Supplier demand? Over three-fifths of small businesses outsource key services

Rudy SooprayenDirector, B2B
October 24, 2019, 2:18 PM GMT+0

And 37% let third-parties handle their finances

Outsourcing is typically associated with the kind of big, international business that opens up call centres in lucrative, far-flung markets. But while SMEs hire third parties less often than their larger counterparts, they’re still keen to secure outside help in a number of areas.

New research from YouGov reveals that over three-fifths (65%) of small businesses with fewer than fifty employees outsource key services – and four-fifths (81%) of medium-sized businesses with between 50 and 249 employees do the same.

So which functions are they outsourcing the most?

No accounting for SME tastes

Overall, 37% of small businesses hand accounting (excluding payroll) off to third parties. This is mostly because they don’t have the necessary internal skills: almost two-thirds (65%) of both small and medium-sized enterprises that outsource the function do so because they don’t have qualified or relevant staff. A small company might not have a dedicated CFO or finance team, but it still needs to balance budgets and file tax returns.

Outsourcing might be seen as a useful stopgap for a business that intends to eventually build an in-house accounting function. This is borne out by the fact that only 14% of medium-sized companies hand finance over to third parties.

But if in-house accounting becomes more attractive past the 50-employee mark, in-house payroll appears to lose its appeal: 37% of medium-sized businesses let external providers handle it, compared to just 25% of SMEs. This might be explained by the fact that our respondents largely consider accounting a headcount problem, and headcount isn’t as much of an issue for medium-sized businesses.

Outsourcing payroll is more often about performance: almost half (49%) do so for better results, 44% do so for greater efficiency, and only 36% do so because they don’t have the right staff.

Unfit to print?

A quarter of small businesses (25%) let third-parties handle their IT support – though this increases to 43% for medium-sized businesses, which outsource the function even more than large organisations (42%). Again, a lack of internal expertise plays a major part: almost seven in 10 (69%) say they don’t have relevant or qualified staff.

It could also be explained by simple convenience. In-house IT might offer greater configuration and customisation, but it also means taking charge of security, upgrades, and maintenance, among other things. Medium-sized businesses may have calculated that having a lighter IT burden is worth losing a little control.

Finally, 33% of medium-sized businesses and 22% of small businesses report that they outsource printing. When asked why, 47% of SMEs cite a lack of relevant or qualified staff – and the same percentage say it’s more efficient to let an external provider handle it.

Photo: Getty

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