Insourcing, outsourcing, offshoring, co-sourcing: What they mean, and how they could help your business

Insourcing. Outsourcing. Offshoring. Co-Sourcing. You’ve probably heard of these terms. You may even know of companies that are using one or more of them to grow their business.

But what do these terms actually mean? And can you take advantage of them to grow your business?

Insourcing usually means performing a business function internally. For accountants, financial planners and SMSF administrators this could mean either:

– performing the work in-house
– bringing a third party outsourcer into the business to do the work.

Many companies prefer insourcing because it lets them maintain control of the entire operation. But insourcing does have its disadvantages. As part of its normal lifecycle, the business will be adding new services, products and processes to its overall operation. This can stretch current resources, create new processes that need a different skillset, and even have staff members leaving the company.

And when that happens, businesses often choose our second option — outsourcing.

Outsourcing involves transferring a portion of work or even an entire operation to outside providers or suppliers rather than completing it internally. Outsourcing has increased significantly in recent years as companies look for ways to improve efficiency and reduce costs. And with Australia’s high labour costs, and small- to medium-sized businesses often struggling to gain efficiencies in every stage of the value chain, it’s hardly surprising.

Offshoring (not to be confused with outsourcing) is when a company relocates a business process to another country. With many Asian countries having considerably lower labour costs, a lot of Australian companies look at offshoring work to further reduce their labour costs.

Compared to outsourcing locally, offshoring usually lowers their overall operating budget. But the loss of control, quality and associated business risks can increase significantly. That’s why some companies set up business hubs in these countries instead, employing their own staff who are then supervised by existing staff to reduce risk and protect the privacy of sensitive client information.

The most recent concept is co-sourcing, which combines some of the benefits of both insourcing and outsourcing. It’s essentially a business arrangement where the work is done by both internal staff and external workers. This can help businesses lower the costs of their back office or administrative functions while still controlling the critical parts of the client relationship.

Co-sourcing is based on developing a long-term relationship with a business partner. It emphasises traditional values of trust, excellent service and quality you’d normally associate with a partnership rather than a contracting arrangement. The business has more control over the operational process, and assumes a shared responsibility for delivering the final product or service to the end customer.

Here at Superfund Wholesale we’ve been providing dedicated administration services to advisors for more than five years. And we’ve seen co-sourcing work exceptionally well for businesses who use the right service model and take advantage of the latest cloud based technology.

If you’d like to know more about insourcing, outsourcing, offshoring or co-sourcing, and whether they could help you grow your business, get in touch with us today.

How close are we to ‘zero-touch’ SMSF administration? (Part 1)

Unless you’ve been living under a rock (or maybe a collapsed pile of Master Tax Guides), you’ll know technology is creating massive shockwaves across the accounting and wider financial services industries.

And thanks to the investment-oriented nature of SMSF accounting and administrative functions, the self-managed space has already seen significant automation. Transactional data feeds and ‘if this then that’ style coding have been speeding up laborious data input and reconciliations for years.

When used correctly, these relatively simple features (contained in many accounting software programs) can have a significant impact on efficiency. Over the past five years I’ve seen the time to complete an average set of SMSF accounts reduce significantly. And all because improved transactional data feeds and rules now automatically allocate/code a significant number of those transactions. Instead of manually dealing with every transaction, we’re now dealing only with exceptions.

But there’s still a lot of room for improvement.

The key factors that drive efficiencies are:

  1. Getting the right data into an SMSF administration platform/accounting system
  2. Dealing with the data once it’s there
  3. Getting information out of the system for stakeholders.

Getting the data in

So much data can be pushed into an accounting platform these days. Here’s a table showing what SMSF data is (and isn’t) available. (Note: This isn’t an exhaustive list.)


Getting more data fed directly into an administration platform means SMSF accounts can be prepared more efficiently. It’s a relatively simple concept, but one that a significant chunk of the SMSF industry has failed to grasp.

The table comes from The SMSF Academy’s Future of SMSF Report (August 2014), which also states 40% of accountants don’t use any data automation for their SMSF clients. And why not? Because they don’t think they have the scale or resources to make it worthwhile.

Unfortunately, that means more than 5,000 businesses (based on 13,033 tax agents) risk the quality of their SMSF service delivery falling behind the rest of the market. And with business owner clients needing better service as they move into retirement, these businesses need to be paying attention more than ever.

Working with SMSF data

Getting accurate and timely data into an SMSF administration platform is one thing. Efficiently converting it into useful information for key stakeholders (members and trustees, independent auditors, the ATO and financial advisers) is another.

Because SMSFs are investment-focused entities and highly regulated, they’re subject to rigid accounting. Most assets, income, expenses and member contributions items can only be treated in a certain way. This means SMSFs are more suited to being automated than other business entities, and will feel the impact of ‘robo-accounting’ a lot sooner.

As I mentioned earlier, ‘if this then that’ transaction-based rules can automatically allocate and code a significant portion of common SMSF transactions. However, there are always gaps that need to be filled. Moving into the 2016 financial year, SuperStream will plug the gaps in employer contributions and rollovers.

Looking further into the future, it will only be a matter of time before the software property managers use will integrate data to plug the gap for rental property income and expenses. The Electronic Service Address for SuperStream may even allow SMSFs to receive remittance advices for more and more transactions.

The ATO has also said it will expand the use of its Standard Business Reporting (SBR) for more robust two-way communication between the ATO, super funds and employers. While the focus will initially be on APRA regulated funds, SuperStream shows that SMSFs aren’t immune to these changes. So the accountants working with SMSFs will either need to change, adapt and use technology to deliver a better client experience, or risk losing them completely.

