Finance and Accounting Outsourcing - An Empirical Study of Service

Southern Cross University
ePublications@SCU
Theses
2009
Finance and accounting outsourcing: an empirical

study of service providers and small business in
Australia
Graham Ray
Publication details
Ray, G 2009, 'Finance and accounting outsourcing: an empirical study of service providers and small business in Australia', DBA
thesis, Southern Cross University, Lismore, NSW.
Copyright G Ray 2009
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Finance and accounting
outsourcing: An empirical study
of service providers and small
business in australia
A Dissertation by Graham Ray
Submitted to the Graduate College of Management,

Southern Cross University in partial fulfilment of the requirement
of the Degree of Doctor of Business Administration
December 2009
Declaration of authorship
I certify that the substance of this thesis has not previously been submitted for any degree, nor
is currently being submitted for any degree.
I also certify that any help received in preparing this thesis and all sources used have been
acknowledged.
Print Name:_ __________________________
Signature: _ __________________________
Date: _ __________________________
i
Abstract
The aim of this research study is to determine whether perception gaps exist between
accounting service providers and small business, by identifying variables considered by
both groups when considering outsourcing internal accounting activities, and how these
perceptions align. Research on small business behaviour is used in many industries to improve
the quality of service to the small business consumer. This research proposes a theoretical
framework that identifies three dependent variables consisting of decision, benefit and impact
factors, and fifteen independent variables influencing each of these factors.
Based on a review of extant literature, there is little evidence that research on the subject of
outsourcing finance and accounting activities within Australia has been conducted thus far
and, as a result, many questions remain unanswered.
While the reviewed literature discussed the decision, benefit and impact factors of
outsourcing (particularly finance and accounting outsourcing), it failed to identify differences
between perspectives of both parties involved in the outsourcing arrangement. Distinguishing
between these different perspectives is important, as it identifies likely perception gaps
between the service provider and the small business client.
Differences of perception are significant, as they impact upon the expectations of small
business and how the service provider satisfies the needs and wants of the small business
client within the outsourcing arrangement.
The study involved data collection from two sub-groups. Service provider participants were
sourced from a national organisation whose members provide finance and accounting services
to small businesses, with 34 service provider respondents drawn from a sample population of
ii
61 participating. Small business participants were randomly sourced from a national database,
with 71 respondents drawn from the selected population of 314 taking part. These sub-groups
were considered reliable and representative of the population of both groups as a whole.
Multiple aspects of available research methodologies were examined in conducting this study.
These included research design; construct and item generation; data collection methods; and
data analysis.
The epistemology employed for this study adopted a positivistic/hypothetico, deductive

approach using a web survey research method to provide valid, reliable and practical data to
identify the perceptions of accounting service providers and small business owner/managers
in relation to finance and accounting outsourcing decision factors. This study not only
identifies the decision, benefit and impact factors of finance and accounting outsourcing, but
also identifies, compares and contrasts the perceptions of accounting service providers and
small business owner/managers.
The research study was confined to accounting service providers and small businesses
operating within Australia, and was conducted during the period July to October 2007. It
should be noted that responses may vary if the survey were replicated in the future.
Cross tabulations and frequency analysis were used to compare and contrast responses
relating to decision, benefit and impact factors. Questions were assessed by using a seven-
point Likert scale utilising statistical analysis to compare the mean of responses by each group,
and examining these responses in respect of the mean of each total. SPSS Version 14 was used
to analyse the data.
Findings emanating from this study confirm an alignment of perceptions and a consensus
by both respondent groups concerning outsourcing activities, benefits to small business,
and impacts on small business. This also gives accounting service providers knowledge of a
specific set of factors impacting upon small businesses in relation to outsourcing decision
making, benefits and impacts.
In particular, this study provides first-hand information to accounting service providers (as
frontline practitioners), to the effect that they should actively collaborate and communicate
with small business clients about their finance and accounting activities.
iii
Lack of prior research, (particularly within Australia) regarding outsourcing decisions by
small business demonstrates a need for further in-depth research that should focus on both
the developing and changing face of business, and the relationships between small business
and accounting service providers.
Research on finance and accounting outsourcing identifying and comparing factors impacting
upon the decision process is important to and useful for theory building, as well as providing
practical implications. Not only will this enhance the literature, it can also provide a useful
benchmark for real-world practice, as small businesses need to be competitive in order to
survive within a more open international business environment.
This research contributes to the body of knowledge by providing a theoretical framework for
accounting service providers and small businesses to further explore issues examined in this
study. While this research focused on identifying differences between perceptions by two
respondent groups, further research linking these factors to the outsourcing activity should
provide a wider view of the issues involved. This in turn will assist towards building a better
understanding of the cause-effect relationships between different variables within the finance
and accounting outsourcing area
Key Words: Outsourcing, Business process outsourcing, Finance and accounting

outsourcing, Small business, Service provider
iv
Journals and presentations
Journal: “Finance and Accounting Outsourcing – The Next Logical Step for Small
Business”. Review of International Comparative Management, ISSN: 1582-
3458, No 8 Volume 4/2007. http://www.rmci.ase.ro, December 2007.
Presenter: DBA Symposium Southern Cross University – Peer review of research

proposal. Tweed Heads, November 2006.
Presenter: “Outsourcing in Australia and New Zealand by Small Business”. Presented at

the Computer Accounting Doctor (CAD) Partners National Conference –
Christchurch, New Zealand, November 2006
Presenter: “FAO Outsourcing – An Exploratory Study of Service Providers and their

Clients in Australia and New Zealand”. Double blind refereed paper presented
at the Small Enterprise Association of Australia New Zealand (SEAANZ)
conference. Auckland NZ, September 2007.
Presenter: “Outsourcing – An Exploratory Study of Accounting Service Providers and

Small Business in Australia”. Double blind refereed paper presented at the SME
– Entrepreneurship Global Conference. Melbourne, July 2008.
v
Acknowledgements
There are a number of people who deserve recognition, and should be acknowledged and
thanked for the support, assistance and encouragement they gave me during this journey of
academic endeavour.
A debt of gratitude goes to my supervisor Dr Philip Neck for everything. It was his
unconditional support, motivation, enthusiasm and above all his direct approach to what to
me was a daunting task that fostered and maintained the commitment and dedication needed
for such a journey of discovery. To you Dr Phil, I simply say “thank you” for everything and
for the inspiration you have given me.
In any journey of discovery there are many people who join the adventure. People who for no
reason other than to offer help, assistance, guidance, friendship and—yes, even criticism—are
crucial to the eventual end of the road trip.
These people have contributed in so many and numerous ways to this research study that it
is impossible to adequately express my feelings for them. Their contributions (both large and
small) have combined to bring this journey to an end, and I will be eternally grateful to them
all. These people comprise academics, colleagues, staff of SCU, friends and DBA candidates
and graduates. To all of these people I can only say “thank you”
It is said that behind every great man there is a great woman. Well I may not be a great man,
but I certainly do have a great woman behind me. My wife Leonie has been beside me all the
way on this journey, and without her by my side this dissertation would not have come to
fruition. Her love, drive, motivation, patience and unending confidence in me and my ability to
complete this study have at times been the only thing that kept me going. “Thank you darling”.
vi
Table of contents
Declaration of authorship........................................................................................................... i
Abstract.......................................................................................................................................ii
Journals and presentations........................................................................................................ v
Acknowledgements................................................................................................................... vi
Table of contents......................................................................................................................vii
List of tables................................................................................................................................ x
List of figures...........................................................................................................................xiii
List of abbreviations................................................................................................................ xiv
Chapter 1 Introduction.......................................................................................................... 1
1.1 Introduction................................................................................................................................ 1
1.1.1 Chapter objectives........................................................................................................... 1
1.1.2 Chapter structure............................................................................................................. 1
1.2 Background to the research...................................................................................................... 3
1.3 Research questions, objectives and proposition.................................................................. 5
1.3.1 Research questions.......................................................................................................... 6
1.3.2 Research objectives.......................................................................................................... 6
1.3.3 Research proposition....................................................................................................... 7
1.4 Methodology.............................................................................................................................. 7
1.4.1 Theoretical framework.................................................................................................... 7
1.4.2 Research design................................................................................................................ 8
1.4.3 Research paradigm........................................................................................................... 8
1.4.4 Research method and data collection.......................................................................... 9
1.4.5 Analysis and interpretation of findings......................................................................11
1.5 Research limitations................................................................................................................12
1.6 Definitions of terms.................................................................................................................13
1.7 Research structure...................................................................................................................15
1.8 Conclusions...............................................................................................................................18
vii
Chapter 2 Literature review.................................................................................................19
2.1 Introduction..............................................................................................................................19
2.1.1 Chapter objective...........................................................................................................20
2.1.2 Chapter structure...........................................................................................................20
2.1.3 Background and rationale for the research................................................................21
2.1.4 Theoretical framework..................................................................................................22
2.2 Parent discipline.......................................................................................................................23
2.2.1 Outsourcing.....................................................................................................................24
2.3 Immediate discipline...............................................................................................................33
2.3.1 Finance and accounting outsourcing.........................................................................34
2.4 Research issues.........................................................................................................................39
2.4.1 Research questions and objectives.............................................................................39
2.4.2 Research proposition.....................................................................................................40
2.5 Conclusions...............................................................................................................................41
Chapter 3 Methodology.......................................................................................................42
3.1 Introduction..............................................................................................................................42
3.2 Overview of theoretical framework.....................................................................................44
3.3 Research design and procedures...........................................................................................45
3.3.1 Research design alternatives........................................................................................45
3.3.2 Research methodology justification...........................................................................46
3.3.3 Research technique justification.................................................................................48
3.4 Research survey design...........................................................................................................51
3.4.1 Construct and item generation....................................................................................51
3.4.2 Survey administration, data screening and data demographics............................58
3.4.2.1 Sampling procedure.............................................................................................58
3.4.2.2 Missing data...........................................................................................................59
3.5 Data collection and analysis...................................................................................................60
3.5.1 Data collection methods...............................................................................................60
3.5.2 Secondary data................................................................................................................61
3.5.3 Primary data....................................................................................................................61
3.5.3.1 Population and sample selection process........................................................61
3.5.3.2 Survey questionnaire design..............................................................................62
3.5.3.3 Data analysis..........................................................................................................64
3.5.3.4 Analysis and interpretation of data...................................................................66
3.6 Ethical considerations.............................................................................................................67
3.7 Strengths and weaknesses identified in the chosen methodology.................................68
3.8 Conclusions...............................................................................................................................68
viii
Chapter 4 Findings and data analysis..................................................................................69
4.1 Introduction..............................................................................................................................69
4.2 Data demographics..................................................................................................................70
4.3 Participant questionnaire and response analysis...............................................................78
4.3.1 Section A – Outsourcing information (Questions 1 & 2).....................................79
4.3.2 Section B – Outsourcing decision factors (Questions 3–7).................................82
4.3.3 Section C – Outsourcing benefit factors (Questions 8–11).................................88
4.3.4 Section D – Outsourcing impact factors (Questions 12–17)...............................95
4.4 Conclusions.............................................................................................................................104
Chapter 5 Conclusions and implications..........................................................................106
5.1 Introduction............................................................................................................................106
5.1.1 Chapter objective.........................................................................................................106
5.1.2 Chapter structure.........................................................................................................106
5.2 Research outcomes................................................................................................................107
5.2.1 Outcomes – Outsourcing decision factors.............................................................107
5.2.2 Outcomes – Outsourcing benefit factors................................................................109
5.2.3 Outcomes – Outsourcing impact factors................................................................110
5.2.4 Revised theoretical framework..................................................................................112
5.3 Implications for policy and practice...................................................................................113
5.3.1 Implications for theory...............................................................................................114
5.3.2 Implications for service providers............................................................................115
5.3.3 Implications for small business..................................................................................116
5.4 Limitations of the study........................................................................................................116
5.4.1 Service provider limitations.......................................................................................117
5.4.2 Small business limitations..........................................................................................117
5.4.3 Analytical limitations...................................................................................................117
5.5 Future research opportunities.............................................................................................118
5.6 Conclusions.............................................................................................................................119
Bibliography...........................................................................................................................121
Appendix 1 CAD partner online survey information sheet and consent form..............131
Appendix 2 CAD partner online survey questionnaire...................................................133
Appendix 3 Small business survey letter...........................................................................147
Appendix 4 Small business online survey information sheet and consent form...........148
Appendix 5 Small business survey questionnaire............................................................150
ix
List of tables
Table 3.1 Characteristics of quantitative and qualitative research paradigms.............................47

