The climate in Southern California is usually ideal. I've often heard, "Ho hum, another day in paradise." However, if you ask 10 people to describe today's business climate, you would probably get many different answers. While some would say the climate has never been better, others might describe the climate as unsettled or stormy. Still others might say the climate is overcast and wonder whether it will turn into rain or burn off into sunshine.

Businesses of all sizes have been fast to outsource a number of services, including payroll, sales, marketing, human resources and information systems, regardless of the business climate at the time. The outsourcing option is less expensive and provides more expertise than doing it themselves or hiring, maintaining and supervising staff. The result is that companies are able to keep smaller core staffs and reap the benefits provided by expert professional services providers. Today, many companies understand that the accounting has become the next logical task to outsource.

The benefits of outsourcing are many. Accounting process outsourcing is about investing your resources in your core business while still maintaining crucial processes that may not add direct value to your company. Outsourcing ensures that your time and attention is better spent on areas that move your business forward, allow you time to analyze the information, develop strategy, respond to business changes or simply manage the business to meet your strategic plans. Outsourcing the accounting processes can free up valuable management time, control expenses at a fixed monthly cost and eliminate expenses related to accounting systems maintenance and upgrades, while reducing expenses over time, such as salary and benefit increases.

What business climates make accounting outsourcing the answer? Good climates include rapid sales growth, mergers and acquisitions and entering new markets. Bad climates can be downsizing, expense problems, high system cost or staff turnover in accounting and office relocation. Both good and bad climates could put your accounting operations and information needs under great strain, requiring management to spend precious time on dealing with the changes and spending time on non-core activities.

When the sun is shining and operations and sales are on the rise, the accounting functions may be under great stress to maintain the pace. New sales and opportunities give rise to challenges for the accounting functions to implement new procedures, including handling inventory, multi-state sales, strategic partnerships, etc. Outsourcing the accounting function for a company with these challenges can be an excellent decision for the following reasons:

1. Use a professional who already has experience with larger enterprises.

2. The outsourced professional may have policies, procedures, forms and documents already prepared that could save many hours of development time.

3. Little or no recruiting costs or delays due to the recruiting process.

4. No costs for employee benefits like health insurance, workers' compensation insurance, paid time off and holidays.

5. Use the professional as much or as little as needed, with no downtime.

6. The outsourced professional also has contacts in the banking, bonding, insurance, CPA and related industries that might be helpful.

7. When an entire industry is growing, the risk of losing a good accounting person to a competitor is high. However, the risk is low with an outsourced professional.

Outsourcing your company's accounting/finance processes can also be very beneficial when you are experiencing a bad business climate. When the storm clouds are hovering and profits and sales are declining, you need to focus your resources in areas that will help your company the most. Also, the accounting functions may be under great stress to pay the bills that often leads to unplanned turnover. Outsourcing the accounting function for a company in this climate can be an excellent decision for the following reasons:

1. Downsizing often leads to inter-department problems whereby various department heads become overly protective of their control. An outsourced professional brought in by the company ownership has only one objective, to remedy the situation, not to protect their turf.

2. Employee morale and attitude are almost always improved by the addition of a fresh face with fresh ideas.

3. Outsourcing can cut employment costs.

4. An outsourced professional can evaluate employees with a clean slate without knowing anything about the past. This objective review based on current objectives and attitudes is often better than the company's evaluation of things in the past.

If your business climate is very stable with little year over year sales growth, controlling or reducing expenses is not a concern and your current accounting systems are sufficient for your long term needs, then outsourcing may not be right for your company.

Choosing an outsourced service provider

Below are some questions that companies should ask when interviewing outsourced service providers:

* Does the vendor have experience with our industry and with similar business requirements to lead to improved solutions?

* Do they offer a broad range of reports and an easy-to-use tool to extract the information you need?

* Does the vendor employ methods for performing the business process in question that meets or exceeds industry standards, and that are consistent with our business requirements?

* Does the vendor have in place a management team that is capable of delivering the agreed-upon service, while meeting any contingency that may arise in our own business environment?

* Do they have a strategy for maintaining state-of-the-art technology and the updated skills to operate it?

* Is the vendor outlining pricing and terms that are competitive?

* Do they provide a satisfactory cost/benefit business case?

Trivoli is a consultant with The Accounting Group, a leading provider of professional, on-site controllers, CFOs and accounting professionals for Southern California's small and mid-size businesses. For more information, call (619) 225-9322 or visit www.teamtag.net.