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 Number-Crunching Tips to Help You Determine if Outsourcing is The Right Thing For Your Business

Outsourcing provides many financial benefits for businesses.

From a cost accounting standpoint, outsourcing can save your business thousands of dollars each year. But to determine if it’s worth it to outsource, you still need to do some number crunching.

Outsourcing fees vary by business needs. Whether you need to outsource tech or customer support, the costs of outsourcing will depend on a variety of factors. But when it comes to tech and customer support costs, you will save plenty on equipment alone by outsourcing these services.

To determine cost savings from outsourcing, consider these accounting tips.

A Make-Versus-Buy Decision

The ongoing debate over outsourcing is also known as the “make-versus-buy” decision. “Make” refers to in-house production or service, while “buy” refers to paying the costs of having another professional team do that work on your behalf.

The big question is whether it is more cost effective to make in-house or buy the good or service from an outside vendor.

Businesses often choose to outsource as a means to reduce costs and boost their bottom lines.

Benefits of the “Make” Decision – Continue Producing Services In-House

Calculate the following costs that apply to your business if you decide to keep all work in-house.

Variable Costs

  • Equipment
  • Labour—i.e. hourly rate of production/service workers directly related to a unit of a product or service
  • Office Overhead
  • Shipping and Handling (if applicable)
  • Sales Commissions

Fixed Costs

  • Salaries
  • Benefits
  • Office Lease
  • Other Fixed Overhead—i.e. office costs, insurance premiums, building and equipment depreciation

Benefits of the “Buy” Decision – Outsource Production Or Services

Now calculate the applicable costs if you were to outsource office support services instead.

Variable Costs

  • Purchase Cost of Product or Service
  • Shipping and Handling (if applicable)
  • Sales Commissions

Fixed Costs

  • Office Lease
  • Other Fixed Overhead

By deciding to outsource, you can eliminate some or all of the applicable costs for communications equipment, labour, variable office overhead, salary, and benefits, depending on the extent of your outsourcing.

If you no longer need a large office to accommodate in-house staff, you can also reduce the fixed costs for your office lease.

You can keep your experienced staff and outsource for areas in high need of assistance. High-demand services that will help keep your business running smoothly include office, tech, and customer support.

Keep these tips in mind when number crunching costs for outsourcing versus hiring more in-house staff. The cost savings of outsourcing will likely be worth it. And you can focus more of your business resources on other important business operations with the extra savings and support.