Table 3.2 Reasons for selecting quantitative or qualitative research paradigm...........................47
Table 3.3 provides a comparison of features associated with the different survey methods....50
Table 3.4 Item measures of degree of outsourcing activities..........................................................53
Table 3.5 Item measures of outsourcing decision factors................................................................53
Table 3.6 Item measures of benefit factors.........................................................................................55
Table 3.7 Item measures of impact factors.........................................................................................56
Table 4.1 Question 18 – Gender – This section sought to identify if there were significant
differences between the genders of respondents in the sample population..................................70
Table 4.2 Question 19 – Number of years in business – This section sought to identify any
significant differences in the number of years respondents had been business, as this may
impact on the perceptions held about F&AO by the respondents.................................................71
Table 4.3 Question 20 – Business location: home or office – To identify possible relationships
that may be detected during data analysis, respondents were asked to indicate whether they
operated their business primarily from home or an external office location, as the business
location may impact on the perceptions held about F&AO by the respondents........................... 72
Table 4.4 & Table 4.5 Question 21 – Location of the business – This analysis sought to
determine the demographic distribution of respondents by state and by area in the sample
population to identify any relationships between location and F&AO activities........................73
Table 4.5 Location of business by area................................................................................................74
Table 4.6 Question 22 – Business structure – Respondents were asked to indicate the type
of business structure used in the business to identify any significant relationships between
business structure and respondent perceptions.................................................................................75
Table 4.7 Question 23 – Number of employees – Information about the number of
employees in each business was collected and considered relevant to other demographic data
collected and to other data relating to perceptions............................................................................76
x
Table 4.8 Question 24 – Annual gross turnover of business – Respondents were asked to
indicate their annual gross turnover from business operations so that relationships with other
demographic data and data collected relating to perceptions could be identified.......................77
Table 4.9 Question 1 – “Do you think small business outsources more or less of their
accounting activities than other small businesses?”...........................................................................80
Table 4.10 Question 2 – “To what extent do you believe small businesses would consider
outsourcing the following activities?”...................................................................................................81
Table 4.11 Question 3 – “To what extent do you agree that the following activities are core
activities of small business?”...................................................................................................................82
Table 4.12 Question 4 – To what extent do you agree with the following statement? “The
timing and co-ordination of the following activities are critical to the overall performance of
small business”...........................................................................................................................................84
Table 4.13 Question 5 – “In deciding to outsource their internal accounting activities, what
level of importance do you believe small business would place on the following criteria for
selecting an outsourcing service provider?”........................................................................................85
Table 4.14 Question 6 – To what extent do you agree with the following statement? “There
are many activities that small business DO outsource or WOULD consider outsourcing
because:”.....................................................................................................................................................86
are many activities that small businesses DO NOT outsource because:”.....................................87
Table 4.16 Question 8 – To what extent do you agree with the following statement?
“Outsourcing of the following activities would provide the same degree of control as if the
activity were performed in-house”.........................................................................................................89
Table 4.17 Question 9 – “Please indicate what you believe is the level of work volume the
following activities represent for small business staff ”.......................................................................91
Table 4.18 Question 10 – “How important do you think the following benefits of outsourcing
the internal accounting functions are for small business?”...............................................................92
Table 4.19 Question 11 – “How successful do you believe small business is likely to be
in achieving cost reduction benefits through outsourcing their finance and accounting
activities?”...................................................................................................................................................94
Table 4.20 Question 12 – “If the following activities were outsourced by small business,
to what extent could the service provider exploit their position through providing these
services?”....................................................................................................................................................96
to what extent would it be difficult to measure whether the activity is performed
satisfactorily?”............................................................................................................................................97
xi
Table 4.22 Question 14 – “If the following activities were outsourced by small business, to
what extent would it be difficult to determine whether the service provider had performed
according to contractual obligations?”.................................................................................................99
what extent would it be difficult for them to arrange for an alternate service provider at short
notice?”.....................................................................................................................................................101
Table 4.24 Question 16 – “What do you consider the business performance of small business
has been in respect of the following activities in the past three years?”.......................................102
Table 4.25 Question 17 – “Which of the following POSITIVE impacts do you believe
will be experienced by small business because of outsourcing their finance and accounting
activities?”.................................................................................................................................................104
Table 5.1 provides a summary of the outcomes and conclusions relating to Section B of this
research study...........................................................................................................................................108
Table 5.2 provides a summary of the outcomes and conclusions related to Section C of this
research study...........................................................................................................................................110
Table 5.3 provides a summary of the outcomes and conclusions relating to Section D of this
research study...........................................................................................................................................112
xii
List of figures
Figure 1.1 Outline of Chapter One with section numbers and their relationships..................... 2
Figure 1.2 Research structure...............................................................................................................16
Figure 2.1 Outline of Chapter Two with section numbers and their interrelationships...........21
Figure 2.2 Preliminary theoretical framework for this research.....................................................23
Figure 3.1 Outline of Chapter Three indicating section numbers and their relationships.......43
Figure 3.2 Principles of survey questionnaire design.......................................................................63
Figure 3.3 Diagram of the quantitative data analysis process.........................................................66
Figure 4.1 Outline of Chapter Four with section numbers and their relationships...................70
Figure 5.1 Outline of Chapter Five with section numbers and their relationships..................107
Figure 5.2 Revised theoretical framework for factors affecting the outsourcing of finance and
accounting activities by small business...............................................................................................113
xiii
List of abbreviations
ABS - Australian Bureau of Statistics
ASP - Accounting service provider
BPO - Business process outsourcing
BPR - Business process reengineering
CAD - Computer Accounting Doctor Partners Pty Ltd.
CBD - Central business district
CP - CAD Partner
DBA - Doctor of Business Administration
F&AO - Finance and accounting outsourcing
KPI - Key performance indicator
SB - Small business
SCU - Southern Cross University
SME - Small medium enterprise
SP - Service provider
SPSS - Statistical package for the social sciences
xiv
Chapter 1
Introduction
1.1 Introduction
This research study aims to explore and identify the variables small business should consider
when deciding to outsource their internal accounting functions. Research on small business
behaviour is used to improve their quality of service to the small business consumer. This
research sets out to develop a theoretical framework to compare and contrast the perceptions
of finance and accounting service providers and small business. Additionally, it examines
the motives of small business when selecting an accounting service provider to perform
the accounting function taking into account the decision factors, benefits and impacts of
outsourcing their accounting activities.
1.1.1 Chapter objectives

The chapter objectives are to present an overview of the research and to briefly discuss
the background of the research, research questions, objectives of the study, and research
proposition. The chapter further discusses the methodology to be used in the study and
identified limitations. Key term definitions are provided, and the thesis structure is discussed.
1.1.2 Chapter structure

Chapter One comprises eight sections and provides the structure for this research. Section 1.1
introduces the research and Figure 1.1 (page 2) provides an outline of the chapter contents.
Section 1.2 provides the background to the research and the reasons for studying accounting
1
Chapter 1: Introduction
service providers and small businesses, along with their perceptions relating to finance and
accounting outsourcing. Section 1.3 considers the research questions, objectives considered
central to this study, and the research proposition.
Methodology and research processes covering questionnaire development sampling, data

collection, analysis and interpretation of findings are outlined in Section 1.4. An outline of
limitations of the study as identified in Chapter Five, is covered in Section 1.5, and is followed
by Section 1.6, which identifies the key definitions and terms used in this research.
Section 1.7 presents the thesis structure and an outline of each chapter, and is followed by
Section 1.8, which presents the conclusions from Chapter One.
Chapter 1 Introduction
1.1 Introduction
1.1.1 Chapter objective

1.2 Background to the research
1.3 Research questions, objectives and proposition
1.3.1 Research questions

1.3.2 Research objectives
1.3.3 Research proposition
1.4 Methodology
1.4.1 Theoretical framework

1.4.2 Research design
1.4.3 Research paradigm
1.4.4 Research method and data collection
1.4.5 Analysis and interpretation of findings
1.5 Research limitations
1.6 Definitions of terms
1.7 Research structure
1.8 Conclusions
(Source: Developed for this study)
Figure 1.1 Outline of Chapter One with section numbers and their relationships
2

Based on a review of extant publications, it is evident little research on the subject of
outsourcing the finance and accounting function in Australia has been conducted, thus far,
and accordingly many questions remain unanswered.
Current literature on outsourcing identifies differing viewpoints on what outsourcing covers.

Some literature defines outsourcing as “hiring an outside company to handle all or part of an
organisations data processing activities” (Romney & Steinbart 2006, p. 626), while others
simply refer to outsourcing as “the assignment of an internal function to an outside vendor”
(Gelinas, Sutton & Hunton 2005, p. 669).
For the purpose of this research, finance and accounting outsourcing is defined as ‘the
strategic use of an external third party organisation to perform all or part of an organisation’s
back office functions within the organisations environment’. This definition has been
determined from the contributions of literature on outsourcing and business process
outsourcing and will be applied to the activity referred to as finance and accounting outsourcing
(F&AO).
It is extensively claimed in the literature that cost reduction is one of the main reasons
tempting most small business to outsource their finance and accounting functions
(Financial Executive 2004, p. 52). However, it seems a number of other factors like “access
to accountants with specialised skills” and “increased service levels” (Financial Executive
2004, p. 52) can also be put forward as an explanation of what really influences the decision to
outsource the finance and accounting function. Most small business owners want more than
someone who simply fills in their tax forms and checks financial reports are accurate. In truth,
most small business owners want an advisor to take an active role in managing the business
through rough years (Ray 2007a).
As the volume of outsourcing undertaken by small business escalates each year, the decision
as to which activity to outsource becomes increasingly more difficult (Selim & Yiannakas
2000), and as such, the decision to outsource any small business activity should be considered
very carefully due to the long lasting implications (Selim & Yiannakas 2000).
3
Outsourcing evolved from activities normally regarded as peripheral (such as cleaning,

catering, and security), then expanded to include critical areas such as payroll, accounts
receivable, accounts payable (McIvor 2003). This form of outsourcing is known as F&AO, or
Finance and Accounting Outsourcing.
The incidence of outsourced accounting services is increasing, and many experts predict
a rapid growth in the outsourced accounting market (Gildea 2005). A report by Dunn
& Bradstreet (https://www.dnb.com/newsview/0200news6.htm) described increased
numbers of small business contracting out finance and accounting services, with growth
really beginning to accelerate in 2002 and 2003. They found accounts receivable and
accounts payable were the most commonly outsourced functions, with a growing number of
outsourcing contracts for a full range of accounting services including payroll, management
reporting and analysis.
Small business managers are learning that outsourcing the finance and accounting function
is sound business strategy ( Jennings 2002). Successful outsourcing of the finance and
accounting function may provide ways for small business to meet a diverse set of tactical and
strategic objectives aimed at improving decision making activity, while saving money and
allowing the organisation to focus on its core business activity ( Jennings 2002).
While great ideas and entrepreneurial skills are fundamental to a business start-up, good
financial management is considered critical to business survival (Gildea 2005). The reason
most small business fail is that they are not up to the challenges of effective financial
management and decision-making (Gildea 2005). This is where outsourcing the finance and
accounting function becomes an alternative for small business to consider in order to remain
competitive.
All organisations need relevant, timely and accurate financial reports and analysis (Thiss
2005). The needs are similar irrespective of organisational size but unlike larger organisations,
small business generally cannot afford to employ an in-house accountant. As such,
outsourcing the internal accounting function can make of sense for small business. It is
generally regarded that the outsourcing of finance and accounting functions by small business
to organisations regarded as experts in the field can alleviate the burden of remaining abreast
4
of frequent changes to tax codes and accounting regulations, as well as providing increased
levels of information transparency, visibility of controls, and clarity of accountability (Client
Operations 2005).
Turning to a qualified external outsourcing partner often becomes a logical step for small
businesses struggling to find work strengths among their in-house personnel (White 2001).
In an age where the small business focus is on core competencies, small businesses are
increasingly outsourcing critical financial functions to experts (Prahalad & Hamel 1990).
Accounting is the core competency for many finance and accounting outsourcing providers,
where they are experts in their field.
Outsourcing is gaining popularity as a means of reducing financial and operational risks

by making businesses easier to manage. As White (2001) points out, “improved risk
management has a direct correlation with improvements in financial performance and
shareholder value”, and as continued pressure for improved financial performance increases,
so do the levels of competency and demands for consistency in finance and accounting
functions. “Outsourcing doesn’t work in every situation, but when it does, it is hard to argue
with better financial reporting, decision making and professionalism as well as lower costs
compared to in-house accounting” (Mulherin 2006, p. 22).

Although the reviewed literature discusses the decision, benefit and impact factors of
outsourcing (particularly finance and accounting outsourcing), it fails to identify differences
between perspectives of the two parties involved in the outsourcing arrangement.
Differences in perceptions are important, as they impact upon the expectations of small
business and, consequently, how the service provider satisfies their needs and wants in the
outsourcing arrangement. This section now identifies the research questions, specific research
objectives related to this study and the research proposition.
5
1.3.1 Research questions

Three questions have been identified that will frame the wording of the research proposition:
RQ1: What are the perceived decision factors and their levels of importance in the decision to
outsource the internal accounting functions as considered by accounting service providers and small
business?
RQ2: What are the perceived benefits of outsourcing the internal accounting function as considered
by accounting service providers and small business?
RQ3: What are the perceived impacts of outsourcing the internal accounting function as considered
1.3.2 Research objectives

The aim of the research is to explore and identify differences in perceptions held by small
business and accounting service providers with regard to the decision factors, benefits and
impacts of outsourcing, and to determine to what degree such differences may exist.
The aim of the research is to:
Identify whether a perception gap exists between accounting service providers and small
business relating to decision factors and their importance in outsourcing the internal
accounting function.
business relating to benefits of outsourcing the internal accounting function.
business relating to the impacts of outsourcing the internal accounting function.
6

“It is possible that small business outsourcing the finance and accounting function to organisations
regarded as experts in these fields can provide increased levels of performance, control and
sustainability; however, the decision, benefit and impact factor perceptions held by the service
providers and small business concerning the outsourcing arrangement may be different, and may
require an alignment of understanding.”
1.4 Methodology
Having identified a research topic and carried out the literature review, the next logical step is
to identify the various approaches, strategies and data collection methods available across the
continuum of research philosophy.

Theory frames how researchers look at and think about a topic and give meaning to concepts,
provide basic assumptions, direct researchers to important questions, and suggest ways of
making sense of data (Neuman 2006).
As suggested by Neuman (2006), a theory comprises three parts: concepts, relationships and
scope. Neuman (2006) further explains that concepts are the building blocks of theory, and
are divided into symbols and definitions. Accordingly, theories provide a framework that can
guide business strategy by understanding operational insights that are useful for predicting
future behavioural patterns.
Sekaran (2003) states that literature surveys provide a solid foundation for development of
the theoretical framework by identifying variables that may be significant, as determined by
previous research findings.
7
1.4.2 Research design

Research is defined as “the process of systematically obtaining accurate answers to significant
and pertinent questions by the use of the scientific method of gathering and interpreting
information” (Clover & Balsley 1984, p. 1). As the outcome of any study is influenced by the
choice of research design, determining the study’s characteristics will be a significant factor in
the quality of the conclusion (Miller & Salkind 2002, p. 18)
As there are a variety of approaches to research, it is helpful to categorise the different types
of research. “Business research can be classified on the basis of either technique or function”
(Zikmund 2003, p. 54), and where the research is based on purpose or function, it can be
further classified into exploratory, descriptive, or causal research.
As indicated by Zikmund (2003), exploratory research does not look for conclusive evidence
to determine a course of action, and is “initial research conducted to clarify and define the
nature of a problem” (Zikmund 2003, p. 54). Exploratory studies are a “valuable means
of finding out what is happening and gaining insights to assess phenomena in a new light”
(Saunders et al. 2003, p. 96).
1.4.3 Research paradigm

A research paradigm is a framework or set of basic beliefs the researcher uses to understand
the nature of reality in order to identify the relationship between variables, and to specify
appropriate methods for conducting research (Collis & Hussey 2003).
Two widely-accepted research paradigms are quantitative (hypothetico, deductive,

positivistic) research; and qualitative (constructivist, inductive, phenomenological or
interpretivist) research (Collis & Hussey 2003).
According to Bryman and Bell (2003), quantitative research is presumed to be exemplified by

social survey and exploratory or experimental investigations employing deductive reasoning
to test the extent of theory. Qualitative research is associated with in-depth phenomenological
interviewing and participant observation drawing on inductive reasoning to develop a model
or theory.
8
This view is supported by McMurray (2006, p. 69), who suggests quantitative research
“emphasises the role of measurement and observation and is associated with the collection
and use of numerical data”, and proceeds from the positivistic assumption that “if something
exists, it does so in some degree and can therefore be numerically measured” ( Jankowicz
1995, p. 174).
This study adopts a positivistic/hypothetico, deductive approach to the research objectives

stated at 2.4.1 (page 39) and assesses the main factors involved in the outsourcing decision
as considered by accounting service providers and small business in Australia. It sets out
to identify relationships between the variables in the theoretical model formulated on the
findings of the relevant existing literature review.
This study will not only identify the decision, benefit and impact factors of finance and
accounting outsourcing by small business, but will also seek to identify and understand the
perceptions and attitudes of finance and accounting service providers and small business.
1.4.4 Research method and data collection

