What is a shared Service Center/Business Process Outsourcing (BPO)?
BPO companies are growing rapidly nowadays
in the corporate world. As above mentioned BPO illustrates Business Process
Outsourcing. Some called this as “Shared Service Center” too. With this concept
companies can reduce their human resource cost as well as other operation costs
too. The basic concept is outsourcing a part of the operation to another
specialized company (BPO Company). The BPO company will charge on a pre agreed
reasonable basis with the company. It can be on the count which produced, time consumed
on task etc. Normally this method is very cost-saving. Companies outsourcing
their manufacturing, operation, finance, Marketing, Investment, Human Resource
(Payroll) etc. Every function can be outsourced nowadays. In here we are
talking in the finance perspective. Normally companies can outsource their
finance functions. Such as,
Receipting: entities are taking payments
directly to their bank accounts from customers, then they collect payment proof
from customer and send it to BPO company for receipting. This process can be
done without sharing any hard document and without meeting people face to face.
Also, electronic receipts can be delivered to the customer directly.
Invoicing: Since the invoicing is 100%
systemized nowadays, this process can be outsourced easily. BPO company can
raise invoices via systems upon the request of company or customer. Then the
company may only review & sign the invoice physically or electronically.
They will not enter details to system and raise.
Reporting: Reporting is also quite an easy
task to outsource. It is less risky, when giving the view only access to BPO
company. They can do any analysis with their expert knowledge.
Credit Control: Now a days companies vastly
use BPO companies for their credit control process. As an individual, you may
have faced many situations where third party companies call you to remind you
of your payments.
Accounts Payable Activities
Payment checking: Payment is the main cash
outflow of a company. Then using expert knowledge to check the payment is particularly
important. They can streamline your payment process & can adapt to internal
controls easily.
Payment processing: A company can outsource
the payment processing process for low cost without recruiting an employee for excessive
cost. Even the liability is also remarkably high when a third-party company is
involved.
Payment issuing: Larger companies have vast
amounts of payments to issue per day. Some companies use dozens and hundreds of
people for this task. But now they can outsource this process for reduced costs.
Reporting: Reporting is a major part in any
division of a company. Same in the account’s payable division. Reporting the
cash outflow is a necessary task.
Reporting
Preparing Financials: Preparing financials
is a task which needs high expert knowledge. Companies can outsource their
financial reporting process.
Preparing Budgets, Developing Models, Data Entering,
KPI handling
Tax
Tax is a vast area where there should be an
important level of expertise. Tax consultants will manage the companies’ all
the tax related activities including negotiation with the governments. Also,
the do Preparing tax schedules, managing all tax related tasks also.
Investment
Investment is an area which should have an
exceedingly prominent level of expertise. Normally it is difficult for the
companies to hire expertise paying high salaries for the investment of their
excess money. Outsource companies will do that job for a commission or a small
pay. Also, they will take the responsibility for their decision.
Banking
Companies can outsource their banking
activities to BPO companies. They will do the banking activities including bank
reconciliations. They will take responsibility for the process.
Payroll
Normally companies outsource their payroll
operation including the salary payments to secure the data of the company. Due
to outsourcing the process, the salary data of employees will not secret to
everyone.
Evolution of BPO
Business process outsourcing not started in
the 20th century. It has a known history from 16th century. Europeans
have outsourced their clothe production to Asian countries. Also, they have established
the companies for that & other productions. We can see some Asian countries
still producing clothes, coffee, Tea for the Europeans. Nowadays you cannot imagine
how this industry has been developed. The company can be seen in a small office
room, but the company can be a Million Doller company. Because the operations
can be outsourced & decentralized due to technological developments. Hence
starting a new business is also quite an easy task for anyone.
Pros and Cons
Pros: Low
cost of operation
Expertise
knowledge & specialization
Can
get the service which is not available locally.
Low
cost than hiring an employee.
More
Liability from the BPO company
Cons: Sometime
operation & cost can be out of control for the main organization
Less
supervision from client’s end
No
specific person for the task
There
can be local holiday barriers & tax barriers.
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