Outsourcing can bring big benefits to your business, giving you the flexibility to rapidly change the capacity of your business to match your customers’ demands without the cost burden that comes with hiring and firing employees. That said, there are a few golden rules that need to be followed if you want all the profit from your sales to stay in your pocket rather than your contractors.
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Payment against results
Contractors are always keen to get their money upfront, which is a standard across many disciplines. This fact aside, you should always make sure that the value of the payments reflects the value of the work delivered to you. The simplest way to do this is to make sure you’re ordering and accounts payable systems reflect the deliverables, both interim and final. This can be achieved easily with modern invoicing software in Australia. Your contractor will issue invoices detailing the deliverable provided which can be receipted against the relevant line item in your accounts receivable system. If the contractor’s invoices don’t match the specified deliverable items then they won’t get paid. That will get their attention.
SMART deliverables
Make sure you tell your contractor exactly what you need them to do. It seems simple, and yet there are always confusions and bottle-necks in any project. A simple technique is adopting the SMART approach, which stands for:
➢ Specific – what are they delivering?
➢ Measurable – how will they know they are finished?
➢ Assignable – who is doing the actual work?
➢ Relevant – how does this fit in with my business’ offering?
➢ Time-bound – when does it need to be completed?
Defining the outsourced work using SMART objectives minimises possible misunderstandings, and most importantly gives the contractor a specific guide on what they need to do to get paid without fuss. If a dispute does arise over the quality, scope or timing of the contractor’s performance, the SMART approach puts you in a very strong position.
Which contractor should I trust?
If your contractor fails to deliver a quality product or outcome on time, it’s your reputation that’s on the line – not the contractor’s. As such, you need to be confident that they can meet your needs consistently. The first step in contractor selection is a capability assessment. Do they have demonstrated skills and the necessary equipment to perform the work you need done? Contractor references and sample pieces of work can be used to support this assessment. The next step is to determine if they have the capacity to carry out the works. You need to find out what work they have committed to prior to your arrangement, and determine if they can fit your work in and uphold the promised standard.
A good contractor is as valuable as a good customer
Having the ability to leverage the capacity of a contractor to increase your profits through additional sales does make them just as valuable as that customer who is giving you the orders. Without both the customer and the contractor, there are no additional profits for your business. It’s that simple. Consequently treating a good contractor like a valuable customer enhances your long term profitability. In order to keep that contractor available when you need them, you may need to work with the contractor to keep a base load of work going to them. That might also stop them from seeking work from your competitors. You also need to stay aware of the contractor’s order book so that when that customer calls with additional orders you know if you can commit to delivering on time to meet their needs, using your contractor.
Outsourcing can be profitable for your business as long as you are clear about what the contractor needs to do. Your contractor should be forthcoming with their capability and capacity allowing you to deliver on your commitments to your customers.
