GUIDELINES FOR OUTSOURCING

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1 CPD. Wherever. Whenever. GUIDELINES FOR OUTSOURCING BY DAMIEN PATKOVSKI Director of iadministrateyourloan.com Damien is available and happy to speak with anyone regarding loan processing and its impact on the industry. He will gladly share insights into the industry from the perspective of a business owner and professional, so please do not hesitate to contact him for an informal chat. iadministrateyourloan.com is your complete loan processing solution. From submission to settlement, allow iadministrateyourloan.com to support you every step of the way. Free yourself to take control of your sales activity and grow your business effectively by employing iadministrateyourloan.com to process your loans efficiently and effectively. Further details about Damien Patkovski and iadministrateyourloan.com can be found at In this article, Damien Patkovski provides insights into outsourcing, frequently asked questions as well as traps and the payoff for mortgage brokers. Damien Patkovski is one of two directors of iadministrateyourloan.com. Damien brings a host of corporate experience with a background in sales management. His experience has allowed him to work with many of the BRW s top 100 companies, providing a high level of corporate exposure that has assisted to enhance the iadministrateyourloan.com business and brand from various perspectives. Damien s experience is now allowing him to play a major role in the strategy and direction that the business employs with a focus on marketing, sales, recruitment and general management. (bach. Creative Industries) (bach. Bus. Management) CONTENT Content... 1 Introduction... 2 Time = Money, doesn t it?... 2 What to Look for in an Outsourcing Provider... 3 Reasons Not to Outsource Your Loan Processing... 3 The Payoff... 4 Acknowledgments... 5 Copyright iadministrateyourloan.com

2 2 INTRODUCTION When looking at outsourcing as a whole, we need to assess the benefits and limitations of the various types of outsourcing within the market. Drawing from my own experience through outsourcing telemarketing, bookkeeping and brand building, I aim to provide an outline of where and how these services can be utilised in a business. I am hearing the phrase I outsource almost everything becoming very common across all segments of the industry, and the trend suggests that these services will become more important to running a small business in Australia. So, let s look at how you can make an informed decision regarding outsourcing a service, taking into account the reasons you will outsource that service and the implementation. Outsourcing has evolved out of a need for a support function that allows businesses to grow their market share in a cost-effective manner. Given that the main factor driving this is time, the question is and will always be: how important is your time? Are you spending too much time working in your business rather than on your business? Are you spending so much time in your business processing and following up that you are losing new business? Are you at a point where you are considering employing additional resources, though you feel this is too costly? Is a lot of your time consumed by qualifying your own leads? Are you drowning in your invoicing and accounting and procrastination about doing your BAS? It is questions like these that developed the framework for the outsource industry, and as such, the demand for these services has continued to feed the ongoing growth of outsourcing. Whilst in its developmental stage, the industry and business owners have to also consider offshoring, adding further complication. I have read a number of articles that discuss offshoring with the terminology, outsourcing thrown in to make the concept sound more appealing. In reality, the two have very separate applications, and unfortunately, they have been placed in context together for so long that they have developed a natural association. Given that outsourcing is an extremely broad subject, this article will focus primarily on loan processing, exploring both the benefits and limitations of local vs. overseas outsourcing. Although the article is focused on loan processing, the information is still transferrable across a variety of industries and services. TIME = MONEY, DOESN T IT? Common knowledge suggests that time is money, yet I continually come across business owners attempting to do everything themselves, including managing their own bookkeeping, marketing, social media and even mortgage brokers processing their own loans. For mortgage brokers, processing their own loans is referring to everything after signing the client, gathering the information for a fact find or client-needs analysis and collection of all supporting documentation. This component includes, but is not limited to, data entry, CRM updates, follow-up and all communication with the lender, solicitors, real estate agents and the client, all the way through to settlement. So, the question comes back to why? Why are so many brokers focused on control rather than placing more importance on finding the correct service provider for their business? There are many reasons for apprehension. Sometimes, the issue is trust, sometimes, it is price and sometimes, a broker just doesn t have enough you guessed it TIME! What I will do is take this opportunity to go through as many of the questions that we regularly receive from brokers so that the picture is clear. One of the main reasons that cause a stall for a broker is the fear of losing control of their loans. By outsourcing the loan processing, a broker should be provided with regular updates, ensuring complete control of loans via and CRM. If the nominated service provider has these provisions in place, what we are talking about is creating an opportunity to focus on profitable business activities. I have personally seen a number of brokers that wear the fact that they perform all tasks in their business as a badge of honour, as though it improves the pardon the cliché customer experience. This is simply untrue; some of the most successful brokers I have worked with have a team that includes processing, marketing collateral and bookkeeping divisions. By utilising specific services and selecting specific service providers to partner with, businesses can unlock their true potential. I have also seen brokers struggle to change their current habits and setup. Some also truly believe that they can do it more efficiently themselves and that outsourcing will cost them. To quickly address the concept of brokers completing administrative tasks themselves, if a broker is personally doing the data entry or follow-up, this is not faster; in fact, this is counterproductive, resulting in slowing your sales cycle down considerably.

