How To Measure The Efficiency Of External Outsourced Partners

When management have decided to outsource some of its business processess to external outsourced partners. one critical factor to consider is to how to measure or maintain certain performance level of the services render by such outsourced providers.

The key performance metric or key performance area(KPA) and key performance indicator(KPI) can be demarcated into the different areas :

TRANSACTION PROCESSING:

• Average cost per transaction

Strictly the average cost per transaction does not varies with the volume. This change unless there is a contractual agreement to alter the cost per transaction if there is significant change in the volume of transactions. This cost is easily obtained from the provider billing statement and should be tracked on a trend line to spot any changes to the per-unit cost.

• Error rate on processing

It’s important to have an almost zero free error rate otherwise it will have great impact on the customers. Therefore, the company should schedule periodic audits of all processed transactions to determine the percentage of errors in such areas as billing addresses, accounts payable matching and others

• Average turnaround time like payment of employee expense reports ( staff) or to the creditors

Periodic checks should be done to ensure that the agreed average turnaround time to pay the above is on target otherwise there will serious repercussions to the company’s business

• Average time to resolve errors
• Timeliness of processing like invoicing customers on time
• Percentage of invoices paid on due date
• Percentages of payment discounts taken

BOOKKEEPING AND ACCOUNTANCY SERVICES:

• Time to release financial statement

This can be measured by the number of days lag between the end of the reporting period and the receipt date.

• Number of percentage of material irregularities

This can be determined by the amount which the financial statements are incorrect, and derive a percentage of inaccuracy based on how far off the profits are from what they should have been.

• Accuracy of accruals

This can be reviewed by looking at the calculation used for the accruals. This can be determined by the amount which the financial statements are incorrect, and derive a percentage of inaccuracy based on how far off the profits are from what they should have been.

In a nutshell, when a company outsourced its bookkeeping,accounting and other business process to external outsourced partners, it is important to have an almost zero free error rate otherwise it will have great impact on the customers. Therefore, the company should schedule periodic audits of all processed transactions to determine the percentage of errors in such areas as billing addresses, accounts payable matching and others