Emory (1991) classified business research based on technique into two types: observation
and surveys. However, Zikmund (2003) expands this classification into four basic types:
surveys, experiments, observation and secondary data studies.
The use of surveys is a research technique in which information is gathered from a sample of
people through a questionnaire (Zikmund 2003), and is one of the most popular research
techniques used in quantitative business research (McMurray et al. 2006). “In using surveys
the researcher systematically asks a large number of people the same questions and then
records their answers” (Neuman 2006, p. 43).
Surveys may be classified by the communication medium used: mail and self-administered
questionnaires; telephone interviews; face-to-face interviews; and web surveys (Neuman
2006).
9
Web surveys use the internet as the communication medium. They are fast and inexpensive,
and allow for a flexible design of the survey with visual, audio or video capabilities. The main
advantages of this method are the relatively short implementation time and flexibility of
design (Manning & Munro 2007).
In terms of research technique, this research study utilises the web survey research method.
The decision to use this survey method is based on various factors including costs, available
budget, time constraints, access to research facilities, expertise of the researcher, research
objective, respondent demographics, and survey instrument complexity (Sekaran 2003).
The web survey research method is more appropriate where there is a lack of secondary data
(Zikmund 2003). In this case, secondary data relative to F&AO in Australia is quite limited.
The study will involve data collection from two sub-groups. For the purpose of this study it is
considered the primary source of data will come from a questionnaire distributed to each of
the sub-groups.
The first participant group comprises licensed members of a national accounting services
provider operating as independent businesses providing accounting services to the small
business sector.
Since many tests have shown the percentage of responses to questionnaires can be
significantly increased by using an advanced notice, the purpose of the pilot study
questionnaire will be explained to this group of accounting service providers before their
annual conference, through their organisation’s website.
A pilot study will be conducted wherein each accounting service provider will be provided
with a hard copy questionnaire and an information sheet, and asked to complete the
questionnaire manually.
The data collected from this pilot questionnaire survey will be used to design a general survey
questionnaire which will then be administered to both groups. This questionnaire will be
peer reviewed to satisfy construct validity. Any necessary changes will then be made, and
10
a final questionnaire prepared and administered to the two participant groups. While each
questionnaire will contain the same questions, the way in which those questions are phrased
will depend upon the group to be surveyed.
In the interest of attaining a high response rate, it is considered desirable to keep the
questionnaires to a reasonable size. Both questionnaires will be limited to 24 questions,
comprising five sections which will allow classification of collected data.
The online survey collection method is considered an appropriate means of data collection
due to the demographic distribution of the two survey groups. This survey method will
provide an opportunity to design and implement the survey questionnaire in a short period
of time, and allow testing the questionnaire before distribution to respondents. Testing the
questionnaire will provide the opportunity to evaluate and rectify any design and completion
issues.
The second participant group to be surveyed will be randomly-selected small businesses

from within Australia. The questionnaire will focus on the perceptions of the small business
and motives for outsourcing their accounting and finance activities with respect to decision,
benefit and impact factors, together with any incentives that would encourage them to further
outsource different aspects of their accounting functions.
1.4.5 Analysis and interpretation of findings

The data obtained from the surveys would be mostly categorical, and will be presented in
terms of frequency and central tendency or dispersion.
Each of the questions will contain statements requiring responses. A seven point Likert scale
generally regarded as providing interval-type data (McMurray et al. 2006) will be developed
for this study and used to record responses. These scales will use anchor words at each end of
the scale, and will be summed to provide composite responses. (McMurray et al. 2006)
As noted by Neuman (2006), the real strengths of the Likert scale measurement are in
its simplicity and ease of use, which allows for more comprehensive multiple indicator
measurement where several items are being combined. Davis (2005) confirms that reliability
is high when it comes to the ordering of people with regard to a particular attitude.
11
Cross tabulations will be used to compare demographic characteristics between the two
participant groups, and frequency analysis will be used to compare perceptions relating to
decision, benefit and impact factors between them.
The data analysis will enable the use of a quantitative research approach focusing on a
comparison of small business and services provider perceptions relating to decision, benefit
and impact factors.
SPSS Ver. 14 statistical computer software will be used to analyse the data collected from the
web based questionnaire.

Research limitations likely to affect this study fall into three predominant categories, identified
as service provider, small business, and analytical limitations.
Service provider participants are sourced from a national organisation whose members
provide finance and accounting services to small businesses. The number of service provider
respondents who participated in the survey was 34, from a sample population of 61. These
were considered reliable and representative of the population as a whole; however, it is
recognised that the small number could affect generalisations made in respect to quantitative
interpretations of the data. The potential for bias was also considered a limitation, as the
primary activity of these respondents is providing accounting services to small business.
Small business participants were randomly sourced from a national database. The number of
respondents was 71 from the selected population of 314, which was considered representative
of small business within Australia. Consideration was given in respect to the generalisability
of quantitative interpretations.
Analytical limitations resulted from the limited number of respondents surveyed. As such,
some trade-offs between the exploratory issues being investigated and the scope of the
research was made. The generalisations of findings, measures and populations within this
study represent external validity, and are considered another limitation.
12
1.6 Definitions of terms

Perry (1998) points out that definitions used by researchers are often not universally applied,
and that key and controversial terms should be defined to establish positions taken in
research.
In this section, the following operational terms and definitions are defined, and will be used
within this context throughout this dissertation.
Business operator(s): There is no standard definition of a small business operator, and no

other ABS publications use the term, or provide statistics about small business operators
as a group. However, the expression “small business operator” is often used in research and
policy debate, and is generally taken to include the following: a person or persons who own
and run the business, and where generally these business operators can be identified as the
proprietor of a sole proprietorship, the partners of a partnership, or the working director(s) of
an incorporated company (Operational definition).
Business process outsourcing: occurs where a supplier takes over responsibility for one or
more of an organisation’s business processes (Borman 2006, p. 99)
Constructs: Qualities used to describe and differentiate between elements or the objects of
perception (Collis & Hussey 2003, p. 345)
Core activities: Those activities considered central to the organisation successfully serving
the needs of their customers (McIvor 2003, p. 108)
Cross-tabulations: The process of placing data for two variables in a contingency table to
show the percentage or number of cases at the intersection of variable categories (Neuman
2006, p. 356)
Dependent variable: Variables whose values are predicted by the independent variable
(Collis & Hussey 2003, p. 346)
Enterprise: An institutional unit comprising a single legal entity or business entity; or more
than one legal entity or business entity within the same enterprise group and within the same
institutional sub-sector (Operational definition).
13
Exploratory research: Initial research conducted to clarify and define the nature of a
problem (Zikmund 2003, p. 54)
Finance and accounting outsourcing: For the purpose of this research, finance and
accounting outsourcing is defined as ‘the strategic use of an external third party organisation
to perform all or part of an organisation’s back office functions within the organisations
environment’ (Operational definition).
Frequency distribution: A table that shows the distribution of cases into the categories of
one variable, that is, the number or percent of cases in each category (Neuman 2006, p. 347).
Independent variable: The variable that can be manipulated to predict the values of the
dependent variable (Collis & Hussey 2003, p. 349)
Likert scale: A scale often used in survey research in which people express attitudes or other
responses in terms of ordinal-level categories ranked along a continuum (Neuman 2006,
p. 207)
Population: A body of people or any collection of items under considerations (Collis &
Hussey 2003, p. 353)
Operated at home: A home based business where most of the work of the business is carried
out at the home(s) of the operator(s) ABS (Cat. No 8127.0, 2004, p. 101)
Operated from home: A home-based business where the business has no other premises
owned or rented other than the home(s) of the operator(s) ABS (Cat. No 8127.0, 2004,
p. 101)
Outsourcing: An arrangement in which one organisation provides a service or services

for another organisation that chooses not to perform those services in-house (Operational
definition)
Regional area: A geographic area outside of the Central Business District (CBD) of capital
cities, including non capital cities (Operational definition)
14
Research: The process of systematically obtaining accurate answers to significant and

pertinent questions by the use of the scientific method of gathering and interpreting
information (Clover & Balsley 1984, p. 1)
Small business: Small businesses (excluding agricultural businesses) are those businesses
employing fewer than 20 people ABS (Cat. No 1321.0, 2001, p. 1)
Strategic alliance: Viewed broadly as arrangements among firms to work together to attain
some strategic objective (Zineldin& Bredenlow 2003, p. 452).
Strategic objectives: High-level goals that are aligned with and support the organisation’s
mission (Romney & Steinbart 2008, p. 796)
Strategic outsourcing: an organising arrangement that emerges when firms rely on

intermediate markets to provide specialised capabilities that supplement existing capabilities
deployed along a firm’s value chain (Holcomb & Hitt 2007, p. 466)
Tactical objectives: Processes or activities identified as part of the strategic planning process
(Operational definition)
Turnkey system: A system comprising hardware and software tailored to suit the needs of
the customer that is delivered to customers ready to be used (Romney & Steinbart 2006,
p. 794)

This thesis comprises five chapters as shown in Figure 1.2 (page 16), and is based on the
recommended DBA thesis structure defined by Perry (1998).
15
Chapter 1 Introduction
1.1 Introduction
1.4 Methodology
1.6 Definition of terms
1.8 Conclusions
Chapter 2 Literature review
2.1 Introduction
2.2 Parent discipline
2.3 Immediate disipline
2.4 Research issues
2.5 Conclusions
Chapter 3 Methodology
3.1 Introduction
3.2 Overview of theoretical framework
3.3 Research design and procedures
3.4 Research survey design
3.5 Data collection and analysis
3.6 Ethical considerations
3.7 Strengths and weaknesses identified in the chosen methodology
3.8 Conclusions
Chapter 4 Findings and data analysis
4.1 Introduction
4.2 Data demographics
4.3 Participant questionnaire response analysis
4.4 Conclusions
Chapter 5 Conclusion
5.1 Introduction
5.2 Research outcomes
5.3 Implications for policy and practice
5.4 Limitations of the study
5.5 Future research opportunities
5.6 Conclusions
Figure 1.2 Research structure
16
Chapter One of this thesis provides a general introduction to finance and accounting
outsourcing, and introduces the research. The chapter further discusses the background to the
research and considers the research questions, objectives and research proposition. Research
methodology employed, data collection, analysis and interpretation of findings are also
discussed, and limitations of the study are identified.
Chapter Two provides the background and rationale to the research and introduces the
preliminary theoretical framework for the study. The chapter identifies the parent and
immediate disciplines and reviews the literature relevant to outsourcing and to business
process outsourcing as it applies to finance and accounting outsourcing. The chapter
then discusses the identified decision, benefit and impact factors influencing finance and
accounting outsourcing by small business in order to define the research issues and identifies
the research questions, objectives and research proposition.
Chapter Three discusses the research methodology employed in this study, and considers the
adopted research design and procedures. The chapter considers research survey design and
data collection and analysis methods used in the study, as well as the ethical considerations
and strengths and weaknesses identified in the chosen methodology.
Chapter Four presents the findings of the research study, and interprets their significance
based on the data analysis, then presents the results to identify the components and construct
a theoretical framework supporting the outsourcing of finance and accounting activities of
small business, based on the data analysis.
Finally, Chapter Five systematically presents the findings of the research study, and draws
quantitative conclusions and implications from the survey data analysed in Chapter Four.
It also presents the results of this analysis in order to identify a theoretical framework
for outsourcing the finance and accounting activities by small business, and outlines the
limitations of the study and possible future research opportunities emanating from this study.
17
1.8 Conclusions
The ultimate aim of this research study is to determine whether perception gaps exist between
accounting service providers and small business. This will be achieved through identifying
variables considered by both groups when considering outsourcing internal accounting
activities, and how these perceptions align.
This chapter has identified the study’s research objectives, and provided justification for the
research based on a review of the literature. Methodology (including data collection methods
and analysis and interpretation of findings) has been outlined in this chapter, and will be
further discussed in detail in the next four chapters.
This chapter also comments on the identified limitations of the research, and provides a list
of terms and definitions used in this study. The chapter concludes with an overview of the
thesis structure. The next chapter consists of a review of relevant literature encompassing the
background and rationale for the research, discusses the parent and immediate disciplines and
sets out the research issues for the study.
18
Chapter 2
Literature review
2.1 Introduction
Chapter One introduced the research study and outlined the nature of the research to follow.
This chapter surveys the literature relevant to this research, in particular outsourcing, business
processing outsourcing and finance and accounting outsourcing that commences with an
introduction to outsourcing accounting activities.
“While sound ideas and entrepreneurial skill are fundamental to the business start-up,
good financial management keeps the business going” (Gildea 2005, p. 18). It is argued
(convincingly) that most small businesses fail due to weaknesses in effective financial
management and decision-making (Gildea 2005). Thus, outsourcing the finance and
accounting function emerges as a possible solution to small businesses remaining competitive
(Gildea 2005).
The small business owner plays numerous roles requiring extensive knowledge of all functions
involved in running a business. Large organisations regularly outsource tasks they choose
not to handle in-house. However, outsourcing such tasks is not always possible financially
for small business, whose owners must master many specialised tasks if it is not possible
financially to employ suitably skilled personnel to complete specific task (Ray 2007a).
19
Chapter 2: Literature review
Some small business managers appreciate that outsourcing the finance and accounting
function can be a sound business strategy towards achieving a diverse set of strategic and
tactical objectives in order to improve decision-making capabilities. Additionally, such
practice allows management to focus on core business activities (Gildea 2005). However, any
decision to outsource small business activities should be considered carefully due to potential
long lasting implications.

The objective of this chapter is to undertake a literature review on outsourcing that reviews
the background and rationale of the research as it applies to finance and accounting
outsourcing in order to prepare a theoretical framework for the study. This review then
proceeds to examine the theoretical implications contained within the parent discipline
of outsourcing, followed by a review of the immediate discipline dealing with finance and
accounting outsourcing. Variables of decision, benefit and impact factors will then be assessed
to identify and define research issues emerging from the literature.

Chapter Two is presented in five sections as outlined in Figure 2.1 (page 21), commencing with
an introduction to outsourcing accounting activities in Section 2.1. Section 2.1.1 outlines the
chapter objective, while 2.1.2 describes the structure of the chapter. Section 2.1.3 provides a
background and rationale to the research, and then Section 2.1.4 introduces the preliminary
theoretical framework for the study. Section 2.2 reviews the literature on outsourcing in
general terms and Section 2.3 focuses on the current literature dealing with finance and
accounting outsourcing. Section 2.4 introduces the research issues associated with this study
leading to Section 2.4.1 which provides the research questions and research objectives for
the study. Section 2.4.2 considers the research proposition, while Section 2.5 provides the
chapter’s conclusions.
20
Chapter 2 Litrature review
2.1 Introduction

2.1.3 Background and rationale to the research
2.2.1 Outsourcing
2.3 Immediate discipline
2.3.1 Finance and accounting outsourcing
2.4 Research issues
2.4.1 Research questions and objectives

2.5 Conclusions
(Source: developed for this study)
Figure 2.1 Outline of Chapter Two with section numbers and their interrelationships
2.1.3 Background and rationale for the research

Outsourced accounting services are increasing and some experts forecast a rapid growth
in the outsourced accounting market. As noted by Gildea (2005), a report by the Dallas
based Everest Group described increasing numbers of small businesses contracting out
finance and accounting services, with growth first accelerating in 2002 and 2003. The report
found accounts receivable and accounts payable to be the most commonly outsourced
function, with a growing number of outsourcing contracts for a full range of accounting
services including payroll, management reporting and analysis. As the volume of outsourcing
undertaken by small businesses increases each year, the task of deciding which activities will
be outsourced becomes more difficult.
21

The key elements of business process and finance and accounting outsourcing are identified
in the immediate discipline (Section 2.3), which has been based on the parent discipline
(Section 2.2). These outsourcing elements, which are important to researchers and
practitioners, are developed in the theoretical framework of this research shown in Figure 2.2
(page 23) in Section 2.1.4 to provide readers with a theoretical overview of this research, before
starting the detailed literature review.
The major themes of the framework are the decision factors and their importance in deciding
to outsource internal accounting functions, and the benefits and the impacts of outsourcing
finance and accounting activities as perceived by accounting service providers and small
business.
Briefly, the framework posits there are three major categories of critical factors influencing
finance and accounting outsourcing that can be measured by different dimensions, namely:
decisions, benefit and impact (or risk factors).
Two stakeholder groups exist within finance and accounting outsourcing; these are the
outsourcing service provider and the small business client, and each forms part of, and
impacts upon the critical factors. These stakeholders have different perspectives of the
decision, benefit, and impact factors of finance and accounting outsourcing.
Distinguishing between these different perspectives is important as it identifies gaps likely

to exist between the provider and the client. Any identified gap in the perceptions of the two
parties can affect the alignment understanding of the service arrangement between those two
parties.
Three research questions are extracted from extant literature review to develop the framework
to provide the focus for data collection in this research.
22
Key considerations for outsourcing
Accounting service
Outsourcing provider perceptions
Perception
decision
gap
factors Small medium
enterprise perceptions
Accounting service
Perception
benefit
gap
Accounting service
Perception
impact
gap
Alignment of understanding
the service arrangements
Figure 2.2 Preliminary theoretical framework for this research

