Doug Houser: From Rea & Associates studio, this is unsuitable, a management financial services podcast for entrepreneurs, tenured business leaders and others, who are ready to look beyond the suit and tie culture for meaningful, measurable results. I'm Doug Houser.
Running a business is a lot of work, but I don't have to tell you that. You already know how busy your average day is. You've lived through the struggles of managing the back office, all while trying to deliver your products and excellent client service. You know how hard it is to recruit and retain really great employees and yet, even though you know it's impossible for you to know and do everything, like most business owners, you've tried to do it all yourself. But what if you didn't have to do everything yourself? What if you were able to outsource certain aspects of your business to professionals with expertise in areas like HR, accounting, payroll, and cybersecurity?
What if you could outsource these business functions without breaking the bank? Today, Renee West and Matt Long are dedicated to finding outsource solutions for owners of small to mid-size businesses. As leaders on our HR consulting services team, and client advisory services team respectively, Renee and Matt hear a lot of misconceptions about outsourcing. So on this episode, they're going to clear the air, while explaining what the outsourcing process might look like for you. Welcome again to unsuitable, Matt and Renee.
Renee West: Thank you very much.
Matt Long: Thanks, Doug.
Renee: Glad to be here.
Doug: Great to have you here, as always. So what types of services are businesses choosing to outsource these days? What are you seeing?
Renee: Well, we're definitely seeing a trend in outsourcing for human resources, and IT and client advisory services as well. So a lot of pieces and parts of what they do throughout the day can be outsourced.
Doug: Now Matt, your particular area of expertise is client advisory services, we've had you on before, but from a business owner's perspective, talk to me about what that means. Because that sounds big. "Oh my gosh, they're going to be all over me." So, what does that mean?
Matt: Yeah, well, sometimes. Really looking at the accounting functions and finance functions from the transactional level work, and the data entry, all the way up to the financial statement preparation, controllership and CFO level services. So kind of the gamut.
Doug: So it depends on what the needs are, and all of that. Renee, you mentioned some of the things you're seeing, obviously HR, IT, all these types of things being outsourced. What are the advantages to doing so from a business owner's perspective?
Renee: There's definitely advantages, especially from a time saving standpoint. Many organizations might not have a full time employee that is responsible for those functions, and they might have a number of different people performing those duties or there's one person doing them all. So, the ability to have somebody come in and help take that off of their plates, however still keep them involved in the process, but allow them to focus on their key duties and their growth of their organization.
Doug: I think that's tremendous. I know when I was a private industry CFO for a few years, I found myself, I was doing a little bit of HR, a little bit of IT, areas which were frankly way outside of my expertise, and I was always more fearful I'm doing more harm than good.
Renee: Right. And that's very common to feel that way. And especially now with heightened awareness around compliance, more companies and owners are looking at what they need to do to be sure that they are doing things correctly.
Doug: Yeah. Now obviously, and you hear this Matt, sometimes, "Oh my gosh, what's this going to cost me?" They think of it perhaps as a cost, and not as an investment. So talk a little bit about the return that you can see from outsourcing.
Matt: Yeah, I think at times it can be a cost cutting exercise. If they have folks in house, as we see a lot of times there'll be a person that maybe not as efficient as we can be, or they're filling their schedule, or filling their day, when they could be done much quicker and much more concisely. And I think outside of the cost perspective of the actual hard dollars, it's the opportunity cost. If these business owners are doing it themselves, they could be serving their customers, drumming up new business themselves, servicing their patients, whatever their business is, and when they're in the back office, whatever that function may be, they're not being customer facing. They're not out driving their business. They're not out growing for themselves.
Doug: And even for those folks who maybe are inside a company, and that you've got a hybrid person doing several of these duties, I think about it in the fact that they can be redeployed to somewhere that's more useful.
Matt: Yeah. A lot of times they're great folks, they're great individuals, great people with great skill sets, but maybe they don't have the unique skill set in order to do some of these functions efficiently, like I said. And a lot of times, they're just fumbling through it. And that can get them in trouble sometimes, just because they don't necessarily know what they know, and they don't know what they don't know.
Doug: Obviously, because they're embedded in that business every day, they don't get the wealth of experience like we do, as external consultants, seeing hundreds and hundreds of businesses.
Matt: I think we can keep it a high level, and make sure that they're seeing the big picture, and driving them where they want to be focusing on, versus being stuck in the weeds and caught up in the day to day.
