BPO

The term business process outsourcing, or BPO, refers to a common method of conducting business in which a company enters into an agreement with an independent service provider to carry out an important business function or job. In most cases, a company will engage another company for such functions once it has determined that a particular procedure, even though being essential for the organization’s operations, is not a part of the core operation of the company. This phase calls for a solid grasp of business process management as well as an in-depth knowledge of the processes that are carried out within the company.

Company executives often conclude that there is no benefit in having their own people do these commodity procedures since these processes do not typically distinguish one firm from another. For example, every company requires a payroll service and accounting service whether from an in-house team or from a BPO. Therefore, outsourcing of these operations or in other phrase delegation of these non-core functions of the company to another firm that specializes in them is something that companies do because they believe it will offer better outcomes within a shorter period of time and at a lot cheaper rate. 

The manufacturing sector was where business process outsourcing first began to flourish. After evaluating that third-party distributors could bring more expertise, pace, and cost effectiveness to certain processes within the supply chains, the manufacturers decide to hire those vendors to handle certain parts of their supply chains. This was done because the manufacturers believed that an in-house team would not be able to deliver these benefits. As time progressed, companies in a variety of different sectors began using the strategy. Nowadays, a wider variety of organizations, including for-profit companies, charitable organisations, and even government entities, are outsourcing a variety of tasks to service providers located for example in the United States throughout North America, and all over the world. This development has led to an increase in the use of business process outsourcing (BPO).

Types of BPOs:

In today’s rapidly evolving and intensely competitive business environment, many enterprises, ranging in size from newly established small businesses to well-established multinational corporations, have made the decision to outsource some of its business functions. Broadly speaking, depending on the nature of the business, a company could opt for a BPO strategies in two ways. They are:

Back-office business functions: When a company delegates its core business support operations, like accounting, payroll processing, IT services, human resource management, regulatory compliance, and quality assurance, to a third-party professional who ensures the smooth operation of the business in an inexpensive and timely manner.

Front office business functions: On the other hand, Front-office functions are activities and company operations that serve or relate to present customers or future customers. Some examples of front-office tasks are customer relation services, marketing, technical supports, sales and so many others.

Some companies hand over the whole of a function, such as their human resources (HR) department, to a single provider. Some businesses just outsource some activities within a particular functional area, such as solely the processing of payroll, while others have their own teams handle all of the other HR procedures. In addition to classifying business process outsourcing (BPO) based on the services it offers, it can also be divided into several categories according to the location of the service provider. They are elucidated briefly below:

Offshore Outsourcing: Whether a company contracts its activities inside or beyond the limits of its native country determines how many business process outsourcing (BPO) choices it has available to it. When a business process outsourcing (BPO) contract is moved to a country in which there is more political stability, reduced labor costs, and/or tax savings, this practice is referred to as “offshore outsourcing.” One example of offshore outsourcing is a business in the United States that delegates its functions to and enters into a contract with ABC Partners, a highly experienced business process outsourcing (BPO) provider in Bangladesh.

Nearshore outsourcing: When a work is outsourced to a country that is geographically close by, the process is referred to as “nearshore outsourcing.” This would be the situation if a corporation based in India collaborated with ABC Partners, an extremely qualified business process outsourcing (BPO) provider in Bangladesh.

Onshore or domestic outsourcing: In a third scenario, known as “onshore outsourcing” or “domestic sourcing,” business process outsourcing (BPO) is contracted within the company’s own country, even if the company’s outsourcing partner is situated in other cities or even in different states. For instance, a company located in Chattogram outsources its business functions to ABC Partners, a very skilled business process outsourcing (BPO) provider in Dhaka, Bangladesh.

Moreover, since the outsourcing service is solely dependent on the technology and infrastructure that allows external organizations to successfully execute their duties, business process outsourcing (BPO) is sometimes referred to as information technology-enabled services (ITES).

How BPO Works:

There is myriad rationale why business executives make the decision to outsource a business operation. These factors vary according to the nature, age, and size of the organization, along with the competitive environment of the market and general state of the economy. For example, startup 

businesses often have no alternative but to outsource their back-office and front-office services because they lack the internal resources necessary to carry them out successfully. An established business in contrast, may decide to outsource a function that it had been handling in-house if it discovers that a third-party service provider is capable of executing the duty at a lower cost or at a higher standard. Experts in management often suggest to CEOs of large companies that they should first identify operations that may be outsourced and then evaluate whether or not it would be advantageous to entrust those services to a business process outsourcing provider.

If this is the case, the company is required to go through the procedure of not only finding the most qualified provider for the job, but also transitioning the work from being done in-house to being done by an outside provider. The transition to an outsourced provider often has a repercussion on people, pre-existing workflows, and established procedures, all of which need a substantial level of change management. The transition to an outsourced provider also has an impact on the organization’s finances. This is true not only in the sense that costs are transferred from the internal function to the outsourced providers, but also, frequently, in terms of the corporation’s tax obligations and compliance purposes.

