Smart Tactic - Outsource Government Accounting
With the tightening of the Federal budget combined with the effects of sequestration take their toll on government contracting companies are looking for survival strategies. For large corporations that are well diversified, this task is easier as they can shift resources from hard hit departments to other business units that are doing well. I have heard of such strategies employed at some of the large government prime contractors where they were able to successfully report better than predicted results due to business units in commercial aerospace or foreign sales having improved results. These business units were able to keep the company in the black, even though the segment of government contracting might be down. Even so, these large companies will have to scramble in the future if sequestration continues and there is every indication that this will continue for the immediate future. On the other hand, what about small business? Small business usually doesn't have the diversification or the international sales groups that can help keep the company in the black.
One of the ways many small businesses (and large businesses for that matter) can consider controlling cost is to outsource mundane tasks. This way the company only pays for what is needed, rather than paying a full time individual plus fringe costs. This type of "pay as you drink" approach is similar to the argument that has swept the industry related to computer and IT expenses with the use of Cloud Computing. When a company utilizes Cloud Computing, they usually can do away with their IT department as well as reduce some of their assets in computer servers and equipment. They pay only for what they use, usually trimming expenses. The same logic applies very well to other back office services such as accounting, contract administration, HR, purchasing, etc.
Let's look at accounting just as an example. When a company is a government contractor (or grantee) they have additional requirements on their accounting system. In many cases this requires following detailed regulations that, while they are public knowledge, requre some familiarity in order to maintain compliance. Of course, if the government finds out the company is non-compliant there can be serious consequences to the business. For this reason, accounting personnel hired by the company many times can utilize a full time job because they spend a lot of their time running down regulations and finding out what is actually required to comply. If the occassion arrises for the company to replace this job function with an outsourced expert, the job will be done more efficiently and quicker. Even though the hourly rate of the outsourced expert may be higher, the efficiency and quality of the job performed will save the company money in the long run.
Now I'm not saying small business should go out and lay off their accounting department in order to outsource this function. What I am saying is that if the company is already having difficulties, or perhaps a person just left the company, it may be a perfect time to consider outsourcing that function. Another opportunity might be if the company is already outsourcing the function but the current outsourced group is not expert in the compliance of government contrating. By replacing the inexperienced outsourced resource with an expert, trained and experienced in government accounting you will also realize a reduction in your costs. You will be glad you considered this once you look into it.