3 3 As mentioned earlier, time is money; therefore, we must agree that time is a cost. Let s look at average Joe Broker, as an example, and break up Joe s time during a working day. Let s say Joe spends 30% of his time on clients and potential customers, 40% on administration and loan processing and, for the purpose of the exercise, the other 30% is taken up by general duties required to run the business. Now, if this 40% of administration time was applied to time spent with clients, we would see his customer time sitting at 70%. This would result in revenue increases reflective of the focus on growing the business. Of course, this is a very basic example; however, the equation is really that simple. I have seen client output more than double in some cases by following this simple formula Fig. 1.0 Broker without processing support Broker with processing support Time spent with clients Time Spent Processing Misc. time use There is a stigma attached to outsourcing that has caused brokers to ignore the possible options available in the market due to an impression of below-standard performance from outsourcing providers. Not dissimilar to any other industry, there are those performing well and those performing unprofessionally. Whether the outsourcing providers are outsourcing overseas, employing inexperienced staff or are a small singleperson operator, any or all of these factors can create significant and immediate impact on a broker s business. The risks need to be mitigated where possible. In reality, one is simply required to investigate and ask the right questions. I d like to have someone in my office to process loans for me. This is a relatively common statement amongst brokers that struggle with control. The whole idea behind outsourcing allows for the business to hold a service provider accountable instead of consuming further time with in-house team members. In addition to this, the cost of maintaining someone within an office is at least six times more expensive compared to outsourcing to an organization that has the ability to manage workload effectively and deliver consistent results. I m so busy; I don t even have time to look at this. That means that this sounds too complicated and too hard. To clarify, outsourcing processing is not as difficult or precious as a broker may think. At the end of the day, a broker s time needs to be considered valuable. By utilizing their time effectively, they will undoubtedly see great rewards. If the broker is so busy that they are unable to look at outsourcing then they need to continue reading this article. I know that there are brokers that may not be aware that there are services of this nature available within Australia. Even though I am aware that there is a general understanding of outsourcing, many have not ventured to explore what it actually entails or how it can benefit their business. Alternatively, they are still tied up in the idea that it means offshoring. The key is finding service providers that meet, if not exceed, your expectations. REASONS NOT TO OUTSOURCE YOUR LOAN PROCESSING These must be the only reasons why a broker and business professional could not find the correct service provider for their loan processing: You love data entry. You think that you will provide a better level of service. You like waiting on hold. You enjoy navigating the ever-evolving online platforms. You would prefer to let many leads go. You have convinced yourself that you are doing your job when administrating. You would prefer not to see your business grow. WHAT TO LOOK FOR IN AN OUTSOURCING PROVIDER Let s look at some of the benefits of outsourcing locally opposed to offshore and vice versa. Offshoring, on the surface, is no doubt the most costeffective method of outsourcing and, if streamlined, can be very effective; however, we need to keep in mind that this model has minimal flexibility to adapt to individuals. In some cases, I have heard that the language barrier requires all communication to be done electronically no phone calls. If this is suitable, then

