Down and out: Cutting costs and reducing complexities with outsourcing

S&W’s new Business Owners Sentiment Survey (The BOSS) found businesses across the UK facing an array of challenges, from rising costs and tax changes to global political uncertainty. It also found an increasing number looking at outsourcing. 

Of the 500 owners of businesses with at least £5 million in turnover, 16% said they were likely to outsource internal functions such as payroll and tax in the next 12 months. A further 21%, responding to the question of what milestones they were currently aiming to achieve, hoped to do so in one to five years. Almost a third (31%) reported that they already outsourced internal services.  

The figures don’t surprise Maria Fandrakis, Business Outsourcing Services Partner at S&W, who sees the appetite for outsourcing increasing.  “We’re seeing huge interest,” she says.

According to Fandrakis, there are several drivers for this, but three are key. 

The first is increasing complexity in many areas where outsourcing has always been an option. From moves to electronic filing under the Making Tax Digital strategy to payrolling benefits in kind, which is required to be in place from April 2027, new rules have “continually ramped up the complexity”, says Fandrakis. 

“It used to be a lot simpler for businesses without skilled accountants or access to the latest technology to do things for themselves,” she says.  

Related to this, the costs of hiring and retaining skilled in-house staff have risen as competition for talent and living costs have increased. Increases in employers’ national insurance contributions in the October 2024 Budget (a significant factor for many business owners in the survey) have exacerbated this.  

For bigger businesses, outsourcing can contain recruitment and retention costs while providing access to hard-to-find expertise, as well as providing a continuity of service. For smaller teams, where payroll complexity may prompt them to look to hire a qualified accountant for the first time, the equation is even simpler.  

“We can do the whole finance function, including payroll, for a fraction of that cost,” says Fandrakis. 

The cost savings outsourcing can provide have been enhanced by developments in automation and artificial intelligence. The opportunities these unlock is the third key driver contributing to an increasing uptake of outsourced services.  

An outsourced provider offers savings on software and licenses for smaller businesses and experience from across sectors, and an awareness of the breadth of available solutions, for larger corporates. It also brings capacity to explore the possibilities for streamlining processes.   

“Companies often want a systems review for accounting tasks that may take their finance team three or four days where we can do these much more quickly,” says Fandrakis. “They simply don’t have time to look at the processes and structure themselves.”  

The efficiency technology brings is substantial, she adds. One of the tools S&W’s team regularly uses, Lucanet, software used for consolidation, can save clients’ in-house teams days of work every month.  

“Once it’s embedded, businesses can prepare their monthly consolidation management accounts in minutes,” she says. 

The mix of benefits outsourcing brings varies widely, however, and this reflects the extent of the solutions available. The terminology can also confuse. The distinction between managed services and outsourcing, for example, is not always clear, but the diversity of terms reflects a vital truth: The precise nature and scope of services offered will vary.  

That’s as it should be, says Fandrakis, since each business’s needs will be different. From automation or interim staff to full finance functions or a complete outsourced solution across payroll, finance and company secretarial, the outsourced provider should be able to fill in gaps as required.  

“We tailor our approach to clients’ capabilities and needs,” she explains. “We can act as an extension of an in-house team or provide an external function so that the client can focus on running the business.” 

The corollary of that flexibility, however, is a requirement for clarity, she adds. Outsourcing works best where the expectations on both sides are well-defined, with the timelines and processes for relevant reviews and approvals clearly laid out.  

“Ultimately, businesses can outsource the tasks, but they retain the responsibilities to HMRC, Companies House and other regulators,” says Fandrakis. “Whatever the outsourcing arrangement, it’s a partnership where both have a role.”