In order to facilitate a seamless handoff of tasks to the outsourcing provider, the business may also need to make an investment in cutting-edge technology. The amount of the task being delegated as well as the sophistication of the technological infrastructure that currently installed at both businesses will determine how much this technology will cost and how far it may be used.

The process frequently begins with company executives choosing certain operations or business functions to outsource as a means of saving cost, enhancing flexibility, increasing productivity, and redirecting resources to the firm’s core business strengths. The management of the company should next evaluate whether they should hire a single vendor to perform all of the work that is being outsourced, or would it be more cost effective to contract different vendors for the various duties. For instance, a company may opt to delegate the majority of its human resources tasks and then either enter into a contract with a single provider to handle all of its outsourced processes or hire two separate providers: one to handle payroll and the other to handle benefits administration.

These variables should lead to the creation of a list of priorities, as well as a comprehensive outline of the extent of the job that will be outsourced. These are used by companies to construct a request for proposal, which is then referred to the BPOs so that they can evaluate whether or not they can match the criteria, in addition to determining at what cost, period of time to execute those tasks, and with what value-adds.

After an organization has decided on whether they intend to engage a single BPO or multiple BPOs to carry out the outsourced jobs, the next step is to decide on the kind of contract that will govern their relationship. This kind of agreements are often classified as belonging to one of the following groups:

Contracts based on time and materials: In this category, the company reimburses the service provider for the amount of time spent to perform the job along with the materials used; 

Contracts based on price: In this category, the price for the specified job is agreed upon in advance.

In addition, enterprises are obligated to work with their suppliers to establish a service-level agreement that outlines the quality of the services that are given as well as the criteria that are used to evaluate success. Some companies negotiate with the suppliers of the outsourced work on whether or not to have the following, depending on the requirements and the kind of work being outsourced:

• Particular employees who are part of teams that are committed to their outsourced task; 
• Workers who are situated solely onshore or, on the other hand, internationally dispersed; 
• Workers who are accessible at all times or just during certain hours.

What are the benefits?

Deloitte, a dominant global professional service provider in more than 20 different industries, published a survey report in 2021, ‘2021 Global Shared Services and Outsourcing Survey Report’. In this report, Deloitte investigated why do the companies pursue BPOs in the first place or what are the benefits of engaging BPO that compel an organisation to outsource their tasks to a third party service provider. In gist, Deloitte discovered the following:

• Standardization and efficiency of procedures was highlighted by 88% of those who participated in the survey;
• 84% of respondents mentioned cost effective;
• 73% of respondents said it was generating company value;
• 61% cited digital agenda acceleration;
• 59% of respondents mentioned strengthening their competencies; 
• 36 percent of respondents mentioned the overall corporate strategy and plans.

The following items are often listed as the advantages of BPO by its proponents:

• Benefits on the financial front include the fact that business process outsourcing (BPO) providers may often complete a business operation at reduced prices or save the organization money in additional ways, such as through tax benefits.
• Due to the fact that the corporate income tax rate in the United States is one of the highest in the industrialized world, corporations based in the United States often find it beneficial to outsource their operations to nations that have lower income taxes and labor forces that are less expensive such as Bangladesh.
• BPO agreements may provide the opportunity to adjust how an outsourced business function is performed, which permits organizations to adapt more adroitly to shifting market circumstances which eventually enhance flexibility.
• Increased competitive advantage Business process outsourcing (BPO) allows a company to concentrate a greater portion of its resources on activities that set it apart from the market.
• BPO providers are in a strong position to accomplish the task with more precision, efficiency, and pace since business processes are the focus of their primary business. This enables them to provide a higher level of quality and performance.
• Business process outsourcing (BPO) providers are much more likely to be informed of developments in the process areas in which they specialize. This indicates that they are more inclined to make investments in innovative technologies, like as automation, that have the potential to enhance the rate at which work may be completed, as well as the cost of doing so, and the quality of it.
• Businesses that require call center operations to be available 24 hours a day, seven days a week can often quickly acquire that capacity and ability by procuring a business process 

outsourcing (BPO) company that has around-the-clock functionalities and multiple geographic locations, which empowers a follow-the-sun business model.

Disadvantages of BPO:

It is needless to say that where there are benefits, there are indeed some disadvantages. Procuring a BPO is not above it. ABC Partners endeavours to mitigate these drawbacks and so far ABC Partners is successful. However, for the betterment of both the hiring company and ABC, here is the list of potential risks associated with BPO:

