Why Should SME consider Outsourced Services in 2022?
Rising Cost leading to High Inflation
A report from DOSM indicates that 449 items out of 552 items prices went up in July 2022 this year. From the 552 items, 53 items has price increase of more than 10 per cent. Given the rising inflation in Malaysia, UOB Global Economic has raised its full-year inflation estimate to 3.5 per cent, from 3 per cent. For businesses, the recent increase in minimum wage in Malaysia from May 2022 by 25 percent from MYR1,200 (US$273) to MYR1,500 ringgit (US$341) will impact cost of businesses significantly especially in manufacturing and construction industry.
The above has to factor in the impact fuel subsidy mechanism that has not been addressed given fuel price has increased. This impacted a lot of costs for many countries worldwide. As an indicative, fuel subsidy for RON 95 is RM2.05 (Sept 2022) and RM1.84 (Jan 2021) while unsubsidised fuel is RM4.30 (Sept 2022) versus RM2.14 (Jan 2021) of which the increased is more than 100%. Any revision in fuel subsidy will have adverse effect on the core inflation
As a result of the above, inflation reduce customers’ spending power while the cost of doing business increases. When real employees’ salaries reduced significantly by inflation rates, that means employees are in effect, incurring pay cuts in real term and this leads to lower job satisfaction, reduced engagement and lowered productivity with increased staff turnover for Employers.
What options can Small-Medium Businesses can significantly increase cash flow and lowered cost during times of high inflation?
Outsource non core business processes
Inflation impacts a company’s resources and ability to meet its business mission, goals and operations. One way to significantly offset the effects of inflation and significantly increase the cash flow is by outsourcing. Outsourcing can financially strengthen a company in a range of ways:
- Subject Matter Experts
As a small-medium-sized growing business, it is harder to attract and retain top talent given budget and business size constraints. This is more challenging for professions that do not involve the core skill of the business’s operations such as Accountant, IT Manager, Lawyer and HR Manager. Outsourcing will provide access to these talents that requires continuous professional development and education to be subject matter experts. - Streamlining Operations According to Best Practices
Outsourcing is often the most affordable and effective way to maximize productivity while using as few precious financial resources as possible for critical non-core functions such as IT, accounting, marketing, payroll, etc. As subject matter expert, they will prescribe best processes and provide updates should there be any changes in compliance and procedures. - Reducing Overhead Costs
Staff costs are naturally the biggest expense in most businesses. And this is not restrictive as there will be EPF, SOCSO, EIS and HRDF contributions. In additions, Employers must provide a work place, hardware, software and tools for employees to work in addition to providing a workspace in the office. Some of them may not be generating revenue directly on the core functions, so it gets challenging to justify their costs. Some of the other costs includes, annual leave, medical leave, hospitalisation leave, bonus and/or company trips. The savings could be up to 40% of the costs per employee. Not forgetting is Business Owners time in managing staffs on top of the costs. Usually with outsourcing, staff replacement and management is also being taken up by the provider. - Pay Per Use Options For Services Required
Outsourcing usually provide various packages and optional add on depending on the budget, needs and requirements of the Business Owners. For example, InTune provide small packages for start up where InTune provide online cloud based software to our clients for them to kick start and they can upgrade to Book Keeping and Payroll Packages when the business reaches a certain level and can be further upgraded to Finance Outsource or Accountant Outsource Packages. Where more services are required, separate add on engagement can be put in place. Cash flow management can also be an example to be added on and when Business Owners would like to raise funds or prepare Funding Proposals. - Digitalisation and Automation
Many business owners are not aware that they can automate workflow management, document control, cloud accounting, leave management, claim management, time management and nearly all of your small-medium businesses’ non-core departments. With InTune, we also bundle in our 24/7 Cloud Software where our clients have access to their system real time from issuing quotations to issuing statement of accounts up to various leave, claim approvals as well as payment online - Segregation of Function and Reduction of Fraud Risk
It is important to work with a team of outsourced professional services provider to protect your business from the financial losses especially with fraud cases. With external party, the risk is being segregated and Business Owners can hold outsourcing provider to be accountable for both confidentiality as well as managing the risks of fraud.
Why Choose InTune Outsourcing?
InTune Outsourcing is one of the Malaysia’s Most Advanced and Top Outsourced Accounting, Finance, HR and Payroll services providers. We have served more than 400 clients todate and InTune offer full-range services from start up to small to medium-sized companies. InTune takes away the stress and pains from managing Accounting, Finance, Payroll and HR, including Bookkeeping, Payment Services, Accounts Payable, Accounts Receivable, Payroll and more, by providing an expert team of CPAs and other accounting professionals who understand the special accounting needs of growing businesses.