Outsourcing and Disbursements with Xero Practice Manager: Outsourced Services

This article is an extract from the book 'Everything you need to know about Xero Practice Manager'
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When running jobs in XPM, we have two types of costs. We have time costs, which are created by time sheets against tasks on a job, and we have disbursements. Disbursements are any cost associated with completing the job that is not a time sheet. Disbursements are also known as costs in XPM. These costs could be from subcontractors that do not do time sheets, outsourcing fees, and any general disbursements such as Xero subscription fees. In this section we’ll be covering how to manage each type, and the considerations you need to make.

Outsourced services

Outsourced services are provided by outsourced service providers who are responsible for delivering the work you assign to them. They are responsible for managing the people, talent and resources you need. Under this arrangement you will be paying a per job or per-month fee via a supplier invoice. You are unlikely to assign them specific jobs and tasks, or provide them logins to your XPM. They will not be doing a time sheet for you in XPM, as you will be receiving an invoice for their time, or for the jobs they have completed.

Outsourced service providers typically have a portal or similar shared communication tool that allows you to load and schedule the job information required. As your practice grows throughout the year, the number of jobs you need completed will change. It is the responsibility of the outsourced service provider to ensure that you always have the team, talent and capacity to deliver the jobs in your portal. Your team will expand and contract seamlessly to meet the seasonality of your work and the new customers you take onboard.

Although we are buying time, we treat these transactions as a supplier invoice, and capture them as a job cost in XPM, rather than as a time sheet.

Let’s look at an example:

Say we may have an agreement of 30% of the job’s fee. So if we are charging our client $3,000 for the work performed throughout the year, we will pay a $900 fee to our outsourced service provider, which leaves a $2,100 budget to complete the work in-house. This $2,100 budget is for our accounting team to manage the communication between our client and the outsourced service provider. If this is done effectively, we would expect to see large write-ups on each job, the work would be completed at a lower cost, and our team would be able to complete more jobs. Your team members therefore become reviewers of the work, rather than the doers of the work.

If information is poorly communicated by your team to the outsource service provider can create a lot of tooing and froing. This delays the jobs, increases the time put to them, and can lead to deadlines being missed as more and more work piles up. This is why clear and effective communication is vital when using an outsourced service provider.

When using an outsourced service provider, our accounting team become job managers. Their time is primarily spent managing the information between the client and the outsourced service provider, and reviewing their work.

We are unlikely to outsource all of the work completed in our practice. We may start with the more routine jobs and tasks, and as we become more familiar with using outsourced services, we may expand that to include a greater proportion of our engagements. The actual jobs required to be completed each month not only vary month to month, but also change throughout the year as we bring on more clients.

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