Doug: Now Renee, from your perspective on the HR consulting side, obviously that continues to get more and more complex in terms of compliance and things like that. So, I imagine that's a huge advantage for a company to say, "I don't even know where to start with this." Right?
Renee: Right. And again, we have those conversations almost daily with clients of, "Everything is changing so quickly. How do we keep up with everything?" And I've mentioned before, that I've seen in my experience in the last three to five years more legislative changes in reference to HR, than I have in my whole career. So, being able to stay on top of that and still focus on your day to day duties, it's nearly impossible to do, because it's ever changing.
Doug: What are some of those things you've seen over the most recent years that are most impactful?
Renee: The most impactful is the heightened awareness around sexual harassment, and the compliance with immigration and ensuring that you're employing legal, United States citizens. And also the compliance piece is huge. That's where we're seeing a lot with the overtime regulations and the Department of Labor making adjustments there, as of this year. Again, there's even more pending legislation right now that we'll see changes, I'm sure, by the end of this year on some other topics as well.
Doug: So from a client perspective, you can go in... It's not that you have to be there all the time, right? You can go in periodically, and help them have the right policies, procedures, programs, handbooks, things like that.
Renee: Sure. We can be as hands on as needed. We can be there if they want us to be there for a situational situation with some performance feedback, or we can help to create or update their handbook. We can also come in from a compliance perspective, and do a compliance review of all of their hiring processes, everything from what their application looks like, to their procedures for interviewing, to their handbook, to how they complete their I-9s. So there's a lot of different opportunities that we can help them on that compliance side.
Doug: Yeah, that's great stuff, because if I think as formerly being of a small company as I was, and helping folks with that hiring process, it's like, "I don't know." We know the person, we've talked to a few people, we know the right person, but we haven't documented this, or done probably the things we need to do.
Renee: And with the tight labor market now, it's even more crucial for employers when they're hiring to have strategies in place, to be strategic in their recruitment and have pre-screening. So they're hiring the right fit of a person for a role to help, because it's hard to find key talent out there right now.
Doug: Yeah, absolutely. So Matt, from your perspective on the client advisory services side talk to me a little bit about how broad the spectrum can be in terms of what you do from say a minimalist perspective, to as embedded as you might be on the high end. What's that look?
Matt: Yeah, yeah. Like Renee said, we can be as involved or as uninvolved as the client would like. Ideally, we're more involved just so we can be more proactive and keep our pulse on things. But, we can have that doctor/patient relationship where we're just checking in and having checkups more, more so than doing a lot of the hands on heavy lifting. We prefer to be involved just so that we can bring matters to our client's attention sooner rather than later. And, like I said, we can do everything kind of soup to nuts or we can scale back and try to leverage what personnel they do have and build our team around their team.
Doug: Okay. So when I'm thinking about advisory services, I start to think about, "Okay, I'm looking at my financials on a monthly basis." Can you help the client understand maybe where there's gaps there, things that they can improve, that type of stuff?
Matt: Yep. And that's really the fun part, right?
Doug: Yeah.
Matt: We do the transactional level work, we prepare the financial statements, but the end game is really, "Hey, let's sit down and let's go through these financials." Let's use them as a tool to make decisions so we can drive their business forward, become more profitable, focused on growth, whatever really their goals are. And that's the fun part. So, being able to take what we've learned from other clients, best practices, things we're seeing in the industry, take that, relay it to our clients that we're working with. We have a large network of non CPAs that we can lean on for other things. It's a lot of fun.
Doug: Yeah, that's cool. If I'm the business owner, that's what I want. Right? That's the value that you can help bring to the table.
Matt: Yeah. And, a lot of these business owners, they know their business very well. They know their trade or their profession very well, but they don't necessarily understand how to connect the financial statements to their business. Maybe it's just a matter of teaching them how to read them, key things to be looking for, when we can shave a couple points off of their cost of goods, what that really does to their bottom line and frees up cash flow.
Doug: Yeah. And oftentimes, I know you and I worked with a client here mutually recently, that quality of financial information is a big thing too. They don't know what they don't know, because they just don't have the ability to have that information at their fingertips. So, a lot of it is getting that in their hands. Right?
Matt: Yeah. And then just kind of coaching them and giving them some direction on what they should be looking for. "Okay, this is where we want to get to. So let's talk about what those steps take to get to that point." And just guiding them and coaching them along the way.
Doug: Okay. So, we've talked a little bit obviously about IT and advisory services, HR obviously, what are some other services that you see that makes sense for outsource type of a role? We have cybersecurity, as a new thing that we do?
