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Although the majority of our clients are too small for offshoring, we’re still seeing a lot of outsourcing of accounting functions (“The Incredible Shrinking Finance Department,” November). The reason? Using outside expertise is less expensive and of higher quality than developing similar resources in-house.
Outsourcing accounting functions removes uncertainty from the hiring-firing process. Companies don’t have to ask, “Should I hire for this position, and will there be enough work to justify this hire next year?”
It is very true that with automation a lot can be done with less staff. Offshoring got factored into the business model simply because of the labor arbitrage, but this should not always be considered a cost saving to the organization. Automation and implementing newer technologies with reengineered processes will result in greater savings to an organization than offshoring and having a [larger] finance department.
Riyadh, Saudi Arabia
Out of Touch
I appreciate your article “One Step Closer to Little GAAP” (Topline, November), but I’m skeptical about the outcome and the changes on the way for small business. GAAP has become irrelevant to most businesses in America, and the Financial Accounting Standards Board and the American Institute of Certified Public Accountants have lost touch with what truly constitutes a “small business” and disclosure requirements for such a business.
In the article you state, “Although private companies are not required to file financial results using GAAP, many have followed the rules at the request of investors and lenders.…” You seem to imply that small businesses have a choice of whether to follow GAAP or not. In reality, if a small business purchases CPA-prepared financial statements it is almost always because a lender requires it.
I have never seen a bank contract that didn’t “require” — not “request” — a CPA-prepared statement in accordance with GAAP. In addition, the fees for reviewed or audited financial statements have become extremely burdensome and lack value for small business. For many small businesses, the sole purpose behind an expensive statement is for lenders to stuff their files.
I applaud the panel’s direction in setting up an oversight board for private-company GAAP. The only way to achieve a small GAAP that is relevant for small business is to establish a rules board that understands and is focused on their needs. Having FASB set the rules and oversee small-business GAAP is a bit like having a public-company auditor prepare a compilation; it just doesn’t make sense, and they are going to feel that they have better things to do.
Also, during the development phase of the new rule set, it is going to be extremely important that small businesses be well represented. The balance-sheet makeup and the reporting and disclosure needs of a billion-dollar private company are very different from that of a $5 million or $10 million company owned by a sole proprietor.
Ultimately, we need to get back to a time when disclosure requirements made sense for small business. We need to get back to a place where they aren’t spending a fortune on statements for the bank. And, we need lenders that aren’t scared into thinking that anything less than a 20-page, Sarbanes-Oxley-compliant statement intended for public-company investors won’t give them what they need to accurately assess a small-business credit.
CFO and COO
Trying to Make a Connection to You
As an entrepreneur, writer, and self-employed consultant on business improvement and integrated credit management, I cannot agree more with your statement that networking on Websites like LinkedIn is very useful (“Cold, Cruel World,” November).
I also recommend joining groups that are relevant to you — then joining discussions or starting one yourself to get responses from peers. Obviously, when you are looking for a job, you can mention this either in your profile or as a small line at the end of your comment on a specific topic (not in the subject).
I have made many global contacts through LinkedIn. Although discussions may take time, it is an excellent way to express your knowledge and vision, so other readers can place you and your experience in a more precise context. By doing so, you can market yourself very effectively. A blog is also a good option, but obviously it takes quite a bit of time to maintain one.
Last but not least, I would recommend writing articles. Again, writing a good article takes a lot of time and some writing skills, but it can be used as an additional marketing tool to present yourself to the outside world.
In the end, networking is all about nonaggressively selling yourself; getting and building new professional relationships; broadening your view; and bringing you in contact with people you might be interested in and vice versa.
Principal and Founder
The issue of medical tourism you bring up in “Have Illness, Will Travel?” (October) sounds like a simple vendor-management problem. Vendor A charges $50,000 for a product and Vendor B charges $35,000, but it will cost me an extra $5,000 in “shipping.” Assuming no difference in quality or reliability, Vendor B is clearly the way to go.
The assumptions are where you can get into trouble. Since the article already dealt with the risk factors of natural disasters and political unrest overseas, I won’t revisit those. But below are a few more to think about.
What if your employee gets, say, hepatitis? If he or she can’t sue the overseas hospital, then who is liable? Will a U.S. hospital or doctor even touch someone who has serious complications if they know they will be the first lawsuit-eligible health-care provider to see that patient?
What about minor complications? Same thing. Who is responsible if those problems persist? Do you ship the patient back overseas every time he or she gets a temperature?
It is also dangerous to assume all triple-bypass surgeries are equal. This isn’t commodity price hedging, these are real people, real doctors, and real hospitals with millions of individual variables. The cardiologist in India might be the best option for one patient but a disaster for the next. Of course, that is true of the cardiologist in Chicago, too.
Hardly anyone will argue that the current U.S. health-care system isn’t overpriced and hopelessly inefficient. Generally, it is much more efficient and effective if the people writing the checks (companies or patients) are working closely and cooperatively with those providing the services. This keeps us from foolishly thinking there is a simple formula for managing a very costly and complex process.
I can’t see how moving your health-care vendors further away will help you manage the quality of the services. This looks like another offshoring cost-containment “magic bullet” that will end up causing a lot more problems than it solves.
American Healthcare Finance