Current literature on outsourcing identifies differing viewpoints as to precisely what
constitutes outsourcing. Some literature defines outsourcing as “hiring an outside company
to handle all or part of an organisations’ data processing activities” (Romney & Steinbart
2006, p. 787), while other writers simply refer to outsourcing as ”the assignment of an internal
function to an outside vendor” (Gelinas et al. 2005. p. 290).
23
2.2.1 Outsourcing
Outsourcing is a typical form of strategic alliance, about “make or buy decisions”. Embleton
and Wright (1998) define outsourcing as having an outside vendor provide services
previously performed in-house, the transfer of “routine and repetitive tasks” to outside
providers, and the paying of other organisations to provide that work. This means that
outsourcing is about the strategic use of resources outside the small business in order to
perform activities that otherwise would have been done by in-house personnel using in-house
resources.
Whatever definition is employed, outsourcing may be viewed as an arrangement in which

one organisation provides a service or services for another that chooses not to perform
them in-house. For the purposes of this research, the Embleton and Wright interpretation of
outsourcing will be adopted.
According to the D&B Barometer of Australian Outsourcing (http://www.dnb.com.au/

recievables/barometer-2002.asp), outsourcing is continuing its penetration of the Australian
business scene with expenditure on financial outsourcing activities eclipsing $2 billion in
2002. This is expected to continue to increase annually.
Much of the anticipated expenditure is expected to come from organisations expending their
existing outsourcing activities into areas such as payroll, accounts receivable management
including debtor collections, financial information systems, and auditing (http://www.dnb.
com.au/recievables/barometer-2002.asp).
Although no details are readily available, it is commonly agreed that outsourcing is a common
practice among both private and public organisations and is a major element in business
strategy. Most organisations now outsource some business activity previously performed in-
house.
Therefore, outsourcing can be seen as a strategic choice made by small business for various
reasons. As Quinn (1995, p. 3) states “companies are looking at it strategically. They are
turning to outsourcing so that they can focus on what really differentiates them from their
competitors, not just to save costs”.
24
Due to the growth and impact of outsourcing on business, numerous reasons why
outsourcing is initiated have been identified by researchers. Small business may expect to
achieve many benefits through outsourcing, however there are significant risks which may be
realised if outsourcing is not successful.
There is an abundance of literature on outsourcing, where many decision factors, benefits and
impacts have been presented although the relationships, and perceptions existing between
small business and service providers have not been investigated, which is the rationale and
basis of this study.
Findings from the literature suggest the issue of outsourcing has generated a great deal of
debate. Amongst those broadly in favour of outsourcing as a strategic response to increased
competition are Quinn and Hilmer (1994), who claim most organisations can substantially
leverage their resources through strategic outsourcing. A particular area suggested by Quinn
and Hilmer (1994) was the strategic outsourcing of activities for which the firm had neither
a critical strategic need nor special capabilities; this view was shared by Jennings (1996) and
Hinton (1996).
Those opposed to outsourcing suggest organisations that rely on outsourcing invite a

disastrous loss of competitiveness. Prahalad and Hamel (1990) suggest the skills that give
rise to the next generation of core competencies cannot be ‘rented in’ by outsourcing, and
accordingly organisational competitiveness may be seriously undermined. Prahalad and
Hamel’s argument (1990) states that core competencies must be nurtured and protected
over time for competitive success, and that these competencies are both the glue that binds
together existing businesses and the engine that drives new business development. Similarly,
Bettis, Bradley and Hamel (1992) concluded that outsourcing plays an important role in the
continuing competitiveness of many western organisations.
Outsourcing may be a relatively new term, but is not a new concept, as the 1980s and 1990s
saw essential organisational activities such as information technology and accounting being
treated as ‘non-core’. As a result, these organisational activities became prime activities for
outsourcing.
25
In light of the current economic environment a renewed focus exists on core business
activities. Small business can no longer assume that all in-house activities must be provided
and managed internally.
Outsourcing may be seen as a plausible business solution and a viable strategic and economic
approach allowing small business to concentrate on their core competencies. Outsourcing
evolved as a viable strategic alternative as small business determined that its activities could
be classified as non-core and core (Hilton 1999), however, the complexity of business does
not allow for definitive rules and a simple decision on what constitutes core and non-core
activities.
Core competencies theory suggests activities should be performed either in-house or by

service providers. Activities which are not core competencies should be considered for
outsourcing with ‘best-in-world’ providers. Some non-core activities may have to be retained
in-house if they are part of a defensive posture to protect competitive advantage (Quinn
1992). Although some authors indicate characteristics of core competencies (Prahalad &
Hamel 1990), ‘most of the literature on this subject is tautological – “core” equals “key” or
“critical” or “fundamental”’ (Quinn & Hilmer 1994).
The most common rationale is that core competencies remain in-house and non-core
activities are outsourced (Hilton 1999), however there can be little objectivity in making
such a decision. If non-core activities can be identified by small business and it is decided to
outsource these activities, then control and the quality of service needs to be monitored to
ensure that standards are maintained.
To achieve control and quality of service over outsourcing activities, a clear understanding
of benefits and impacts are necessary requiring an alignment of perspectives between service
provider and small business
Advocates of outsourcing suggest a better outcome is attained by outsourcing all or part

of an organisation’s internal activities. Marshall (1994) suggests one claim that supports
outsourcing is flexibility. An outside service provider can often be hired at a moment’s notice
or for a specified period of time, which is particularly useful where the organisation’s need
exceed the capabilities or abilities of in-house staff. Flexibility can be a decisive factor in an
26
organisation’s success, and an outsourcing manoeuvre can usually contribute to its internal
and external flexibility (Bengt 2005) Outsourcing can eliminate the need for hiring additional
permanent staff when in-house staff cannot cope with the extra volume of work to be done.
From the above, Bengt (2005) suggests outsourcing is a euphemism for cutbacks in staff
or capacity, while others may see it as an effective way of concentrating on core business
activities by divesting non-core activities. Thus outsourcing may be a strategic tactic for
organisations plagued by diversification.
Outsourcing may also be seen as the strategic use of resources outside the buying
organisation, performing activities that would otherwise have been carried out by in-house
personnel using internal resources (Ray 2007b). Organisations are adopting a strategic
approach to outsourcing in order to focus on what differentiates them from competitors, and
not simply as a cost-saving strategy (Quinn 1999).
However, cost savings or cost cuts can also provide a relevant tactical reason for outsourcing.
Embleton and Wright (1998) suggest the most obvious reason for outsourcing is to reduce
costs by providing time savings and freeing staff for other activities. Cutting costs is often seen
as a major benefit of outsourcing however, this can lead to disappointment. A much better
reason for outsourcing may be the specialised knowledge the outsourcing service provider
can provide (Lankford & Parsa 1999). A common outsourcing need is to obtain specialised
expertise that is cheaper to purchase than to develop in-house, as this need for expertise can
be sporadic or irregular, and may not justify a permanent employee.
The rapid growth of outsourcing suggests public and private organisations expect it to be
beneficial, although naturally, the expected benefits will vary in accordance with different
organisations particular circumstances. In addition to the cost savings attributed to
outsourcing, Lankford and Parsa, (1999) and Bengt (2005) identify increased flexibility and
responsiveness for small business, reduced risk, low cost, access to new business technology,
and reduced operating costs as benefits associated with outsourcing.
27
Organisations outsource to obtain benefit or advantage. Bagranoff, Simkin and Strand (2005)
state that advantages provided by outsourcing include; an attractive business solution, lower
costs, avoids seasonal fluctuations, and affords greater flexibility. While these benefits may
exist it is important to understand the impact these benefits may have on the organisation.
The benefit of providing a better business solution may be achieved by handing over a
particular function or activity to an expert who is better equipped, more experienced, and
therefore better able to perform the tasks as required (Bagranoff et al. 2005).
The effectiveness of outsourcing may come in part from cost savings that outsourcing service
providers can achieve with economies of scale. Furthermore, outsourcing fees can be fully tax
deductible resulting in reduced federal income taxes (Bagranoff et al. 2005). Outsourcing for
cost reasons can occur when provider’s costs are low enough that even with added overhead,
profit and transaction costs, providers can still provide a service for a lower cost. Kremic,
Tukel and Rom (2006) state specialisations and economies of scale are mechanisms used to
achieve these levels of efficiency and cost savings due to outsourcing can be quite significant.
If an activity or function is to be outsourced for cost reasons, it assumed that the current
in-house costs are considered higher than the expected costs of outsourcing the activity or
function. Organisations outsource to reduce costs, therefore the higher the internal cost to
perform the activity or function relative to the expected cost, the more likely the activity or
function is to be outsourced (Kremic, Tukel & Rom 2006).
Outsourcing enables organisations to stabilise their data processing operations, particularly

with regard to fluctuating seasonal activity and personnel requirements, by paying
outsourcing service providers fixed monthly fees for services provided based on the levels of
activity (Bagranoff et al. 2005).
Furthermore, Kremic, Tukel and Rom (2006) in their paper Outsourcing decision support: a
survey of benefits, risks and decision factors identify a range of expected benefits including cost
savings, reduced capital expenditure, increased speed of service, greater flexibility, access
to latest technology, access to skills and talent, staff augmentation, increased focus on core
activities, legal compliance, and improved accountability and management.
28
Beaumont and Sohal (2004) suggest the criteria used to evaluate outsourcing decisions may
be multidimensional and intangible and, apart from being able to estimate cost savings, the
organisation should also consider the intangible impacts of freeing up management time and
dependence upon the outsourcing service provider.
Additional to the benefits and risks of outsourcing, there are other factors such as strategy,
cost, and function characteristics which may impact the outsourcing decision (Quinn 1999).
Core competence may be seen as a strategic factor linked to the outsourcing decision and as
providing competitive advantage to small business. It is widely recognised in the literature
that identifying what a core function is will have bearing on whether or not to outsource it
(Quinn 1999: Lankford & Parsa 1999: Prahalad & Hamel 1990). Quinn (1999) suggests
that ‘those activities—usually intellectually-based service activities—that the organisation
performs better than any other enterprise’ are core activities. That is, a function or activity that
is core to the organisation is less likely to be outsourced.
The ideas of core competence and its relationship to outsourcing have evolved from the work
of Prahalad and Hamel (1990), who argue that the real sources of competitive advantage
are to be found in management’s ability to consolidate corporate-wide technologies and
production skills into competencies that empower individual businesses to adapt rapidly to
changing business opportunities.
The second strategy factor is critical knowledge. Some organisational functions or activities
may be unique, as the data or technology generated feeds into other critical processes (Green
2000). Similarly, there are some organisational functions or activities that generate data or
knowledge which the organisation wants to control (Green 2000). This suggests that if an
activity or function provides critical knowledge it is less likely to be outsourced.
Another strategic factor identified is the lack of human resources. In small business, access to
people with specialised knowledge may be an issue. An activity or function is more likely to
be outsourced if there is a lack of internal human resources to perform (Green 2000). Impact
on quality is another strategic factor as the quality of an organisation’s services establishes
29
reputation and can create demand. Quality of the service and its’ impact on the organisation
may be seen as positive or negative factor influencing the outsourcing decision by small
business.
A number of issues are involved in the outsourcing decision by organisations and Lankford
and Parsa (1999) suggest the following as key items for consideration:
• impact on the organisation’s competitiveness
• identifying the services to be outsourced
• the number of service providers to be used
• service provider reliability
• service provider service quality
• the ability to return to in-house operations if required
• co-ordinating with the service provider and evaluating performance
• providing the latest/advanced technology and expertise
Many small businesses are increasingly involved in outsourcing due to changes in technology,
organisational structure, strategic planning and customer demands (Ray 2008). Small
businesses have been both vendors and clients from this trend, as many small businesses
purchase the expertise they lack, cannot develop themselves, or are able to purchase at lower
cost (Ray 2008).
Many businesses purchase payroll and accounting services from other small businesses (Gale
Group 1998), while others purchase software and services from other small businesses.
Conversely, many small businesses are vendors that provide specialised services.
The advantages in outsourcing can be operational, strategic, or both (Lankford & Parsa
1999). Where operational outsourcing may provide short term trouble avoidance, strategic
outsourcing may offer long term solutions in maximising opportunities as a long-term
30
relationship may enable service providers to accomplish their own strategic planning through
co-ordinating their efforts and the efforts of their clients (Hoffman & Kranhke n.d). All too
often, the small business approaches outsourcing as a tactical or short-term solution.
Recently the main drivers for outsourcing appear to be shifting from cost to strategic issues
such as core competence and flexibility (Lankford & Parsa 1999). Outsourcing as a strategy
may offer improved business performance on numerous dimensions (Prahalad & Hamel
1990). The most often cited strategic reason for outsourcing is to allow small business to
better focus on its core competencies (Quinn & Hilmer 1994).
Flexibility appears to be an important driver not just from a scale perspective but also
regarding the scope of the product or service, as small business need to react quicker to
customer requirements and outsourcing is seen as a way to accomplish this (Kremic, Tukel &
Rom 2006).
The rapid growth of outsourcing suggests that small businesses expect benefits from
outsourcing. Expected benefits of outsourcing as suggested by Kremic, Tukel and Rom
(2009) include realising the same or better service at a lower overall cost, increased flexibility,
access to latest technology, access to greater levels of expertise and the ability to re-focus
scarce resources onto core functions.
Outsourcing is a rather recent strategy of small business, where the complete costs are
not always known. This poses a risk and while it is recognised that all the potential risks of
outsourcing are not currently known, Kremic, Tukel and Rom (2006) suggest the following as
potential risks associated with outsourcing:- unrealised savings with a potential for increased
costs, employee moral savings, over dependence on a supplier or service provider, lost
corporate knowledge and dissatisfied customers.
In today’s environment, outsourcing selected small business activities is becoming an integral

part of the small business strategy. Activities considered as non-core to small business such as
payroll, human resources, and information systems are more frequently being outsourced to
external service providers (Lankford & Parsa 1999).
31
Theorists and practitioners alike, claim that outsourcing non-core competencies allows an
organisation to strategically focus on its primary business and that while most areas where
outsourcing occurs fit this non-core definition, a look at the activities less often outsourced
leads to questions as to whether the move to outsourcing usually is driven by key competency
focus (http://www.dnb.com.au/recievables/barometer-2002.asp). Areas such as investment
analysis, financial reporting, receivables management and financial information systems are
hardly core competencies for most small business.
A number of authors (including Quinn et al. 1990) emphasise the benefits of outsourcing
in providing increased focus on a set of core activities and reduction in the functional scope
of the organisation, enabling the development of a more focused organisation capable of
increased responsiveness to market change. The complementary use of outside resources can
also provide opportunities for enhanced leverage of the organisation’s core resources.
A potential obstacle for service providers is whether their client perceives outsourcing from
a strategic or tactical perspective (Hoffman & Kranhke n.d). If clients view outsourcing
strategically then benefits may be realised by the service provider. This is especially true if
the service provider and client can develop a strategic alliance allowing the service provider
to plan, hire, train staff and monitor quality, and thus provide a quality service to its client
(Hoffman & Kranhke n.d).
In addressing the issue of strategic outsourcing Quinn and Hilmer (1994) emphasise the
need for the organisation to concentrate resources on a set of core competencies “where it
can achieve definable pre-eminence and provide unique values for customers … strategically
outsourcing other activities … including many traditionally considered integral to the
organisation” (Quinn & Hilmer 1994, p. 43).
If the client views outsourcing as a tactical initiative, the service provider is subject to that
client’s fluctuating demands. Irregular or fluctuating demand may cause the service provider
difficulty in satisfying the client’s demands, which may result in problems with turnover,
morale, poor service quality, costs and inefficiencies (Hoffman & Kranhke n.d). This in turn
may decrease the small business’s profitability, sustainability, future competitiveness and
survival.
32
Strategic decisions need to be evaluated against a long-term perspective. For outsourcing

