Outsourcing is the practice of contracting an outside third party agent to take over specified functions. As Jones (2008) suggests, the potential benefit of knowing when to outsource is a very high return on investment, however, a company should understand the strategic rationale for outsourcing through the sourcing model, pursue a sourcing strategy that aligns with the company strategy and acknowledge the scenarios under which outsourcing is undesired. One of the tools that will lead towards that understanding is referencing their income statements.
Income StatementBusinesses prepare various reports from accounting information. One key tool that assists companies to make informed financial decisions is through the use of their income statements. The income statement is a report that presents the revenue, expenses, and ending net for a business for a period. The income statement shows the track record of the company and the profitability of the company. The income statement is divided into two parts.
1.The first part is known as the heading and;2.The second part is known as the body of the report.
The heading of the statement identifies the company, the type of statement, and the time period covered by the statement. The body lists the revenue and expenses. Where total revenue exceeds total expenses, the excess represents the net income. Where the total of the expenses exceeds the total revenue, then the difference represents a net loss. Allowing a company to review its financial capabilities will facilitate how to address potential advantages and disadvantages to outsourcing.
Outsourcing Advantages and DisadvantagesAdvantagesThere are many reasons that companies might outsource some or all of its departmental services. Today, companies want to ensure that the potential outsourcing advantages are in-line with their strategic progress in order to stay ahead of the competition.
Lower costs and quality concernsIt is possible...