Renee: Yes. Yes. And I know that it seems that a lot more companies are open to looking at options for outsourcing. And I think definitely, cybersecurity is a big part of that. And that will continue to grow as well. I think definitely too, looking at things from a safety perspective, companies are looking to outsource assistance with that, with compliance as well.
Matt: Yeah, and I think to piggyback off that, I think that we're seeing a shift, it started in the accounting, finance, HR functions, then it evolved to IT. Cybersecurity, I think every business has a need there. Obviously, payroll processing is a big one that's been around forever, but I think we're going to start seeing a shift too, to where you're going to see much more outsourced marketing, outsource public relations, and I even think it's going to start becoming even higher level. We're going to see outsourced operational control, outsourced strategic planning, things of those nature.
Doug: Interesting. And it does make sense if you think about the fact that you have outside folks like yourselves, that see hundreds and hundreds of these examples each and every week, and you can bring all those best practices to bear for the client. You're not just so down in the weeds with the one business. So if you partner those together, their knowledge of their own operation, and what their strengths are with these external benchmarks as it were, that's the perfect marriage, right?
Renee: Right.
Matt: And I think the beauty of it too is we certainly don't know everything. but we do have a large network and are able to... We really look at ourselves as solution drivers and finding the answers for our clients, whether that's internally within Rea or whether we got to at look at our network.
Doug: Right. That's a good point as well. We're certainly not the experts in everything. What are some of the biggest impediments you see Renee, when you're out talk to a prospective client about maybe outsourcing HR, for example?
Renee: That's a good question. I think a lot of them are looking at the cost of course, as a concern. Are we able to put money towards this type of service? And our response to that is, "It's better to be proactive and have measures in place, and have compliance reviews rather than being fined or have organizations or have the Department of Labor come in and extend fines, which could be very detrimental to a company's bottom line." So, it's that ability to really share that there's value and that continued growth of the organization at all different levels. But, there's a lot of opportunity for fines out there right now with department organizations coming out. So, it's better to be proactive.
Doug: Yeah, and I think too, Matt, you probably see this, but when you talk to business owners at some point, a transfer of their business, whether it's internally to other family members or management or an external sale, if you don't have all these policies and procedures and ways of functioning in place, then what's your business really worth?
Matt: And, where's the continuity there? And I think that when you look at it, a business in my mind, a lot of these business owners, yes, cost is certainly a factor, but they're also sometimes resistant to change in general. It's the way they've always done things. So when we are suggesting new processes, or looking at new technologies, sometimes they're a little resistant in that respect. And getting them over that hurdle a lot of times really opens up the possibilities of all the other things that we can do for them and the efficiencies we can really gain.
Doug: Yeah. And again, I've heard this before too, it's like, "Well, I've had so-and-so in that role, or so and so in that role, but think about what they enjoy doing too. Maybe, as you said, they're just filling their day. Can you re-deploy them into something that's more beneficial not only to the company, but for them personally, and professionally? Right?
Matt: Yeah. More fulfilling for them, certainly.
Doug: So it's having the ability to think and have those conversations with the group. Do you find that when you go into a company, do you try to involve more than just the owner or do you start there and then say, "Okay, do we bring other management team folks in into this conversation?"
Renee: I think that varies. I know from the HR side, work with the owners and ask them of the involvement, "Who are we able to work with?" And, I found that being able to work with the team and involve them, helps them to understand the importance of what we're doing, and they have buy in to what we're doing as well. But we definitely leave that up to the organization and be aware of their culture, to do what's best based on that individually.
Doug: Very cool.
Matt: Yeah, and just echoing that, I think, we typically start with a business owner, the decision maker. I'm a big proponent of bringing in the folks that are currently in that role, so we can really just understand really what are they doing, what is consuming their day, what do they think's important versus the business owner? And really just trying to get the full picture, so that we can put the best plan in place in order to do the work efficiently.
Doug: Along those lines, do you get a lot of interesting divergence between this person thinks this is what's important, and the owner's like, "What? What are you talking about?" Does it happen?
Matt: Occasionally. Sure. Yeah. Occasionally. It's like the left hand isn't talking to the right, and it catches you off guard sometimes, and just sit back and let them talk. And a lot of times, I can take a lot out of it just by them interacting.