decisions, that includes a consideration of longer term trends in the supply market, including
concentration, and the changing costs that face the small business in the near, medium and
longer term. The service capability of service providers and their financial strength must also
be assessed to avoid provider failure (Blumberg 1998) as must their ability to understand the
client’s goals, mission and culture.
Outsourcing decisions and transactions are typically large and complex, strategically and
operationally important, and involve significant organisational strain (Mazzawi 2002).
As such, success in outsourcing is driven by the quality of the relationship between the
service provider and the small business client, rather than the fine details of the outsourcing
arrangement. Successful outsourcing by small business is dependent on trust. Aligned,
mutually beneficial outsourcing relationships deliver results and build-in the room to
manoeuvre that allow both parties to ensure that the outsourcing arrangement remains
appropriate to their circumstances and business imperatives.
Outsourcing is a hierarchical sequence of decisions (Beaumont & Sohal 2004), with the
fundamental decision being whether or not to outsource a business process or activity.
In summary, outsourcing may be seen as a strategic or tactical initiative adopted by small

business to satisfy increasing demands of competitiveness and sustainability through
increased cost savings and improved core activity focus. While outsourcing can often
help control costs, simplify operations, and keep the small business focused on its core
competencies, it will not work unless it is properly implemented. It should be noted that
outsourcing may fail due to inadequate requirements being defined by the client, lack of
guidance in planning or managing the outsourcing arrangement or because of misconceptions
between the client and service provider resulting in poor communications.
2.3 Immediate discipline

Current literature provides no definitive definition of finance and accounting outsourcing. For
the purpose of this research, finance and accounting outsourcing is defined as ‘the strategic
use of an external third party organisation to perform all or part of an organisations back office
33
functions within the organisations environment’. This definition has been determined from
the contributions of literature on outsourcing and business process outsourcing and will be
applied to the activity referred to as finance and accounting outsourcing (F&AO).
2.3.1 Finance and accounting outsourcing

The roles of the small business owner are numerous and require extensive knowledge of all
aspects in running a business. Organisations regularly outsource the tasks they choose not
to handle in-house, however small businesses are not always so financially fortunate and are
usually required to master certain tasks themselves or hiring a high salary employee to do so
(Hirschman 2000).
As the business environment continues to change rapidly and competition becomes more
intense, small businesses are focusing more on their core competencies and outsourcing non-
core activities and functions to external service providers (Kim & Won 2007).
Business process outsourcing (BPO) is the outsourcing of business functions generally

performed in-house by white collar and clerical employees to achieve various benefits such as
cost savings, better quality, and ability to focus on core competencies (Tutorial-Reports.com).
BPO involves outsourcing processes that are not core to an organisation, but essential to the
organisation’s efficient operation (Tutorial-Reports.com).
Further, Bagranoff, Simkin and Strand (2005, p. 199) state “business process outsourcing is
about specialisation and allowing the organisation to focus on core business processes.”
BPO allows the organisation to transfer complete responsibility of specific non-core processes
to the outsourcing service provider, who guarantees certain service quality standards. BPO
deals with an organisation’s non-core processes, and may include administrative support,
document processes and finance and accounting outsourcing.
Business process outsourcing has been increasingly used in today’s business practices (Zhu,
Hsu & Lillie 2001). Small businesses are searching for any strategy that can provide them
with success. Outsourcing is one of these strategies that can lead to greater competitiveness
(Embleton & Wright 1998).
34
BPO typically covers back-office financial operations like accounting, human resources,
supply chain and call centre operations (Ephraim 2005). Organisations are realising that
outsourcing allows them to focus on core competencies while leveraging BPO’s best-practices
capabilities (Ephraim 2005).
Small business has outsourced so many activities in recent years; it was only a matter of
time before the internal accounting function was to find itself next in the queue to receive
the outsourcing treatment. However, while the decision to hand over to outside service
providers support activities such as cleaning and security, might be taken with some degree
of ease (Selim & Yiannakas 2000), the decision to outsource functions such as internal
accounting should be taken with extreme caution since such decisions could have long-lasting
implications.
As the amount of outsourcing undertaken in a small business escalates year after year,
decisions as to which activity or function to outsource inevitably become more difficult.
There can be no doubt that as long as outsourcing initiatives get closer to the organisations
core and to activities which are at the centre of its future success, the risks involved will be
greatly increased (Selim & Yiannakas 2000).
Organisations outsource for various reasons; costly transactions, too much time spent on
daily operations, high cost of upgrading applications, lack of integrated processes, difficulty
hiring or retraining process staff and lack of timely or accurate reports (Babcock 2004).
Outsourcing has evolved from activities normally regarded as peripheral, such as cleaning,
catering, and security (McIvor 2003) to include critical areas like payroll, accounts receivable
and accounts payable. Due to the strategic importance of outsourcing (McIvor 2003), the
decision to outsource is given more consideration by small business.
Outlining his vision of the future Drucker (1995, p. 12) stated “In another 10 to 15 years,
organisations may be outsourcing all work that is “support” rather than revenue producing,
and all activities that do not provide career opportunities into senior management. In
many organisations a majority of the people who work for them might be employees of an
outsourcing contractor”
35
Outsourcing is not really a new phenomenon. Small business has been outsourcing activities
and functions such as security, cleaning and maintenance for decades. However, small
businesses are now outsourcing a whole range of activities or internal functions they would
not have previously considered. Small business is increasingly rejecting the “we can do it all”
mentality and are focusing solely on what they are best at and are outsourcing the rest.
The specific arrangements of F&AO may differ between small business, however they
usually entail the transfer from the client to the service provider the following functions;
financial reporting, financial statement preparation, accounts payable processing, sales report
processing, payroll processing, bank reconciliations and cash balance reporting (Laube &
Roberts 2002). This transfer of functions means small business is no longer dependent on
key accounting personnel to perform internal accounting functions as the responsibilities are
turned over to the F&AO service provider.
Outsourcing internal accounting functions means one less internal function that takes time
and resources away from what really determines small business success (Laube & Roberts
2002), as clients gain access to better technology and expertise than they could afford to
develop internally.
Small business may regard outsourcing of F&AO functions as “giving up control” of vital
business process, however outsourcing internal accounting functions may be regarded as
a way to gain control by managing the day-to-day operations of the business and paying
someone else to report the numbers (Laube & Roberts 2002). More and more small business
are recognising the need to stay focused on what they do best – their core competency or
process.
Outsourcing is a way of reducing financial and operational risks by making them easier
to manage (White 2001). With improved risk management correlating directly with
improvements in financial performance and shareholder value, continued pressure
for improved financial performance will increase, as will the levels of competency and
consistency in finance and accounting functions (White 2001).
36
“As small businesses struggle to find work-strengths among their in-house personnel, turning
to a qualified, external outsourcing partner often becomes a logical step” (White 2001. p. 51)
In an age where focus on core competency is the mantra (Prahalad & Hamel, 1990), small
businesses are increasingly outsourcing critical financial functions to experts. Accounting is
the core competency of many finance and accounting service providers who are experts in
their field.
Cost reduction is one of the main reasons most small businesses outsource their finance and
accounting functions (Embleton & Wright, 1998). However, other factors such as increased
flexibility, responsiveness, reduced risk, low cost, access to new business technology and
reduced operating costs (Hosking 2004; Bengt 2005), can also influence the decision to
outsource the finance and accounting function.
Hosking (2004) identifies four key benefits of outsourcing: Increased flexibility and
responsiveness for the business, reduced risk, lower cost access to new business technology
and reduced operating costs.
Data processing tasks have long been a target for outsourcing (Bagranoff, Simkin & Strand
2005), with outsourcing of accounting functions such as accounts payable, accounts
receivable, payroll, general ledger accounting and financial reporting becoming more
widespread.
Finance and accounting business processes, including accounts payable, accounts receivable,
financial reporting, tax consulting and internal audit services are expected to be the most
widely outsourced business process categories in the near future (Financial Executive 2004.
p. 51). Spending on F&AO is estimated at $65 billion by 2006, a 12.3% five-year compound
annual growth rate (Financial Executive 2004. p. 51). “Dunn & Bradstreet’s Global Barometer
for outsourcing predicts F&AO will represent ten per cent of the total worldwide market for
outsourced services by 2005” (Financial Executive 2004. p. 51).
In a study of outsourcing, the Economist Intelligence Unit and Arthur Anderson found that
26 per cent of organisations that do outsource, outsource some part of their finance and
accounting function, with 42 per cent expected to outsource in the near future (Vollmers
1997. p. 64).
37
The data suggests a growing importance of F&AO, making it one of the fastest-growing
sectors of the BPO industry.
Thiss (2005) suggested organisations need relevant, timely and accurate financial reports
and analysis, and that their needs are very similar, irrespective of the organisations’ size.
Unlike larger organisations, small businesses generally cannot afford to employ an in-house
accountant (Thiss 2005).
The Controller’s Report (2006) suggests many organisations have specialised departments to
handle important operations, and that focusing on critical non-core functions like F&AO can
distract business executives and detract from the organisation’s ability to grow to its bottom
line. The report suggests this is where outsourcing the F&AO activities has found its niche.
F&AO is about knowledge, skill, technology and strategies to improve the organisations
ability to streamline its financial operations, and a holistic approach to F&AO can allow an
organisation to focus on its core business functions, leaving an expert resource to improve a
key, non-core activity (The Controller’s Report 2006).
Outsourcing doesn’t work in every situation, but when it is does, it is difficult to argue against
better financial reporting, decision-making and professionalism (as well as lower costs) when
compared with in-house accounting (Mulherin 2006).
As Thiss (2005. p. 8) suggests: “if you’re a small to mid-size business, chances are you cannot
afford to hire the breadth of expertise you may require”; and that “with a few exceptions,
outsourcing accounting can result in operating cost reductions and better strategic insight. No
matter your size, your needs are constantly changing” (Thiss 2005. p. 8).
By relying on external service providers for activities viewed as secondary to their core
business, small business are finding that they can simultaneously reduce their costs and at the
same time maintain, or even improve, the quality of their output (Selim & Yiannakas 2000).
Outsourcing the internal accounting function may be relatively new, but with these benefits, it
is easy to see why it is here to stay (Mulherin 2006). Organisations are embracing outsourcing
internal accounting functions as they realise that they have certain limitations and that
specialised service providers have as their strengths, these limitations (Selim & Yiannakas
2000).
38
In summary, this section focuses on finance and accounting outsourcing, a discipline- specific
segment of the business process outsourcing industry. Key points in this section identified
F&AO as being principally concerned with an organisation’s back office activities. The
activities generally outsourced may include all of the organisation’s finance and accounting
business processes. This section further identifies the needs of small business in relation to
finance and accounting activities, and the subsequent benefits of outsourcing these activities
to specialist service providers.
2.4 Research issues

The parent and immediate disciplines laid the groundwork for directly addressing the research
problem introduced in Chapter One. A theoretical framework (Figure 2.2, page 23) was
presented, from which the research questions and objectives could be developed in order to
provide the focus for data collection and analysis.
The aim of the research is to explore and identify the differences in perceptions held by
small business and accounting service providers with regard to the benefits, impacts and
decision factors of outsourcing, and to determine to what degree such differences may
exist. The reviewed literature discusses in depth the decision factors, benefits, and impacts
of outsourcing (particularly finance and accounting outsourcing), but fails to identify
differences in perspectives of the two parties involved in the outsourcing arrangement.
Differences in perceptions are important, as they impact upon the expectations of small
business and how the service provider satisfies the needs and wants of small business in the
outsourcing arrangement. This study is aimed at filling this perception difference gap.
2.4.1 Research questions and objectives

The first objective is to identify the gap likely to exist between different perceptions held by
accounting service providers and outsourcing small business. This gap will relate to decision
factors and their importance in outsourcing the internal accounting function.
As a result of the stated objective, Research Question 1 (RQ1) was identified as being relevant
to this study.
39
RQ1: What are the perceived decision factors and their levels of importance in the decision to
outsource the internal accounting functions as considered by accounting service providers and small
business?
The second objective is to identify the gap likely to exist between the different perceptions
held by accounting service providers and small businesses relating to the benefits of
outsourcing the internal accounting function. It is extensively claimed in the literature that
‘cost reduction’ is one of the main reasons, if not the main reason, that tempts most small
businesses to outsource their internal accounting functions. However, it seems that a number
of other factors like ‘access to service providers with special skills’ can be put forward as an
explanation as to what really influences the decision to outsource the internal accounting
function.
to this study.
RQ2: What are the perceived benefits of outsourcing the internal accounting function as considered
The third objective is to identify the gap likely to exist between the different perceptions held
by accounting service providers and small businesses relating to the impacts of outsourcing
the internal accounting function.
to this study.
RQ3: What are the perceived impacts of outsourcing the internal accounting function as considered

“It is possible that small business outsourcing the finance and accounting function to organisations
regarded as experts in these fields can provide increased levels of performance, control and
sustainability; however, the decision, benefit and impact factor perceptions held by the service
providers and small business concerning the outsourcing arrangement may be different, and may
require an alignment of understanding.”
40
2.5 Conclusions
This chapter has been presented in five sections as outlined in Figure 2.1. Section 2.1 provided
an introduction to outsourcing activities. Section 2.2 identified and reviewed the relevant
literature relating to the parent discipline dealing with the definition of outsourcing and key
items to be considered by small business. Section 2.3 discussed the immediate discipline
of finance and accounting outsourcing and provided support for adopting accounting
outsourcing by small business, and Section 2.4 introduced the research issues associated with
this study.
This study takes the view that the considerations associated with outsourcing the accounting
function by small business do not take into account the perceptions held by the two parties;
namely, the accounting service providers and small business, and as such, differences in
perceptions may exist. These differences are important as they impact upon the expectations
of small business and how the service provider might go about satisfying the needs and wants
of small business in the outsourcing arrangement.
The next chapter will discuss the methodological issues and the particular methodological
approach adopted for this research.
41
Chapter 3
Methodology
3.1 Introduction
Chapter Two reviewed the literature and research issues relevant to finance and accounting
outsourcing in Australia, and developed a theoretical model based on the identified gaps. The
model is composed of three first-order latent constructs comprising outsourcing decision,
benefit and impact factors. Three research questions and three research objectives were
identified as the basis for the research proposition.

This chapter aims to justify and outline the research methodology applied in investigating the
research questions and objectives identified in the theoretical model developed in Chapter
Two.