There’s a second layer of automating accounting transactions. But it’s a little trickier to describe, so I’ll talk about it in our next article. I’ll also talk about how to produce useful information for the key stakeholders, and predict when zero touch SMSF accounts will become a reality.

Part 2 of this article is available here: How close are we to ‘zero-touch’ SMSF administration (Part 2)

How to become a connected SMSF adviser

In late 2014 I attended the Xero Roadshow and was blown away by a presentation by Xero’s Steven Leaney on the journey to become a ‘connected adviser’.

I would define a connected adviser as: Any relationship professional who has leveraged technology and re engineered their business to make themselves invaluable to their chosen brand of client and in doing so creating almost unlimited opportunities for growth.

Although definitions may vary, the concept of using technology to create service offerings which make you the go-to guy (or girl) for your particular niche sounds pretty cool right? Delivering something that the clients you love working with will pay you handsomely for.

The following table compares a traditional advice (accounting) business to that of a connected adviser:

How to become a connected adviser | Superfund Wholesale

The presentation got me thinking, how can an adviser (financial planner, accountant, administrator etc.) working in the SMSF space apply the same principles and become a ‘connected’ SMSF adviser?

Applying the principles learnt from Xero, there are three key things an SMSF adviser must do to transform into a connected adviser:

  1. Identify your ideal clients
  2. Get your clients into the cloud
  3. Leverage and automate everything

Identifying ideal clients

This concept is nothing new so I will not rehash generic information about identifying and targeting a specific niche market.

What I will say is that to become truly connected with the niche you want to work with, you will need to ensure you adequately communicate not just how and what services you provide – but why you do what you do.

The best resource I can provide is this (edited) TED Talk video from Simon Sinek.

The idea is to ensure the clients you will be attracting and providing fantastic cloud based services to the clients that you as the adviser actually want to work with!

Get your clients into the cloud

The core of any SMSF service offering will rely on getting your clients SMSF accounting information into the cloud. Xero is the market leading the small and medium business cloud accounting space in Australia however currently does not have an SMSF product.

Class Super is the Xero equivalent when it comes to SMSFs. Although there are a handful of other providers, Class is definitely the most advanced and connects to the Xero ecosystem via an integration with Xero Practice Manager (formerly WorkflowMax). It is also worth noting that the majority of large SMSF administration businesses use Class Super.

From an SMSF advice perspective, a cloud solution provides the following benefits:

  • Access to the clients financial records anytime from any device
  • Accounts kept up to date through automated data feeds from banks, brokers and investment platforms
  • Single ledger means everyone can work on and advise from the same information (accountant, auditor, adviser, client)
  • Integration with other cloud planning tools such as Xplan
    In addition to using Class (or an administrator who uses Class) for your clients SMSF accounts, to become a connected SMSF adviser you need to look at cloud solutions for other aspects of your business. Your planning software, document management, CRM and marketing tools can reside in the cloud and you will need the flexibility the cloud provides to truly create the business you want.

    Leverage and automate

    This is where the fun begins. The connectivity the cloud provides enables opportunities to leverage the investment in cloud technology to automate routine processes within a business, creating efficiencies and the ability to take on more clients with the same number of staff (even for a sole practitioner) or to go deeper and provide more services to existing clients.

    Let’s look at the following example: A small financial planning practice differentiates itself by providing a small number of proprietary direct equity model portfolios to their SMSF client base. The process of re balancing client portfolios every time the model changed was manual and cumbersome, and took considerable staff time. Each trade had to be manually calculated on spreadsheets and the trade orders submitted individually to the broker.

    In addition the advisers within the practice always struggled to provide advice on the fly to the SMSF clients as they always had to cobble together ‘best guess’ information by combining out of date financial statements with transactional and investment data to get an up to date picture of each SMSF.

    An alternate cloud based solution this practice could use would include:

  • Utilising an SMSF administrator to move all their clients accounting onto Class Super
  • Plugging their models into a portfolio tool such as Financial Simplicity
  • Changing to a broker that could receive bulk orders generated from Financial Simplicity as well providing a data feed to Class Super
    Leverage Class Super | Superfund Wholesale

    Working in a clockwise direction starting with the adviser at the top of the above diagram, the integrated cloud technologies would come together as follows:

    1. The adviser would load their proprietary model portfolios (intellectual property) into Financial Simplicity
    2. Financial Simplicity would pull in details of the SMSF clients’ portfolios from Class Super and compare to the applicable model (determined by the adviser) to calculate the trades necessary to re-balance the portfolio
    3. Advice and compliance documents generated for clients and orders required to re-balance client portfolios pushed through to broker for execution in bulk
    4. Broker provides data feed of transactions and holdings to Class Super
    5. Adviser accesses up to date client portfolio through Class’ FundWeb online reporting or via the reporting integration with Xplan

    The above is just one example of how the cloud can be leveraged to enhance business efficiencies and service levels. There are many other areas within an SMSF advice business where other cloud and integrated technologies could be used including:

  • Billing and fee collections
  • Quoting and fee agreements
  • Review appointment scheduling and reminders
  • Marketing and client education

    Bringing it together

    Both the financial services and accounting professionals are in the midst of major disruptive change being driven from technology. With change comes opportunity and by leveraging cloud technologies SMSF professionals have the means to re-engineer business models to reach new clients or reinvigorate and deepen existing client relationships.

    Don’t let yourself be a servant of what is – become a shaper of what might be!

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