Doug: Yeah. So it's probably eye opening just from that perspective. Matt, talk a little bit about the size of businesses. Obviously we deal with owner managed closely held businesses, that's our bailiwick. But from a revenue or asset size, what do you see on the small end where outsourcing works, and what do you see on the large end? What's your experience out there?
Matt: It's kind of the gamut there. We work with very small startups. That one, don't have any accounting background at all. They're a serial entrepreneur or they know what they're starting, but they don't necessarily understand the accounting or the importance of it right then. But they know that as they grow, they're not going to be able to keep up with it. And if they ever want to go and get some outside investors, that they're going to have to have some financials in place.
Matt: And then on the other side of it, we work with some pretty large organizations where we're acting as their controller, and bringing all the financials, and working with their internal accounting department really. And their accounting departments doing the day to day. We're just giving the accounting department direction, guiding them, reviewing their work, helping them put processes in place.
Doug: So even like 40, 50 million revenue businesses and up, there's certain functions there that work. That's fascinating.
Matt: Yeah. We're very much client-centric and client focused and look at it as what makes the most sense for this client in particular?
Doug: Yeah. Now Renee, from your perspective on the HR side, is there a specific size that works best? As companies get bigger, obviously they have their own sort of HR areas, but where do you see most help?
Renee: Actually, to echo what Matt has mentioned, it varies. And those smaller to medium size organizations tend to have the most need. However, those larger companies even if they have an existing HR department, at times might have projects or certain items that need external review, where we can come in and be a part of that and be that third set of eyes that is not necessarily an internal HR review. So, we're seeing that growth in that area as well.
Doug: Very cool.
Renee: Yes, it is.
Doug: Yeah. So what might some of the special project, what might that be [inaudible 00:21:14] ?
Renee: Sometimes, there might be, if there's an internal investigation, if there's harassment issue or something where they need someone coming in from the outside, performance reviews, or performance assistance and development of some of their team members, we definitely have tools to help with that as well.
Doug: Okay. And even prescreening on the hiring side, and things like that, as well?
Renee: Yes. We work with individuals to again, look at how to structure a prescreening process to have processes in place to find that right fit. If there's a certain production job where they need to have a certain type of skill, we can strategically work on developing that job, posting that job description to help solicit the most type of applicant traffic to match that.
Doug: Fascinating.
Renee: And then help them with the interviewing process and questions. We also can conduct background screenings to ensure that they're hiring qualified individuals.
Doug: Who they think they're hiring.
Renee: Who they think they're hiring. Yes, very important. So really, we from the HR consulting can support them, the total employee life cycle from the time of recruitment all the way through even off-boarding, if and when there is an economic downturn, our sources will switch to that compliance from an outsourcing and a resource perspective, to help individuals.
Doug: Very cool. Matt, from your perspective on client advisory services side, what do you see coming down the pike here in 2020 and beyond? Is it technology? Probably more than anything?
Matt: Yeah. I think anyone that knows me, I keep preaching the technology continues to change, continues to get better. I think what we're going to see is that it's going to continue to do more and more heavy lifting. Just this week alone, I think I've demoed three or four softwares and we're constantly looking and vetting software to see what is best for our clients that we can implement and use. And then we're going to see more and more of that. I think in the future, our services are going to shift a little bit from doing a lot of the transactional work and doing a lot of the financial statement preparation, to implementing systems and implementing processes and training some folks on their end, because they can potentially just have the technology doing all of the heavy lifting, and just a CFO or just a controller.
Doug: So everything continues to evolve. That's why I want the experts involved. Like you guys.
Matt: Quickly. You got to keep your pulse on it here, or you can't keep up.
Renee: You do.
Doug: Yeah, that's great stuff. It's good to have the outside expertise. Well, Matt and Renee, thank you. It's very insightful and loved having you on as always, and look forward to having you on again to do a deeper dive into these topics.
Renee: Look forward to it.
Doug: So if you want more business tips and insight, or to hear previous episodes of unsuitable, visit our podcast page at https://www.reacpa.com/podcast. Thanks for listening to this week's show. You can subscribe to unsuitable on iTunes, or wherever you like to get your podcasts, including YouTube. I'm Doug Houser. Join us next week for another unsuitable interview, from an industry professional.
Disclaimer: The views expressed on unsuitable on Rea Radio are our own, and do not necessarily reflect the views of Rea & Associates. The podcast is for informational and educational purposes only, and is not intended to replace the professional advice you would receive elsewhere. Consult with a trusted advisor about your unique situation so they can expertly guide you to the best solution for your specific circumstance.