This chapter is presented in eight sections (as outlined in Figure 3.1, page 43), commencing
with an introduction to the chapter. Section 3.1.1 outlines the chapter objective, while
Section 3.1.2 describes the structure of the chapter. Section 3.2 provides an overview of
the theoretical framework, and Section 3.3 considers research design and procedures and
discusses research design alternatives, the research methodology, and research technique
justification. Section 3.4 discusses the research survey design, Section 3.5 and its subsections
discuss the data collection methods used and data analysis techniques applied. Section 3.6
42
Chapter 3: Methodology
discusses the ethical considerations applicable to this study, and Section 3.7 identifies the
strengths and weaknesses of the chosen methodology, and finally Section 3.8 provides the
chapter’s conclusions.
Chapter 3 Methodology
3.1 Introduction

3.3.1 Research design alternatives

3.3.2 Research methodology justification
3.3.3 Research technique justification
3.4.1 Construct and item generation

3.4.2 Survey administration, data screening and data demographics
3.4.2.1 Sampling procedure
3.4.2.2 Missing data
3.5.1 Data collection methods

3.5.2 Secondary data
3.5.3 Primary data
3.5.3.1 Population and sample selection process
3.5.3.2 Survey questionnaire design
3.5.3.3 Data analysis
3.5.3.4 Analysis and interpretation of data
3.7 Strengths and weaknesses identified in the chosen methodology
3.8 Conclusions
Figure 3.1 Outline of Chapter Three indicating section numbers and their relationships
43

Through observation and the gathering of facts from various situations or business operations,
information can be generalised as a concept and used to explain some characteristics of
certain phenomena. For more in-depth study, this involves the underlying theories concerned
with verifiable concepts and empirical evidence (Ray 2008).
Theory as defined by Zikmund (2003, p. 41) is “a coherent set of general propositions, used as
principles of explanation of the apparent relationship of certain phenomena”. Neuman (2006,
p. 50) further defines social theory as “a system of interconnected ideas that condenses and
organizes knowledge about social world”. Therefore, theories provide a framework that can
guide business strategy by understanding operational insights useful for predicting future
behavioural patterns.
Theory frames how researchers look at and think about a topic and give meaning to concepts,
provide basic assumptions, direct researchers to important questions, and suggest ways to
make sense of data (Neuman 2006).
As suggested by Neuman (2006), a theory comprises three parts: concepts, relationships

and scope. Neuman (2006) further explains that concepts are the building blocks of theory,
and are divided into symbols and definitions. Social theory contains concepts, a relationship
among concepts, and a causal mechanism, or reason for the relationship. Scope of theory
allows clearer communication to an audience.
Scientific method techniques are used to analyse empirical evidence. There are seven stages in
an analytical process of scientific theory building: assessment of relevant existing knowledge
of a phenomenon, formulation of concepts and propositions, statements of hypotheses,
design of research to test hypotheses, acquisition of meaningful empirical data, analysis and
evaluation of data, proposal of an explanation of the phenomenon and statement of new
problems raised by research (Zikmund 2003).
Building blocks of scientific inquiry include the process of initially observing phenomena
identifying the problem; identification of problems; constructing a theory to explain what
might be happening; developing hypotheses; determining aspects of research design;
collecting data; analysing data; and interpreting results (Sekaran 2003).
44
Sekaran (2003) goes on to suggest a relationship between a literature survey and theoretical
framework is that literature surveys provide a solid foundation for developing the theoretical
framework. That is, literature surveys identify variables that may be significant, as determined
by previous research findings.
Deductive and inductive approaches are applied in building and testing of theory from two
directions (Neuman 2006):
Deductive approaches start with an abstract, logical relationship between concepts and
move toward empirical evidence, while inductive approaches begin with observations and
move toward abstract generalisations and ideas. Preliminary relationships are identified after
refining concepts from observations and developed empirical generalisations (Ray 2008).

Once the objectives of the research have been defined, the research design can be planned.
One definition of research is “the process of systematically obtaining accurate answers to

significant and pertinent questions by the use of the scientific method of gathering and
interpreting information” (Clover & Balsley 1984, p. 1). As the outcome of any study is
influenced by the choice of research design, determining the characteristics is a significant
factor in the quality of the conclusion (Miller & Salkind 2002).
3.3.1 Research design alternatives

As there are a variety of different research approaches, it is helpful to categorise the different
types of research. This thesis is concerned with the types of research applied in business.
Business research can be classified on the basis of either technique or function (Zikmund
2003), and business research based on the purpose or function of the research can be further
classified into exploratory, descriptive, or causal research.
45
1) Exploratory research is “initial research conducted to clarify and define the nature
of a problem” (Zikmund 2003, p. 54). Exploratory studies are a “valuable means of
finding out what is happening and gaining insights to assess phenomena in a new light”
(Saunders et al. 2006, p. 96). This research does not look for conclusive evidence to
determine a course of action.
2) Descriptive research is “designed to describe the characteristics of a population or

phenomena” (Zikmund 2003, p. 55). The object is ‘to portray an accurate profile of
persons, events and situations’ (Saunders et al. 2003, p. 97). This is often carried out
to describe characteristics of groups within an organisation or community (Sekaran
2003). Descriptive research is less ambiguous and is carried out against a backdrop of
prior knowledge of the central problem (McMurray et al. 2006) seeking to determine
answers to who, what, when, where and how questions (Sekaran 2003).
3) Causal or explanatory research is conducted to establish that an activity occurs as

a direct consequence of a particular activity (Zikmund 2003), and is conducted to
identify the cause-and-effect relationships between variables, where the research
problem has already been narrowly defined (Saunders 2003; Sekaran 2003), or to
establish differences between groups, or the independence of two or more factors in a
situation (Sekaran 2003).
3.3.2 Research methodology justification

A research paradigm is a framework or set of basic beliefs the researcher uses to understand
the nature of reality in order to identify the relationship between variables, and to specify
appropriate methods for conducting research (Collis & Hussey 2003; Clover & Balsley 1984;
Zikmund 2003).
Two widely-accepted research paradigms are quantitative (hypothetico, deductive,

positivistic) research; and qualitative (constructivist, inductive, phenomenological or
interpretivist) research (Collis & Hussey 2003). Table 3.1 contrasts the main differences
between these two research paradigms in terms of their assumptions of reality, research
purpose, researcher role, methodology, data collection and data analysis techniques.
46
Table 3.1 Characteristics of quantitative and qualitative research paradigms

Features Quantitative paradigm Qualitative paradigm
Assumptions of reality Objective, real, independent of the Subjective, socially constructed,
observer, single, characterised by natural multiple, arising out of social interaction
laws
Purpose Generalisability Contextualisation
Researcher role Objective, distant, non-interactive, value Subjective, up close, personal values,
& bias free, no influence on research beliefs & attitudes biasing the way of
outcomes & data collected and analysed collecting and analysing data
Methodology Hypothetico-deductive Inductive/interpretive
Data collection Reduction/aggregation of data to Capture of lived experience of
numbers informants
Data analysis Falsification of null hypotheses with Identification of recurring themes &
statistical tests patterns to search for meaning
(Source: adapted from McMurray et al. 2006)

Two principal approaches used in gathering information to provide insights into research
questions are considered in Table 3.2
Table 3.2 Reasons for selecting quantitative or qualitative research paradigm

Criteria Quantitative paradigm Qualitative paradigm
Researcher’s world A researcher’s comfort with the A researcher’s comfort with the
view ontological, epistemological, axiological, ontological, epistemological, axiological,
rhetorical and methodological rhetorical and methodological
assumptions of the quantitative assumptions of the qualitative paradigms
paradigms
Training & experience Technical writing skills, computer Literary writing skills, computer text
of the researcher statistical skills, library skills analysis skills, library skills
Researcher’s Comfort with rules and guidelines for Comfort with lack of specific rules and
psychological conducting research; low tolerance for procedures for conducting research;
attributes ambiguity; time for a study of short high tolerance for ambiguity; time for
duration lengthy study
Nature of problem Previously studied by others so that Exploratory research; variables
body of knowledge exists; known unknown; context important; may lack
variables, existing theories theory base for study
Audience for the study Individuals accustomed to supportive of Individuals accustomed to supportive of
quantitative studies qualitative studies
(Source: Creswell. 2003, p. 9)

Quantitative research “emphasises the role of measurement and observation and is associated
with the collection and use of numerical data” (McMurray et al. 2006, p. 69), and proceeds
from the positivistic assumption that “if something exists, it does so in some degree and can
therefore be numerically measured” ( Jankowicz 1995, p. 174).
47
Based on the information contained in Tables 3.1 and 3.2, this study has adopted a
positivistic/hypothetico, deductive or quantitative approach to the research objectives as
stated at 2.4.1 (page 39). Neuman (2003) states that variables and their relationships are the
central idea in quantitative research, and that quantitative researchers primarily follow a
deductive route moving from abstract ideas or variables to specific data collection techniques
to precise numerical information, providing an empirical representation of the abstract ideas
produced by the adopted techniques (Newman 2003).
This study has adopted a deductive approach to assess the main factors involved in the
outsourcing decision as considered by accounting service providers and small businesses in
Australia. It sets out to identify relationships between the variables in the theoretical model
that were formulated on the findings of the relevant existing literature review.
3.3.3 Research technique justification

Emory (1991) classified business research based on technique into two types: observation
and surveys. However, Zikmund (2003) expands this classification into four basic types:
surveys, experiments, observation and secondary data studies.
1) The use of surveys is a research technique in which information is gathered from a

sample of people through the use of a questionnaire (Zikmund 2003), and is one
of the most popular research techniques used in quantitative business research
(McMurray et al. 2006). “In using surveys the researcher systematically asks a large
number of people the same questions and then records their answers” (Neuman 2006,
p. 43).
2) Experimental research holds the greatest potential for establishing cause-and-effect

relationships between variables (McMurray et al. 2006). The use of experimentation
allows investigation of changes in one variable while manipulating other variables
under controlled conditions (Zikmund 2003). This is supported by Neuman (2006,
p. 41), who states that experimental research is “research in which the researcher
manipulates conditions for some research participants but not others, then compares
group responses to see whether it made a difference.”
48
3) Observation allows the researcher to observe and record the behaviour of others
without relying on reports from respondents (Zikmund 2003). Observation may be
unstructured, where a research question has not yet been formalised and the researcher
may be aiming to develop a theory of what is going on in a certain situation, whereas
the structured approach may be more suitable when the researcher is seeking to test
hypotheses (McMurray et al. 2006).
4) Secondary data study is using “data previously collected and assembled for some
project other than the one at hand” (Zikmund 2003, p. 63).
Surveys may be classified by the communication medium used: mail and self-administered
questionnaires; telephone interviews; face-to-face interviews; and web surveys (Neuman
2006).
1) Mail survey and self-administered questionnaires are distributed directly or mailed to

respondents. This survey method is cheaper than other methods, and allows the survey
to be distributed to a wide geographical area. This method is also very effective, and
can provide strong response rates.
2) The telephone interview is a survey method in which respondents are contacted by

telephone to gather responses to survey questions. Although this method is quite
expensive, it is flexible and represents better value than the face-to-face interview while
providing many of the same benefits (Neuman 2006).
3) Face-to-face interviews are direct communications with respondents wherein

interviewers ask respondents questions in face-to-face situations. This method
can provide the highest response rate, although it is very expensive to administer
(Zikmund 2003).
4) Web surveys use the internet as the communication medium. They are very fast and
inexpensive, and allow for a flexible design of the survey with visual, audio or video
capabilities. The main advantages of this method are the relatively short time required
for implementation, and flexibility of design (Manning & Munro 2006).
49
Table 3.3 provides a comparison of features associated with the different survey methods
Features Mail Telephone Face-to-face Web
questionnaire interview interview survey
Administrative issues
Cost Cheap Moderate Expensive Cheapest
Speed Slowest Fast Slow to moderate Fastest
Length (number of questions) Moderate Short Longest Moderate
Response rate Lowest Moderate Highest Moderate
Research control
Probes possible No Yes Yes No
Specific respondent No Yes Yes No
Question sequence No Yes Yes Yes
Only one respondent No Yes Yes No
Visual observation No No Yes Yes
Success with different questions
Visual aids Limited None Yes Yes
Open-ended questions Limited Limited Yes Yes
Contingency questions Limited Yes Yes Yes
Complex questions Limited Limited Yes Yes
Sensitive questions Some Limited Limited Yes
Sources of bias
Social desirability No Some Worse No
Interviewer bias No Some Worse No
Respondent’s reading skill Yes No No Some
(Source: Neuman. 2006, p.300)

In terms of research technique, this research study utilises the web survey research method
The decision to use the web survey method is based on various factors including cost,
available budget, time constraints, access to research facilities, expertise of the researcher, the
research objective, respondent demographics, and survey instrument complexity (Sekaran
2003).
The web survey research method provides a quick, efficient and accurate means of assessing
information about the population through its ability to reach a geographically widespread
population, interactivity and respondent anonymity (Zikmund 2003), and is more
appropriate where there is a lack of secondary data (Zikmund 2003). In this case, secondary
data relative to F&AO in Australia is very limited.
50
The web survey method provides the opportunity to design and implement the survey
questionnaire within a very short period of time, and also allows testing of the questionnaire
before its being made available to the intended respondents, which provides the opportunity
to evaluate any design and completion issues.

Drawing on material presented in Chapter Two, this section considers the research
questionnaire design and follows a three-stage approach comprising item generation, pilot
survey design, and the main survey design.
3.4.1 Construct and item generation

The generation of items to measure the constructs and design the pilot questionnaire was
achieved through the literature review undertaken in Chapter Two.
Seeking a high response rate, it was felt the survey questionnaire should be kept to a
reasonable size. Seventeen constructs and sixty two items were identified as being relevant to
this study, and these would allow appropriate classification of data collected.
Seven-point Likert scale questions were used in the main body of the questionnaire in order
to allow for more sophisticated data analysis than if categorical measurement scales were
used. Neuman (2006) noted the real strength of the Likert scale measurement was in its
simplicity and ease of use, and the fact it allowed for more comprehensive multiple indicator
measurement when several items are combined, while Davis (2005) confirms reliability is
high when it comes to the ordering of people with regard to a particular attitude.
The pilot questionnaire was divided into five sections, each designed to collect data relating
directly to the research questions under study.
Section A (Outsourcing information) was intended to gather information regarding

participants’ perceptions of the level of outsourcing undertaken by small business, as the
level of outsourcing can be influenced by perceptions relating to decision, benefit and impact
factors.
51
Section B (Outsourcing decision factors) was designed to gather data relating to factors affecting
the outsourcing decision by small business.
Section C (Outsourcing benefit factors) collected data regarding participants’ perceptions of the
benefits of finance and accounting outsourcing by small business.
Section D (Outsourcing impact factors) provided analysis data on the perceptions of the
impacts upon small business of finance and accounting outsourcing.
Section E (Background information) collected general demographic categorical data from

respondents.
Thirty-eight finance and accounting service providers and five academics piloted the
questionnaire. The academics came from diverse backgrounds with the majority possessing
small business and research specialisations; the survey instrument was also reviewed by
experts in survey design. Several iterations of the questionnaire were pilot tested, with
the feedback from the accounting service providers suggesting the questionnaire was
comprehensive and highly relevant.
Piloting was achieved by presenting the pilot survey instrument to the Annual General
Meeting of a national accounting service provider in November 2006. Conference attendees
were asked to complete the pilot survey, which included a section for comments and
recommendations regarding questionnaire layout, relevance and appropriateness of the
questions to address any ambiguities.
While the small business survey questionnaire was based on the accounting service providers’
survey, the questions were rephrased to represent the small business owners’ perspective.
The questionnaire items’ design is described as follows in the order the questions appear
within the questionnaire.
Section A – Outsourcing information (Questions 1 & 2)
Questions 1 and 2 in Section A of the questionnaire collected data regarding participants’

perceptions on the level of outsourcing undertaken by small business. All survey
questionnaires provided an opportunity to collect data that could be contrasted and
compared. Likert scale questions were used in this section.
52
Table 3.4 Item measures of degree of outsourcing activities

