How to outsource?

How to outsource activities generating the least possible impact on procedures that are already underway?

In the articles “Why Outsource?” And “What to outsource?” concerning the outsourcing issue, we have discussed topics that explain the advantages of a good outsourcing culture, which activities are more advantageous when placed in the hands of third parties and a few labor aspects.

Very good.

Having overcome these common issues related to the outsourcing processes and once you’ve employed the strategy of using outsourced employees for internal procedures at your company, which seems for us to be the more modern trend of administering accounting, tax and financial departments, we recognize that the next relevant step refers to how to start the outsourcing of activities without this transition causing any negative impacts on procedures that are already in progress.

As such, we will list a few steps below so that the entire process unfolds in the best possible way, according to the experience we’ve acquired over the last years and after numerous deployments of outsourcing activities.

Step 1: Be clear on what will be outsourced and what should stay with in-house employees

In our second article on outsourcing, we concentrated specifically on offering commentary on this topic and, in order not to be redundant, we sum it up as follows:

Give first preference to outsourcing transactional activities, i.e., those that are not strategic to the company or to the department and that require a long time to run;

Make sure you have room in your budget to outsource seasonal or one-off activities, which are apart from the ordinary day-to-day scalability of the staff. Some examples, such as last-minute accounting reconciliations requested by the auditor, large-scale audits, rectifying ancillary obligations that have already been delivered, documents that for some reason were collected and were not correctly entered into the company’s ERP or into the tax system, etc.;

Use outsourced employees for special projects, such as software and systems deployment, launching a new business within the company that will need a staff focused on the project for a few months, and other needs that are outside the staff’s normal plans. For more details, take a look at the article “What to outsource?”.

Step 2: make a detailed outline of the activities to be outsourced

After selecting the activities that will be performed by the outsourced professionals, a detailed outline needs to be made on how these activities are currently performed (“as-is”).

This outline needs to contain three main components, which we’ve listed below:

Process flow drawing: One suggestion is to use Microsoft Visio® for this design stage. It already includes all the components that will integrate the pre-formatted flow and lets the team designing the flow to have greater flexibility and clarity in the flow charts that will be created.

It’s important to note that each “box” drawn in the flow must contain an action, which will be later detailed in a separate document. To be more precise, simply ensure that each box contains a verb, suggesting an activity (action) to be performed. Below is an example of a flow:

Sample flowchart

 Tools used in the performance of each activity: Once the flow is drawn, it is extremely important to identify the tool used for its performance in each item. In the flow example we present above, we have already identified the tool used in a line under each activity, which in our example we find: WEB, Excel, RM (ERP) and manual (activity performed manually).

Procedure Manuals or “Desk-procedures”: for each item in the flow, a detailed manual needs to be written on how the activity or action is carried out. This manual needs to contain all the information so that, at the very least, someone who has never carried out this procedure may there find the entire process on how to do it. We’re obviously not including the technical knowledge expected by the professional who will perform the procedure. If, for example, the work involves the tax or accounting area, the assumption is that the person who will use the manual to carry out the activity is already well-versed in the area.

The purpose of the manual or desk-procedure is to provide a detailed explanation of the operational routines and the specifics on the work that needs to be done, such as user and system passwords, who to send the information to after the activity is performed, how and why each screen in a system must be completed, any peculiarities encountered, etc.

With the charting and outline completed, the steps are listed below for the effective implementation of outsourcing:

Flow tests and manuals: After the flows have been drawn and manuals prepared, it is crucial to make sure that they are “working”. To achieve this, another person in the area, other than the same professional who already performs the activities, should attempt to do them by only using the manual for support. This step is important, because points will be identified here that can be clarified in the desk-procedure along with specific aspects that were not originally included.

Qualitative analysis: finally, before outsourcing the selected activity that has now been charted and tested, those in charge of the department that is outsourcing some of its procedures (usually the coordinator or the manager) should focus on the flows and manuals and take the opportunity to review them. It’s not that uncommon to identify improvement points and even technical accounting, tax and financial conditions that can create value for the company.

Implementation: so that the “baton can be passed” from those who currently perform the activity to those who will carry it out from now on, we recommend that there be a transition period where both professionals will be conducting the activities together for a predetermined time. This time frame can vary greatly from activity to activity. As a rule, we take the following factors into account in order to arrive at an optimal period:

Routine and non-seasonal activity: One week, with 2 of those days spent with the professional who will deliver the activity being done while explaining it to the person who will be taking over, and an additional 3 days with the person who will take over performing the activity and clearing up any questions about the role.

Routine, but seasonal activity (example – closing): 35 days, starting 5 days before the closing. The closing will be simulated with the professional who will take over the procedures during the first 5 days. After this, the actual closing that will be performed by the professional who already does it and, 30 days later, the professional who will take over the activities will perform the actual closing, accompanied by the person leaving the position.

For the closing, it should be mentioned that the outsourcing process, in addition to the advantages already mentioned in the other two matters, can provide the opportunity to revisit the activities that will be carried out by third parties, improving them and generating value for the business either through a higher quality performance in the activities that will be outsourced, or in savings for the corporation.

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