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The efficiency of accounting service provision

Peter Barrar (Manchester Business School, The University of Manchester, Manchester, UK,)
Douglas Wood (Manchester Business School, The University of Manchester, Manchester, UK,)
Julian Jones (School of Accounting and Finance, University of Manchester, Manchester, UK)
Marco Vedovato (Universitá Ca’Foscari di Venezia, Dipartimento di Economia e Direzione Aziendale, Venice, Italy)

Business Process Management Journal

ISSN: 1463-7154

Article publication date: 1 August 2002



The paper uses a procedure called data envelopment analysis (DEA) to compare internal against external (outsource) efficiency in the delivery of finance function activities. The approach allows a direct comparison between the in‐house efficiency of UK small, medium and large companies in managing their accounting activities both with UK outsource contractors and also against the rather larger and more numerous contractors observed in Italy. The paper finds that, through comparative advantages, outsourcing presents a more efficient solution for the management of very small firm accounting than internal provision. Furthermore, there is evidence that substantial scale benefits continue to be available to outsource contractors, while inefficiency on internal provision is mainly technical. The paper concludes that outsourcing provision is likely to offer worthwhile savings to small firms, allowing them to shed competitive weaknesses and operate at efficient or best practice levels. At the same time, by converting an internal fixed cost, fixed capacity activity into a flexible, variable cost activity, SMEs have the potential to transform a previously unmanageable activity into an efficient or best practice activity that can grow or contract with the business.



Barrar, P., Wood, D., Jones, J. and Vedovato, M. (2002), "The efficiency of accounting service provision", Business Process Management Journal, Vol. 8 No. 3, pp. 195-217.




Copyright © 2002, MCB UP Limited

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