Item Description
Question 1 Do you think small business outsources more or less of their accounting activities than
other small business?
1a Level of outsourcing by small business clients compared with other small businesses
Question 2 To what extent do you believe small business would consider outsourcing the following
activities?
2a Computer accounting help and training
2b Accounting systems installation and training
2c Monthly business performance reporting
2d Quarterly cash-flow reporting
2e Management accounting service
2f Budget and cash-flow service
2g CCH benchmarking and KPI service
2h Financial diagnosis using Optimist
2i Financial planning and forecasting service
2j Turnkey management systems
2k Job costing/management software
2l Business exit/succession planning service
2m Business appraisal service

Section B – Outsourcing decision factors (Questions 3–7)
Questions 3 to 7 in Section B of the questionnaire collected data regarding participants’

perceptions relating to the factors affecting the outsourcing decision by small business. All
survey questionnaires provided the opportunity to collect data that could be contrasted and
Table 3.5 Item measures of outsourcing decision factors

Item Description
Question 3 I consider the following activities as core activities in small business:
3a Payroll
3b Accounts receivable
3c Computer hardware support
3d Computer software support
3e Management accounting
3f Internal auditing
3g Human resource management
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Item Description
Question 4 The timing and co-ordination of the following activities are critical to the overall
performance of small business:
4a Payroll
Question 5 In deciding to outsource the internal accounting activities, what level of importance
do you believe small business would place on the following criteria for selecting an
outsourcing provider?
5a Prior experience with service provider
5b Cost of services provided
5c Flexibility of services provided
5d Testimonials from other businesses
5e Business ethics
5f Level of expertise of service provider
5g Industry knowledge
Question 6 There are many activities that small business DO outsource, or WOULD consider
outsourcing because:
6a Outsourcing provides greater flexibility with accounting activities
6b Specialist service providers can provide a better service
6c Outsourcing can yield cost savings
6d Other businesses are using outsourcing service providers
6e Service providers are in a better position to manage changes in technology, etc
6f Outsourcing allows small business to minimise risk
6g Service providers are generally specialists in their field
Question 7 There are many activities that small business DO NOT outsource because:
7a It would be difficult to appraise the service providers’ performance
7b The service pr oviders could act in their own interest to the detriment of the business
7c Timing and co-ordination of activities are critical to the success of the business
7d The activities are viewed as core to their business
7e It is difficult to find service providers they can trust
7f It is difficult to find service providers with the level of expertise they require
7g Small businesses have adequate in-house expertise
7h It would be too expensive for their business
7i There would be resistance by existing staff
54
Section C – Outsourcing benefit factors (Questions 8–11)
Questions 8 to 11 in Section C of the questionnaire collected data regarding participant’s

perceptions of the benefits of finance and accounting outsourcing on small business. All
survey questionnaires provided the opportunity to collect data that could be contrasted and
Table 3.6 Item measures of benefit factors

Item Description
Question 8 To what extent do you agree with the following statement:
“Outsourcing of the following activities would provide the same degree of control as if
the activity were performed in-house”?
8e Management accounting services
8f Budget and cash-flow services
8g CCH benchmarking and KPI services
8i Financial planning and forecasting services
8l Business exit/succession planning
8m Business appraisal service
Question 9 Please indicate what you believe is the level of work volume the following activities
represent for small business
9a Payroll
Question 10 How important do you think the following benefits of outsourcing the internal
accounting functions are for small business?
10a Cost savings
10b Provision of special services
10c Internal resources freed up for other purposes
10d Provision of technical expertise
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Item Description
10e Improved company focus
10f Provision of trained accounting staff
Question 11 How successful do you believe small business are likely to be in achieving cost
reduction benefits through outsourcing their finance and accounting activities?
11a Not at all successful
11b Minimally successful – (less than 10% saved)
11c Moderately successful – (10% - 30% saved)
11d Significantly successful – (31% - 50% saved)
11e Very successful – (more than 50% saved)
11f Don’t know

Section D – Outsourcing impact factors (Questions 12–17)
Questions 12 to 17 in Section D of the questionnaire provided data on the perceptions of the

impacts upon small business of finance and accounting outsourcing. All survey questionnaires
provided the opportunity to collect data that could be contrasted and compared. Likert scale
questions were used in this section.
Table 3.7 Item measures of impact factors

Item Description
Question 12 If the following activities were outsourced by small business, to what extent do you
think the service provider could exploit their position through providing these
services?
12a Payroll
Question 13 If the following activities were outsourced by small business, to what extent would it be
difficult to measure whether the activity is performed satisfactorily?
56
Item Description
13m Business appraisal services
Question 14 If the following activities were outsourced, to what extent would it be difficult to
determine whether the service provider had performed according to contractual
obligations?
Question 15 If the following activities were outsourced by small business, to what extent would it be
difficult for them to arrange for an alternate service provider at short notice?
Question 16 What do you consider the business performance of small business in general has been
in respect to the following activities in the past three years?
16a Payroll administration
16b Accounts receivable management
57
Item Description
Question 17 Which of the following POSITIVE impacts do you believe would be experienced due
to outsourcing finance and accounting activities?
17a Do fewer mundane or routine activities
17b Able to devote more time to strategic activities
17c More face to face time with customers, staff etc
17d More training time
17e No positive impacts
17f Other

Section E – Background information (Questions 18–24)
Questions 18 to 24 in Section E collected data relative to the demographic aspects of the two
sub-groups surveyed, and are not presented here.
3.4.2 Survey administration, data screening and data demographics

This section describes the administration of the two survey questionnaires, data screening,
reliability of data and missing data relating to F&AO by small business.
3.4.2.1 Sampling procedure

This section provides discussion on the composition of the two survey groups and the
methods used in the sampling procedure adopted in this research study.
Accounting service providers The sample for this study was provided by CAD
(Computer Accounting Doctor) Partners Pty Ltd. All members of CAD Partners Pty Ltd
were included in the sample, which provided a sample size of 61 service providers.
Some 34 of the 61 CAD Partners Pty Ltd responded to the survey that represented a 55.7%
response rate. According to Sekaran (2003, p. 295), “Sample sizes larger than 30 and less than
500 are appropriate for most research”; therefore, the response rate of 55.7% (34 responses)
from CAD Partners Pty Ltd was considered acceptable for this study.
58
For security, the CAD Partner Pty Ltd questionnaire (Appendix 2, page 133), and CAD Partner
information and consent document (Appendix 1, page 131) were housed on the SCU (Southern
Cross University) server. A document explaining the survey purpose and links to the online
questionnaire was sent to all CAD Partners, and these documents were subsequently
distributed to all CAD Partners via the CAD Partner Pty Ltd website.
Small business owners The sample for this study was randomly selected small businesses
located around Australia. The sample was taken from randomly selected industry disciplines
listed on the Who’s Who in Business in Australia website (http://www.cserver.com.
au.ezproxy.scu.edu.au/wwiblive/lists.asp). From the selected industries, any business
displaying an email address was selected for inclusion in the survey. This list represented 314
possible respondents of the 637 listed businesses.
The number of small businesses who responded to the survey numbered 71 of the 314
possible respondents, representing a 22.6% response rate of small business, which was
considered acceptable for this study.
The small business questionnaire (Appendix 5, p 162), and an information statement

explaining the survey purpose (Appendix 3, p. 159) and consent document (Appendix 4,
p. 160) were provided to all small businesses surveyed.
3.4.2.2 Missing data

Tabachnick and Fiddell (1996), suggest two commonly-used options for dealing with missing
data, or questions where no response has been recorded.
The first option is to delete the case from the analysis where there are only a few missing
values, or where the missing values are randomly distributed throughout the data file.
The second option is to replace the missing value with an estimate. Where an interval scale
analysis is used, the conservative method suggested is to replace the missing value with the
mean value (using the available scores to determine the mean value). The second option of
replacing the missing data values with a mean value was chosen for this analysis.
There were no instances of missing data values observed in the responses, and as such, no
action with regard to the treatment of missing data values was required.
59

This section explains the process of data collection, data analysis and the techniques used
for analysis that are aligned with the selected research paradigm and the selected research
methodology discussed in Section 3.3.
3.5.1 Data collection methods

Concern regarding the generalising of combined quantitative and qualitative research is due
to the number of entities that might be examined, particularly where only a small number of
atypical organisations is considered (Bryman & Bell 2003)
Combined quantitative and qualitative studies can be used firstly to test theories and secondly
to generate new ideas (Bryman & Bell 2003). Thirdly, combined quantitative and qualitative
studies can confirm secondary data from other research. In this study, collected data came
from entities as a result of combined quantitative and qualitative studies, and the product
was analysed together with information from secondary data to offer a qualitative conclusion.
Bryman and Bell (2003, p. 474) asserts that “most combined quantitative and qualitative
study research involves more than one method of data collection”.
Data refers to known facts or things used as a basis for inference or reckoning. Data can be
described as qualitative or quantitative, as suggested by Collis and Hussey (2003). Qualitative
data is concerned with qualities and non-numerical characteristics, whilst quantitative data is
all data collected in numerical form. Collis and Hussey (2003) indicated there will always be a
combination of quantitative and qualitative data in a research study, no matter what paradigm
is being followed.
In terms of data sources, there are two main sources of data: secondary and primary data.
Secondary data as defined by Collis and Hussey (2003, p. 355) is “data that already exists such
as books, documents and films”. Secondary data are usually historical, already assembled, and
do not require access to respondents or subjects. However, primary data as defined by Collis
and Hussey (2003, p. 353) is “original data which is gathered at source, such as survey data or
experimental data”.
60
3.5.2 Secondary data

An extensive literature review of the parent and immediate disciplines was carried out as it
applied to F&AO and SMEs. The secondary data search was an ongoing process that included
textbooks, electronic journals and publications, and web-based literature on business process
reengineering (BPR), business process outsourcing (BPO), outsourcing and F&AO.
3.5.3 Primary data

Primary data is data that has been collected at a source and includes survey data collected
from respondents in uncontrolled situations by asking questions or making observations; and
experimental data collected in controlled conditions through the use of experiments (Collis
& Hussey 2003). In this study, the primary data was collected through the use of an online
questionnaire survey distributed to each of the sub-groups.
3.5.3.1 Population and sample selection process

To ensure the research was valid, reliable and relevant, it was necessary to develop a sampling
strategy to provide an acceptable cross-section from the finance and accounting service
providers’ population and small business population.
The study commenced with a review of the literature, followed by a pilot study with a national
accounting body of accounting service providers, to clarify the issues and formulate the
research questions for inclusion in the questionnaires to be distributed to accounting service
providers and small business.
The study involved data collection from this population, and for the purpose of this study
it was considered the primary source of data would come from the use of a pilot study
questionnaire distributed to each member of the national accounting service providers’ body.
This group of participants operates as independent businesses providing accounting services
to the small business sector.
As many tests have shown the percentage of responses to questionnaires can be significantly
increased through the use of an advanced notice, the purpose of the pilot study questionnaire
was introduced to the accounting service providers at their Annual Conference, held in New
Zealand during November 2006.
61
These participants were provided with a hard copy of a questionnaire and an information
sheet, and asked to manually complete the questionnaire. The data collected from this
questionnaire survey was used to further refine and define the questionnaire content. Having
revised the original questionnaire survey questions based on analysis of the accounting
service providers’ responses, the survey was subsequently peer reviewed in order to satisfy the
questionnaire’s construct validity. Some changes were made to the questionnaire following
the peer review, and a final questionnaire was then prepared and administered to the group of
participants.
The service provider questionnaire focused on accounting service providers’ perceptions

in relation to the services offered to small business, and what they considered the decision
factors, benefits and impacts of outsourcing the accounting function by small business.
3.5.3.2 Survey questionnaire design

A well-designed questionnaire is “an efficient data collection mechanism” (Sekaran 2003, p.
236) that provides accurate and useable data (Cavana et al. 2001). To maximise the potential
to provide accurate and usable data, the questionnaires were designed using three principles
as illustrated in Figure 3.2 (page 63).
62
Content and purpose Type and form of

of question 1 questions
Principles of
Wording and wording Classification data or
language personal information
Data
collection
Questionnaire Questionnaire Testing goodness of
administration data
Categorisation Scales and scaling

2
Principles of
measurement
Coding Reliability
Appearance of Introduction of
questionnaire 3 respondents
General
Length of appearance Instructions for
questionnaire completion
Figure 3.2 Principles of survey questionnaire design

(Source: adapted from Sekaran. 2003, p. 238)
Step 1 in Figure 3.2 (page 63) requires that the questionnaire be carefully worded. The type
and form of question depends on whether the information relates to an objective variable
(such as length of time the respondent has been in business), or a subjective variable (such as
perceptions of the benefits of outsourcing their finance and accounting functions) (Cavana et
al. 2001).
The questions were clear and unambiguous, with the type and form of question designed
to give the clearest answer. In general, closed questions were sought that were beneficial for
the researcher to code; however, some questions were open-ended to offer greater depth of
understanding, such as asking respondents what they considered beneficial about outsourcing
their finance and accounting functions.
63
Step 2 in Figure 3.2 (page 63) concerns the principles of measurement that ensures the “data
collected are appropriate for testing the issues” (Cavana et al. 2001, p. 234). Once the
information regarding the data sought has been determined, the method of data measurement
is considered.
By using the appropriate principles of measurement as noted in Figure 3.2 (page 63), the
goodness of data is assessed through tests of validity, reliability and repeatability (Sekaran
2003). The development of measurement scales is consistent with the information being
sought. Ordinal scales are used to identify number of employees, location, years in business
and annual gross income.
Interval scales are used to group responses into certain categories and to measure the
magnitude of differences in attitudes relating to constructs such as satisfaction and
preferences (Sekaran 2003). To establish clear, specific and unambiguous definitions of
the research issues, operational definitions for each construct are designated and listed in
definitions (Chapter One, Section 1.6).
Step 3 in Figure 3.2 (page 63) relates to the general appearance, which is the final principle of
the questionnaire design. “An attractive and neat questionnaire with appropriate introduction,
instructions, and well-arrayed set of questions and response alternatives will make it easier for
the respondents to answer them” (Sekaran 2003, p. 245).
3.5.3.3 Data analysis

