Outside Looking In | Article

people and keyboardIn good times and bad, but especially in bad, corporations want to make sure they are not paying too much for their essential services. Electricity bills are already high enough!

At the same time, federal and state governments have rules that all companies must follow. Ignoring one of those arcane rules can be very painful financially. But who has time to sort through all the records to make sure all the T’s are crossed?

The audit and compliance process is a crucial but not mission critical function. That means it is a prime candidate for outsourcing. My definition of outsourcing is the ability to extract lead from gold, which is also the title of my new book. Outsourcing transfers the ownership of a process to a vendor who can do it better. And you don’t have to spend your time or money to enjoy this improvement.

For example, corporations want to invest their capital in processes that affect their bottom lines, like improving marketing or manufacturing. They rarely want to spend millions purchasing state-of-the-art audit systems. However, in today’s fast moving world, companies that don’t invest in cutting edge technology operate in the shadows of their competitors and lose the operating efficiencies that technology brings.

On the other hand, outsourcing vendors happily invest in technology. Ernst & Young (E&Y), for example, recently spent $150 million on new audit software. The outsourcing vendor made the capital outlay because financial audit is a good process to outsource since it is very scalable and provides lots of leverage. Buyers who outsource their audits to outsourcing vendors have access to this top flight technology.
Outsourcing any audit function does not present a conflict of interest. In fact, it increases controls because an independent third party is serving as the watchdog.

Access to Top Technology

In today’s tight labor market, it is easier for outsourcing firms to attract top auditing talent than it is for you. These experts tend to be happier in an environment where they can impact the process. And it’s easier for the suppliers to continue to educate their employees in the latest developments in their field. Yet you, the buyer, have access to these specialists thanks to your outsourcing relationship.

Advanced technology. Intensive education. Better talent. These things make the outsourcing vendors intrinsically better at auditing processes and complying with regulation. That assures their buyers a high outsourcing return at a lower cost.

In addition, outsourcing relationships are deepening. Buyers are asking their vendors to get involved in analyzing trends and suggesting solutions. This creates a win-win situation for both parties. That’s what outsourcing is: the ability to turn lead into gold.

Lessons from the Outsourcing Primer:

  • Audit is not a core competency, making it a good process to outsource.
  • Today, technology is crucial to auditing efficiency. Only firms specializing in this function can afford to invest in the technology that’s needed.
  • Outsourcing firms can attract the top talent in the audit field.
  • Outsourcing relationships are deepening as buyers look to their vendors for help in improving their business.

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