Exhibit 1: Outsourcing Diagnostic Tool
Lang offers this checklist to clients as a self-evaluation tool to help them determine whether to outsource a particular function. The client identifies the activity it is considering outsourcing and then rates it from 0 to10, to represent the degree to which it is core or noncore. A task that’s a core function of the operation gets a low number (meaning “don’t outsource”). A high number, corresponding to the degree to which it is noncore, indicates “do outsource.” A total higher than 70 indicates an activity the client probably could benefit from outsourcing. Items 1 through 8 pertain to operational issues; 8, 9, 10, 11 deal with staffing considerations; and 12, 13 and 14 address cost.

Here’s how it might be filled in by the CEO of a midsize education association, with an annual budget of $5 million and a staff of 16, who needs to determine whether to outsource accounting or replace a staff person who has just announced she’s leaving. The department also has an administrative assistant who has responsibilities besides accounting.

Name of business activity: “accounting functions.”

1. Core/noncore _____ (Accounting is not a core activity for the organization: 10 .)

2. Reduce service/increase service _____ (We’d have more time for serving our clientele: 10 .)

3. Less flexible/more flexible _____ (Arrangement might be more flexible, to vary with our seasonal needs: 8 .)

4. High risk/lower risk _____ (We don’t know how hiring an employee will work out. With outsourcing there’s less risk, and we can find the right skills quickly: 10 .)

5. Easy to maintain/difficult to maintain _____ (We’ve had luck with our accounting department in the past, but the future is uncertain: 5 .)

6. Difficult to outsource/easy to outsource _____ (It’s easy to find an outsource firm to provide the accounting services we need: 10 .)

7. Inability to grow/ability to grow _____ (If our organization grows, we can easily add services if we outsource: 8 .)

8. Inefficiencies/increased efficiency _____ (Efficiency could increase if specialists do the accounting and the administrative staff member takes on additional work: 8 .)

9. Instability/stability _____ (Not much turnover: 5 .)

10. Stagnant ideas/new ideas _____ (The outsourcing firm is up to date on all the latest accounting information: 10 .)

11. Basic skills/cutting edge skills _____ (A candidate with new ideas and top skills probably will require too high a salary: 10 .)

12. Higher operating costs/lower operating costs _____ (Cost of outsourcing may be lower based on proposals received: 7 .)

13. Fixed costs/variable costs _____ (Our organization likes fixed costs, such as knowing the salary of the hire: 3 .)

14. Small capital requirements/large capital requirements _____ (Does not apply here.)

Results: 70 and below: Don’t outsource.
  71 to 100: Consider outsourcing.
  101 and above: Outsourcing is likely to be beneficial.

In the example above, the total is 104 . Outsourcing the organization’s accounting probably would work out well.

Source: Lang Group.

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