Outsourcing Concept

Despite the increasing trend in companies relying on outsourcing there are still some who do not clearly understand what meant by outsourcing or what are the benefits behind it. This is the most basic question many have about the subject of outsourcing. Some companies are not yet interested in any of the aspects of the issue because they have not yet grasped the most basic understanding of the process.
In the simplest language outsourcing is when a company delegates the completion of certain tasks to an outsider, not employed by the company directly. This outsider is an independent contractor who is subcontracted to complete these tasks. In exchange for the individual's services, he or his company receives monetary compensation according to what both parties will agree upon.
This description of outsourcing makes it far easier to understand the concept. Most people incorrectly assume outsourcing only applies to manufacturing situations where large corporations have products manufactured overseas by a subsidiary and don't realize examples of outsourcing can be seen just about everywhere and can be applied on Financial Services.

Domestic Outsourcing
Domestic outsourcing refers to outsourcing where both the Creditor and the independent contractor are located in the same country, no matter the Debtor location.


Overseas Outsourcing
Overseas outsourcing is the type of outsourcing that most people already understand. This is where large corporations and even some smaller Company enter into agreement with other company overseas to achieve different goals, and to avoid setting up new company in other country.

Benefits of Outsourcing

Some might wonder why companies would go to outsource certain tasks. Outsourcing is popular because there are great deals of benefits to the companies who outsource the work. Some of the benefits include:

  • Reduced labor costs
  • Increased workforce
  • Greater flexibility

It is a common target for each and any company to reduce cost, and on the other hand increase revenue, that is where we find the magical equation for success in business and we all memorize this little fact by heart. One of the ways that can be applied to achieve cost savings is by outsourcing tasks domestically. Reduction of labor costs is the primary source of savings in this case. Independent contractors hired on a contract basis for the purpose of completing specific tasks are often not given benefits such as social insurance, Medicare and workers' compensation

Another benefit to outsourcing is enjoying a larger workforce without actually hiring additional employees. Companies who maintain relationships with qualified outsiders have more opportunities open to them, because they are able to rely on these outsiders to assist them if they acquire large or complicated projects which need for example invoices delivery, fresh and old debts collection/recover, or even need to check about potential partners.

Finally, outsourcing gives a company a great deal of flexibility, and indirect way of motivating your in-house staff. Companies who have a significant workload where the majority of the employees are highly utilized and squeezed may find it hard to increase its cash flow, or keep it at a satisfactory level to the management, specially that every day pass, decrease the chance for recover debts. By outsourcing the collection task your staff will be focused on the fresh invoices, while someone else is taking care of recovering your debts. On the other hand, the in-house staff will be alerted and motivated to improve their collection performance, otherwise they will lose portion of the collection commission when the invoices get old and fly to the outsiders.

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