by Richard H. Gamble

"It's a new world out there," observes Danielle Hewitt, president and owner of Invisible Accountant Inc., Irvine, Ca. "Owners and executives are turning small companies into lean, mean selling machines. They're learning that they need business skills as well as expertise in the service they provide, so there is a lot of training and retrenchment going on."

Outsourcing non-core activities—accounting services in Hewitt's case—makes it easier for small companies to concentrate on running the business and making sales, she reports.

That's why small companies may be leading the way in an outsourcing arena that has traditionally been a laggard: finance and accounting.

The penetration numbers for F&A outsourcing are still quite low, but they are highest among the smallest companies, perhaps because they don't have the resources to staff their own finance operations. Among all respondents to The Outsourcing Institute's Sixth Annual Index, 16% of all companies currently are outsourcing elements of finance, but 23% of the smallest companies (under 500 employees) do so. Some 6% outsource general accounting, compared to 2% for the overall sample, and 11% outsource payroll, compared to 6% reported for the group at large.

The numbers are much higher for those considering F&A outsourcing: 19% for the whole survey group but 23% for companies under 500 and 24% for companies between 500 employees and 1,000 employees—considerably higher percentages than for any of the larger companies.

In fact, in many F&A categories, small companies are showing the greatest interest:

• 9% for general accounting, compared to 5% for all companies;
• 5% for general finance, compared to 3% for all companies;
• 4% for taxes, 2% for all companies;
• 9% for payroll processing, compared to 7% for the group at large.