing. He helps companies get the most from their billing solution and has a track record of decreasing costs through best billing practice implementations.
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