What Is BPO in Business? How Does It Relate to Accounting?

By now, many of us are familiar with outsourcing business operations. As for what business process outsourcing (BPO) means exactly and how it adds value to your company, the idea is not as well known. However, BPO is essential to everything from daily operations and decisions to streamlining business with effective methods and improving operations before they become so outdated that they're problematic.

But how does it relate to accounting? You can hire a BPO firm specializing in accounting—for instance, a premium financial accounting firm offering a one-stop shop for all your cloud-based accounting, finance, HR, and tax needs.

You can outsource your accounting to this firm and rely on them as a third party to handle your non-primary business processes. At the same time, you focus more on continual growth and improvement within your business.

Here's everything you need to know about BPO and how it relates to accounting.

Understanding Business Process Outsourcing (BPO)

More than two-thirds of large U.S. companies leverage outsourcing to some degree, and more than one-third of small businesses outsource part of their business processes. BPO is a growing market as more companies seek more efficient and effective ways to get ahead of the ever-changing business market fueled by continuous consumer behavior changes and rapidly advancing technology.

These changes affect both the back office and front office, and depending on your needs, a BPO firm can help with one or the other:

• A back-office BPO can assist you with operations that aren't client-facing, like administrative and support services. These include processes in IT, HR, regulatory compliance, payment processing, accounting, etc.
• On the other hand, a front-office BPO will address more customer-related operations like sales, marketing, and tech support.

The BPO you hire is a third-party vendor or subcontractor. This means they have no final say over your business operations but advise and complete tasks specific to your contract. The BPO company you hire is here to ensure the area of business you hired them for is working at its maximum potential and capacity.

Examples of BPO

Some popular examples of BPO include:

• Call center services
• Human resources (HR) management
• Accounting
• Payroll
• Customer service
• Marketing
• Information technology

The Attraction of BPO

It’s important to note that employees waste half their time on needless administrative tasks. They struggle with what to focus on, resulting in low productivity—not very helpful for growing businesses.

By outsourcing administrative work and non-core tasks, you give your team members (and yourself!) more time to dedicate to industry-specific business matters (i.e., customer relations/customer service, leadership, etc.). You also get access to resources beyond your typical reach, like technology that improves the efficiency and speed of select processes (for instance, automation).

Another primary attraction is cost. Outsourcing outside of the U.S. has also become popular since the corporate income tax in the country is among the highest. Outsourced operations outside the U.S. offer opportunities to cut labor and tax costs.

Are you still deciding whether a BPO is suitable for you? Here's an overview of the most important disadvantages and advantages you need to know.

Disadvantages of BPO

Like with every business endeavor, BPO does have its challenges, like:

• There is potential for a security breach since you’ll share sensitive information with the BPO company.
• May experience customer backlash regarding domestic employment if outsourcing outside of the U.S.
• Communication can be challenging if there are language barriers present between you and the offshore BPO company.
• You can incur unforeseen or hidden costs if you don't thoroughly review the contract.

Advantages of BPO

The advantages that are fueling the growth of the BPO market include:

• Cutting costs—59% of businesses cite savings as the reason for outsourcing processes. You’ll cut costs while growing your business.
• Hyperfocus on critical operations—tasks outside your business expertise are still important, but they can keep you from focusing on your industry. With a BPO company, you spend less time on tasks that aren't key to your business, which means more time spent on core business tasks.
• Access to specialized expertise—BPO companies acquire and train the top professionals in their specialized fields. While you may not be sure what to look for when filling a position in this area, your BPO business is narrowing down hires to only the best of the best in the industry (using their unique knowledge and insight into the profession).
• Improved quality and results—what's considered a 'non-core' function for you is a core function for your BPO company. Therefore, the results will be significantly better because they have the best technology and practices available to complete the job.
• Easier to scale—as your business and needs grow, a BPO company can grow with you. It can be particularly challenging to manage your accounting since it gets more complex the more you thrive, especially if you're not well-versed in accounting. However, an accounting BPO business with full-service CFO services can make a significant difference.
• More flexibility—whether managing your company's risk or responding to customer needs with new products/services, a BPO company can help you act fast and efficiently. One way, in particular, is by adjusting their in-house resources to suit your changing needs better. For instance, an accounting BPO firm would expand financial tools and services and provide expertise and guidance as needed. A good example is updating your burn rate during an economic downturn.
• Establish or expand your global presence—a global presence isn't specific to all BPO partnerships. However, for those who intend to establish or expand their global reach, a BPO with multi-language capabilities can significantly help. This could mean 24/7 support for customers if you're using your BPO for call center support; call centers that operate overseas make customer support throughout different time zones much easier to manage.

What Is the Goal of BPO and What Are Its Types?

As a third-party outsourcing company that handles your business operations in a specified area of expertise, the goals of a BPO are to:

• Cut costs
• Center your focus on key business tasks
• Free up time on non-core assignments

When done with the right BPO company, your business will be able to address the key practices, technology, and expertise needed to thrive in its industry. In contrast, a specialized BPO ensures other aspects of your company succeed without your around-the-clock attention. Goals beyond these basics depend on the type of business process outsourcing you're interested in.

These are the three types to consider.

Local Outsourcing

Local outsourcing is a BPO service received within your country's limits. In this case, you are not limited to your city or state but the entire U.S.

So, if the specialized skills and rates or costs are more desirable in another town and state, outsourcing may be more beneficial than finding a company closer to home. Local outsourcing accounting is a prevalent BPO type since the specific expertise in financial and legal laws, practices, and procedures will be specific to the U.S.

Staying close to home in this business area can be more beneficial. In contrast, other business components may be better served outside the U.S.

Offshore Outsourcing

The services outsourced overseas fall under the offshore outsourcing BPO type. While this method can often receive backlash, it is a great way to cut resources, labor, taxes, and more costs.

The most popular example of this type of BPO service is for companies needing call centers for customer support. It provides benefits such as lower wages, reduced technology costs, and more customer service availability.

Nearshore Outsourcing

While offshore is overseas, nearshore outsourcing in BPO refers to contracts with companies in countries closer to home. Examples of countries located 'nearshore' to the U.S. would be Canada, Mexico, and Central America.

This type of BPO may be a good option for lowering costs. Using the same example of call centers, research shows that businesses can save up to 50% or more by outsourcing nearshore. However, you must be careful with language barriers and timezone constraints.

Does My Business Need BPO?

Businesses, big and small, are benefitting from the BPO market, streamlining their operations and expanding their reach within their industries. Whether you need a BPO depends on your answers to these questions:

• Do you need to reduce costs?
• Are you lacking in productivity and efficiency?
• Are you in the process of scaling your business?
• Is your staff feeling burnt out or overwhelmed?
• Are your technology and operations outdated?
• Are essential tasks not being completed?
• Are you a tech startup?

If your answer is yes to one or more of these questions, you will benefit immensely from a BPO. In accounting, especially, there is no room for error.

The financial health of your business will determine not only your overall success but the limits to what you can achieve in the industry and build in the coming years. Get started with our accounting services to maximize your business potential today!