• In BPO services, documents with high sensitivities and regulated data are transferred from both ends of the procedure. Therefore, both organisation and the BPO should take necessary steps to make sure that the communication medium they are using is safe and using cutting edge technologies to secure the contents of the documents. There are possible threats of virus, hacking, malware or ransomware problems which may cause huge problem for both the parties. If precautions were not taken, it would be nearly impossible to retrieve the data that were lost or stolen.
• Regulatory compliance requirements are stretch even to work that is outsourced. Therefore, a management shall ensure that the BPO it employs comply with the regulations that the organization is required to abide by and that the provider conform the laws that govern the organization’s contracted work. 
• It is possible for organizations to grossly misjudge the quantity of work that needs to be completed, which may result in Expenses that were either not foreseen or were greater than expected.
• It’s possible for companies to run into miscommunications with the firms they outsource their work to, or they may discover that there are intercultural impediments.
• An unhealthy reliance on the outside service provider. When a company decides to contract out the performance of a certain function or service, it grows an unhealthy reliance on the business partner who actually does the job. This connection has to be managed by the company to make sure that critical goals are accomplished at the cost that was agreed upon. If this is not the case, the company can have a pretty hard time bringing the business back in-house or even switching the contract to another supplier that offers outsourcing services.
• An enterprise has a duty to keep a watchful eye out for problems that can put a temporary halt to, or even permanently terminate, their partnership with an outsourced service provider. Problems with finances or the workplace at the outsourced supplier, global political unrest, natural catastrophes, and shifts in the market environment are some examples of these types of risks. Organizations are required to take into consideration such risks and develop methods on how to adapt, which needlessly complicates the post disaster recovery and business continuity strategies of such organizations.

How to Pick the Right Business Process Outsource Provider:

Enterprise leaders should engage BPO providers that can not only help them achieve their business goals but also make them more agile, adaptable, inventive, and ultimately more competitive in the market. As a result, enterprises shouldn’t base their decision to work with a BPO provider just on the cost of the contract with that provider. In addition to this, they need to think about how effectively the provider can deliver on those other areas, examining each provider to see whether they have the following:

• A comprehensive grasp of the organization’s operations and the marketplace in which it operates;
• The potential not just to fulfill existing demands, but also to expand in order to fulfill future requirements;
• A comprehension of, and the capacity to fulfill, compliance and regulatory standards, in addition to the requirement for maintaining data privacy;
• Reporting metrics to show that it is performing on the requirements outlined in the contract; and
• The geographical areas in order to fulfill the necessities of the company and the regulations.

Why company considers outsourcing?

In recent years, accounting companies have come to constitute a significant portion of the global business process outsourcing (BPO) market. According to the ‘2021 Global Shared Services and Outsourcing Survey Report’ published by Deloitte, the functions of accounting, finance, payroll, and information technology are the ones that are outsourced the most often. Accounting, being an internal company function i.e., the back-office function, always persuades entrepreneurs to outsource accounting services to the knowledgeable accounting service providers (i.e. BPO) in order to lighten their load and concentrate on their specific business objective.

The decision to use the services of an outsourced accounting firm may be influenced by a number of significant factors. An outsourced accounting firm is able to provide numerous services to companies, including but not limited to the following: articulating strategies for the business regarding how to save up; highlighting meticulous financial statements and reports; making sure that all applicable laws, rules, regulations, and accounting standards are conformed; proposing adequate investment alternatives for the company; and so forth. In addition to this, an outsourcing accounting firm will provide all of the essential and necessary financial management services, such as receivable accounts and accounts payable, account consolidations, cash flow management, the compilation of financial statements, tax planning and corporate taxation, and so forth.

Due to the fact that accounting is not the primary function of the organizations, an Outsourced Accounting Firm is capable of significantly augment the commercial effectiveness of the businesses by providing assistance to the accounting department’s administrative tasks of the company. This happens because the organizations are free to concentrate their whole attention on their operations, rather than having to devote resources to overseeing or surveilling their in-house accounting departments.

Why ABC Partners?

The range of tasks that may now be outsourced to an accounting service provider has expanded significantly over the last few years. The following are examples of the services offered by ABC Partners:

• Management of accounts receivable and payable.
• Compilation of balance sheets.
• Upkeep of the daily cash flow report.
• Processing of payroll.
• Preparation of income tax, value added tax, and other taxation.
• Reporting on finances, maintaining books, performing analyses of financial data.
• Billing and submitting invoices, preparing yearly reports.
• Management of financial risks.
• Account reconciliation.
• Services in relation to disbursements.
• Assistance for audits.
• Management of labor costs.
• Due diligence on financial contracts.

The use of third-party accounting services has developed into a standard practice across all types of companies. It contributes substantially to the reduction of costs and the enhancement of company performances. In addition, ABC Partners’ skilled accountants ensure that their client companies are constantly in compliance with the myriad of ever-evolving rules and regulations. In the modern economic environment, the recommendations of the financial specialists are quite necessary. In particular, an accounting company which also serves as a provider of BPO services like ABC Partners, is able to assist with any and all accounting or financial-related processes. As was mentioned earlier, outsourcing accounting services to an experienced accounting firm can drastically cut the operations and maintenance costs of a business, improve its accuracy and efficiency, make it possible to receive appropriate financial advice, safeguard compliance with applicable rules and regulations, and accomplish a great deal more than just that. Therefore, it is unavoidable for firms to have a need for accounting services that are outsourced.