4 4 offshore is a viable option for you. Having said that, supporting Australian-based outsourcing organisations is imperative to the way in which this industry will be defined. Although the concept of outsourcing has been around for quite a long time, it is only in recent times that it has truly found its niche. Some key questions to ask: Is the outsourcing business based in Australia? Over time, we have seen that a greater number of outsourcing companies are electing to outsource overseas (offshoring). There are risks associated with this due to the lack of understanding compliance and laws within Australia. Inexperience coupled with the complications of managing sub-contractors abroad (time differences) can create new threats. This is only really scratching the surface, though it highlights why this is one of the most, if not the most important, factor when making the decision to outsource. ASIC recently raised this very issue: ASIC is taking an increased interest in the area of overseas outsourcing to ensure licensees have procedures in place to identify and manage associated risks. 1 The overseas organisations, albeit cheaper, are not necessarily more cost effective in the long term. Brokers need to ask themselves: if the service provider is not able to take on all components of the task, has this defeated the purpose of outsourcing? Does the organization have extensive knowledge of various CRM platforms and the loan process? A broker needs to know that the organisation handling loans has had experience across the variety of scenarios that exist within the industry and within Australia. The more platforms they have worked with, the more experience and adaptability they will possess. Is the company reputable? An outsourcing business should speak for itself via their peers or social network of brokers. Who are they using and why? Will they provide references without hesitation? Any business that hesitates to provide references should ring alarm bells. What is the turnaround time? This is particular to each broker as far as the nature of their loans is concerned. If many of a brokering organisation s loans are considered urgent, does the service provider have provisions in place to manage this effectively? Payment terms vs. cash flow? This refers to the balance that each broker needs to build within their own 1 The Advisor, 09 December 2013, ASIC puts outsourcing under spotlight, Steven Cross business. This is not a major concern for some; however, brokers starting out or those with small volumes would see this as a higher priority. Outsourced loan processing organizations are relatively flexible with regards to this; brokers usually just need to ask. THE PAYOFF Outsourced loan processing organizations have a very unique position of visibility. They have brokers from numerous aggregators and have gathered information that is not openly available. From this, trends have been developed that have since formed the basis of the outsourced loan processing business model. As a business owner in this space, I have seen brokers perform extraordinarily well and others that have taken the opportunity to place their business on cruise control. The outsourcing model is designed to work best for those with an entrepreneurial mindset that drives them to continue to strive for results. Once the administrational side of processing loans is alleviated, the true potential of a mortgage brokering business can be unlocked. It is up to the individual broker regarding how they utilise the time they have now regained. To be quite clear, a broker generating 3-5 loans per month would realistically be able to generate 6-9 loans per month by outsourcing. The cost of outsourcing the 6-9 loans would be covered by 1 additional loan per month (think about how achievable this is when the focus is not on submitting loans or chasing updates all day). In conclusion, by following a detailed process of analysis, brokers can effectively locate and employ the services of their ideal service provider. The pointed questions I have highlighted can expose outsource service providers with flawed practises and as a business owner, by taking into account due diligence, this method is highly effective in filtering out the potential candidates. Given that an outsourcing model can achieve results relatively easily, it surprises me how often I have seen brokers continually go down a road that overwhelms them in regards to administration and paperwork. In many cases, these brokers are so focused on the administration that they have failed to refill their pipeline and have struggled to stay in business. So, if there is something to be left with, it is to act now! Save the business from going in circles for years to come by investigating and electing to utilise the service offerings available in the market.

5 5 ACKNOWLEDGEMENT The Advisor - 09 December 2013, ASIC puts outsourcing under spotlight, Steven Cross These materials are copyrighted by iadministrateyourloan.com. If you copy, publish or distribute any part of the information without prior written permission, you will be pursued to the full extent of the law. iadministrateyourloan.com and/or Damien Patkovski are not engaged in rendering legal, accounting, finance, professional or other advice or services. This information is for educational and informational purposes only. No person should act on any information provided before they have formed their own opinion through investigation and research regarding the suitability of the information for their circumstances. All enquiries should be forwarded to Tracey via at: [email protected].