Outsourcing of the accounting function by local manufacturing enterprises : an evaluation

Abstract

This study investigates local manufacturers' current practices and looks into more advisable set-ups. The major objective of this study is to analyse the accounting set-up of local manufacturing companies. Outsourcing has so far been overlooked by some business. However such a study might inspire a business to rethink how it should operate in the future. In the past few years companies worldwide have started looking at outsourcing for various motives and not just as a cost-cutting measure. A survey was conducted amongst the financial controllers or senior managers of the manufacturing companies who were listed in the 'Made in Malta - International Business Directory 2004 ', issued by the Malta Enterprise. The primary source of data was a structured questionnaire which was divided into two main sections: the first part was answered by those respondents who outsourced all their accounting functions and the second part was answered by the manufacturers who had their own accounts department. The study concludes that whilst cost remains a prime motivator for outsourcing, the emergence of service providers with the expertise to reengineer certain processes of the modern business environment has proved to be the key reason for outsourcing. An element of outsourcing was existent in all of the respondents' accounting system. Outsourcing of non-core activities made it easier for manufacturers to concentrate on running the business. The importance of close communication between management and service providers was emphasized in order to guarantee efficient work done on a timely basis. The study makes the following recommendations: • Manufacturers should consider outsourcing routine tasks of a repetitive nature which are prone to economies of scale when performed by one company; • The right service provider should be chosen after considering various factors and a good relationship should be maintained; and • Benchmarking in outsourcing can be useful since measurement and comparative analysis would be made possible.