The data analysis will be completed in a series of steps which are explained in detail, section
by section. These steps were, firstly, preparing for analysis; secondly, getting a feel for the data;
thirdly, testing the “goodness” of data; and, finally, testing issues (Sekaran 2003) (see Figure
3.3, page 66). The steps cover the type of data required, the manner in which data are collected,
and how data are reported (Saunders et al. 2003). The results will be presented in tabular
form indicating information as output, thus familiarising the researcher with recorded data
( Jankowicz 1995). The report will then break down the results, tabulate the information,
discuss the dependent and independent variables, and explain their significance ( Jankowicz
64
1995). Figure 3.3 (page 66), identifies the steps taken before data are analysed to test the issues.
Step One prepares the data for analysis, whilst Steps Two through Four cover analysing the
data.
“Quantitative survey analysis may be considered in two distinct groups – categorical and
quantifiable” (Saunders et al. 2003, p. 329). Categorical data cannot be measured, but can be
classified or ranked. In this survey, location of business, gender and type of business structure
is categorised. This data can be further sub-divided into descriptive (nominal) and ranked
(ordinal) (Saunders et al. 2003).
Quantifiable data is data that may be numerically measured, such as percentages of businesses
that currently outsource aspects of the accounting functions, or number of years in business,
which offers continuously quantifiable data. Quantifiable data can be continuous or discrete,
and can be analysed using interval or ratio scales of measurement (Saunders et al. 2003).
Step 1. The first step in the quantitative data analysis process is preparing the data for
analysis. Appendices 2 (page 133), and 5 (page 150) show that the consequences of data coding
were considered at the time the survey questionnaire was being prepared (Sekaran 2003).
Questions 18–24 of the survey questionnaire were categorical in nature and required a
single response, whilst a seven-point Likert scale was used for Questions 1 to 17, requiring
participants to indicate their personal response to the question asked on a scale between one
and seven. Responses for all questions were imported into SPSS data for analysis.
65
Research
Data Data Interpretation
Discussion questions
collection analysis of results
answered
1 Getting data ready 2 Feel for data 3 Goodness of data 4 Issues testing
for analysis
Mean Reliability Appropriate statistical
Editing data Standard deviation Validity manipulations
Handling blank Correlations
responses Frequency
Coding data distributions, etc.
Categorising data
Creating data files
Programming
Figure 3.3 Diagram of the quantitative data analysis process

(Source: adapted from Sekaran. 2003, p. 301)
3.5.3.4 Analysis and interpretation of data

The remaining three steps in the data analysis process are considered below.
Step 2. Getting a feel for the data. Calculating the test of the means, standard deviations and
variances presented the researcher with an overview of how participants responded to each
question. The information gained from these ratios showed the scales were sufficiently graded
to give a significant result (Sekaran 2003).
Step 3. Testing for goodness of data. Goodness of data is tested for reliability and validity. In
this research, convergent validity (which establishes the degree of correlation in the results)
and discriminatory validity (which establishes when two different concepts are not correlated
and do not converge) (Cavana et al. 2001) were applied. Once the initial feel showed the
information was credible, the goodness of fit was established to lend credibility to the
succeeding analyses and findings (Sekaran 2003).
Step 4. Testing the issues developed for the research. “Data analysis is the application of
logic to understand and interpret data collected” (Zikmund 2003, p. 73).
66
In this study, finance and accounting service providers and small business were surveyed
in order to develop an understanding of the attitudes, perceptions and beliefs held when
considering F&AO through the use of an online survey questionnaire. A range of tests
including frequency distributions and cross-tabulations was chosen to analyse the data
collected from this survey, which allowed the simultaneous investigation of more than two
variables (Zikmund 2003).
SPSS Ver. 14 will be used to analyse the quantitative data acquired through the responses
to the accounting service providers’ survey questionnaire and the small business survey
questionnaire.

“Ethics is the study of what constitutes right and wrong or good and bad human conduct”
(McMurray et al. 2006, p. 19). In general, research is designed so a respondent does not
suffer physical harm, discomfort, pain, embarrassment or loss of privacy and, as such, all
questionnaire surveys contained an information sheet explaining the expected benefits of the
research, and that their rights and wellbeing would be adequately protected. Respondents
were advised their participation is voluntary, and that they had the right to withdraw from the
survey at any time.
In this study, respondents were informed of the duties and responsibilities of both the
researcher and the university and the purpose of the research by means of an Information
Statement (Appendix 1, p. 143; Appendix 4, p. 160) provided at the start of the online
questionnaire, along with the option to accept or decline the offer to participate in the survey.
Ethics approval for this research study was granted on 22 November 2006 under approval
number ECN-06-138 (Appendix 1, p. 144).
67
3.7 Strengths and weaknesses identified in the chosen

methodology
In summary, the strengths of the approach adopted for this study include the mix and
match of qualitative and quantitative techniques in order to reflect the formulation and
conceptualisation of the research issue.
Possible weaknesses could include that participant selection was restricted to members of a
national accounting body, and as such were existing practitioners of finance and accounting
services.
3.8 Conclusions
This chapter examined multiple aspects of research methodology available in the conduct of
this study, including research design; construct and item generation; data collection methods;
and data analysis.
Due to the nature of the deductive testing, the researcher used quantitative methods, with
a single survey conducted to provide the researcher with valid, reliable and practical results
using a cross-section of finance and accounting service providers and small businesses.
Chapter Four of this study will present the findings data analysis results forming the basis for
the conclusions and recommendations emanating from the methodology, and data collection
and analysis methods used in this study.
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Chapter 4
Findings and data analysis
4.1 Introduction
Chapter Three presented the different aspects of research methodology available for
conducting this study and detailed the choice of research methodology employed (including
research design, data collection and data analyses methods). This chapter will focus on the
findings and data analyses emanating from the study and attempt to analyse and interpret the
collected data.

Chapter Four will systematically present the findings of the research study and interpret their
significance based on the data analysis, and present the results to identify the components
and construct a theoretical framework supporting the outsourcing of finance and accounting
activities by small business based on the data analysis.

Chapter Four comprises four principal sections. Section 4.1 introduces the chapter, identifies
its objectives and explains how the chapter is structured. Section 4.2 reviews and discusses
the data demographics of the two sub-groups by breaking down and grouping small business
and accounting service provider respondents. Section 4.3 provides a statistical analysis of
the questionnaire responses undertaken by both groups of respondents. Section 4.4 sets out
conclusions drawn from the findings and analysis of the two surveys.
69
Chapter 4: Findings and data analysis
Chapter 4 Findings and data analysis
4.1 Introduction

4.3 Participant questionnaire response analysis
4.3.1 Section A – Outsourcing information

4.3.2 Section B – Outsourcing decision factors
4.3.3 Section C – Outsourcing benefit factors
4.3.4 Section D – Outsourcing impact factors
4.4 Conclusion
(Source: developed for this study.)
Figure 4.1 Outline of Chapter Four with section numbers and their relationships

This section examines the demographic aspects of the two sub-groups surveyed. The survey
questionnaires collected data to be contrasted and compared using cross-tabulation tables.
Demographic data was collected from a range of questions contained in Section E of the
questionnaire survey. The results are reported in the following sub-sections.
Section E – Background information (Questions 18–24)
Table 4.1 Question 18 – Gender – This section sought to identify if there were significant
differences between the genders of respondents in the sample population.
Survey Group
SB SP Total
Male Count 64 34 98
% within Gender 65.3% 34.7% 100.0%
Gender
% within Survey Group 90.1% 100.0% 93.3%

Female Count 7 0 7
% within Gender 100.0% 0% 100.0%
% within Survey Group 9.9% 0% 6.7%
Total Count 71 34 105
(Source: data analysis for this study)
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Table 4.1 shows that 100%.of the service provider (SP) respondents were male, No female
responses were received. Of the small business (SB) respondents, 90.1% were male and 9.9%
female.
The total percentages indicate that 93.3% of all respondents were male and 6.7% were female,
and that of the total number of male respondents, 65.3% were from small business, while
34.7% were from service providers.
Gender of respondents had no impact on the survey outcome, and served as demographic
information only.
Table 4.2 Question 19 – Number of years in business – This section sought to identify any
significant differences in the number of years respondents had been business, as
this may impact on the perceptions held about F&AO by the respondents.
Survey Group
SB SP Total
Count Less than 1 year 14 3 17
% within No. of Years in Business 82.4% 17.6% 100.0%
Number of years in business
1 year–2 years Count 3 2 5

2 years–3 years Count 5 4 9
More than 5 years Count 49 25 74

Whilst the survey was random in the choice of participants, Table 4.2 indicates that 69% of
small business respondents and 73.5% of service providers have been in business for a period
of five years or more, while only 4.2% of small businesses and 5.9% of service providers have
been in business for a period of one to two years.
Overall, the majority (70.5%) of all respondents had been in business for more than five years.
71
Table 4.3 Question 20 – Business location: home or office – To identify possible

relationships that may be detected during data analysis, respondents were asked to
indicate whether they operated their business primarily from home or an external
office location, as the business location may impact on the perceptions held about
F&AO by the respondents.
Survey Group
SB SP Total
Home Count 0 19 19
Where does business
% within Where Does Business Operate From 0% 100.0% 100.0%

operate from
% within Survey Group 0% 55.9% 18.1%

Office Count 71 15 86
% within Where Does Business Operate From 82.6% 17.4% 100.0%

Table 4.3 shows significant differences between the groups, as all small business respondents
operated their business from a location other than home, while 55.9% of service providers
operated their business from home, and 44.1% from a location other than a home office
environment.
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Table 4.4 & Table 4.5 Question 21 – Location of the business – This analysis sought to
determine the demographic distribution of respondents by state and by area in
the sample population to identify any relationships between location and F&AO
activities.
Survey Group
SB SP Total
Qld Count 23 4 27
% within State Location of Business 85.2% 14.8% 100.0%
% of Total 21.9% 3.8% 25.7%
NSW Count 28 20 48
Location of business by state
% of Total 26.7% 19.0% 45.7%

Vic Count 16 0 16
% within State Location of Business 100.0% 0% 100.0%
% of Total 15.2% 0% 15.2%
WA Count 4 1 5
% of Total 3.8% 1.0% 4.8%
Other Count 0 9 9
% within State Location of Business 0% 100.0% 100.0%
% of Total 0% 8.6% 8.6%

Table 4.4 shows the diversity of locations from which respondents were drawn, with the
highest being 45.7% (48) from NSW, followed by 25.7% (27) from Queensland, and 15.2%
from Victoria. The remaining 13.4% of respondents came from Western Australia and other
states.
The distribution of respondents by group shows that 32.4% (23) of small business
respondents and 11.8% (4) of service provider respondents come from Queensland, while
39.4% (28) of small businesses and 58.8% (20) of service providers come from NSW.
73
The total distributions for the sample population indicate that 21.9% (23) of small business
respondents and 3.8% (4) of service providers came from Queensland, with 26.7% (28) of
small business and 19% (20) of service providers coming from NSW.
Table 4.5 Location of business by area

Survey Group
SB SP Total
CBD Count 32 14 46
% within Area of Location 71.1% 28.9% 100.0%
Location of business by area
% of Total 30.8% 12.5% 43.3%

Regional Count 28 16 44
% of Total 26.9% 15.4% 42.3%
Rural Count 11 4 15
% of Total 10.6% 3.8% 14.4%

Table 4.5 shows the diversity of areas within each state (Table 4.4, page 73) from which
respondents were drawn; the highest being 43.3% (46) from CBD areas, with 42.3% (44)
from regional areas, and only 14.4% (15) from rural areas.
The distribution of respondents by group shows that 45.1% (32) of small business
respondents and 39.4% (13) of service provider respondents were located in CBD areas, with
39.4% (28) of small business respondents and 48.5% (16) of service provider respondents
located in regional areas, and 15.5% (11) small business respondents and 12.1% (4) service
provider respondents located in rural areas.
The total distributions for the sample population indicate 30.8% of small business
respondents and 12.5% of service provider respondents were located in CBD areas, with
26.9% of small business respondents and 15.4% of service provider respondents located in
regional areas, while only 10.6% of small business respondents and 3.8% of service provider
respondents came from rural areas.
74
Table 4.6 Question 22 – Business structure – Respondents were asked to indicate the type
of business structure used in the business to identify any significant relationships
between business structure and respondent perceptions.
Survey Group
SB SP Total
Sole trader Count 10 12 22
% within Business Structure 45.5% 54.5% 100.0%
Partnership Count 8 0 8
Business structure
% within Business Structure 100.0% 0% 100.0%

Company Ltd Count 47 20 67
Trust Count 6 2 8

Table 4.6 shows the company structure to be the most common for 66.2% (47) of small
business respondents and 58.8% (20) for service provider respondents, while 14.1% (10)
of small business respondents and 35.3% (35.3) of service provider respondents were
sole traders. It is interesting to note that 11.3% (8) of small business respondents were
partnerships, and there were no service providers operating under this structure. Family
Trusts accounted for 8.5% (6) of small business respondents and 5.9% (2) for service
provider respondents.
75
Table 4.7 Question 23 – Number of employees – Information about the number of

employees in each business was collected and considered relevant to other
demographic data collected and to other data relating to perceptions.
Survey Group
SB SP Total
1–5 Count 56 23 79
% within No of Employees 70.9% 29.1% 100.0%
6–10 Count 9 1 10
No of employees

21–50 Count 6 4 10
More than 50 Count 0 6 6
% within No of Employees 0% 100.0% 100.0%

Of the 105 respondents surveyed, more than half of each group was micro to small in size,
with between one to five employees. Overall, the data identified in Table 4.7 showed that
91.5% (65) of small business respondents had fewer than 20 employees and 70.6% (24) of
service provider respondents had fewer than 20 employees. It also showed that 8.5% (6) of
small business respondents had between 21 and 50 employees, and that 11.8% (4) of service
provider respondents had between 21 and 50 employees.
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Table 4.8 Question 24 – Annual gross turnover of business – Respondents were asked to
indicate their annual gross turnover from business operations so that relationships
with other demographic data and data collected relating to perceptions could be
identified.
Survey Group
SB SP Total
Count Less than $100,000 25 12 37
% within Annual Gross 67.6% 32.4% 100.0%
Turnover of Business
$100,000–$250,000 Count 21 7 28
Annual gross turnover of business
$250,000–$500,000 Count 6 2 8
$500,000–$1 million Count 4 2 6
$1 million–$5 million Count 12 5 17
Greater than $5 million Count 3 6 9

Of the 105 respondents surveyed, more than half of each group was micro to small in size,
with annual gross turnovers less than $250,000. Overall, the data displayed in Table 4.8
showed 64.8% (46) of small business respondents had an annual gross turnover of less than
$250,000 while 55.9% (19) of service provider respondents had an annual gross turnover of
less than $250,000.
77
The research also identified that 8.5% (6) of small business respondents had an annual
gross turnover of between $250,000 and $500,000 and that 5.9% (2) of service provider
respondents had an annual gross turnover of between $250,000 and $500,000.
Additionally, 26.8% (19) of small business respondents had an annual gross turnover of more
than $500,000 and 38.2% (13) of service provider respondents had an annual gross turnover
of more than $500,000
The data collected in Section 4.2 presented no surprises in terms of distribution of

respondents. Australian Bureau of Statistics (ABS) provide demographic distribution data,
however this was (or could) be considered unsuitable as a comparative measure due to the
nature and extent of the data and the data collection method used in this survey.
The data presented in this section will be revisited and discussed further in Chapter Five.
4.3 Participant questionnaire and response analysis

The survey questionnaire delivered to both respondent groups contained five sections.
Section A collected data regarding levels of outsourcing activity and whether outsourcing
was a future consideration. Section B concerned points pertaining to the decision factors
considered by small businesses. These questions were designed to provide information on
how service providers and small business perceive the factors to be considered by small
business in the outsourcing decision process. Section C related to the benefits of outsourcing,
and sought to identify how the service provider and the small business operator perceive
benefits provided to the small business through outsourcing the finance and accounting
activities. Section D of the questionnaire sought to collect data on how service providers
and small business perceived the impacts of finance and accounting outsourcing. Section E
collected data relating to the demographics of the respondents, and has been discussed at
Section 4.2 (page 71)
Of these five sections, three principal sections (Section B, C and D) were considered central
to the research study.
78
A seven point Likert scale generally regarded as providing interval-type data (McMurray et
al. 2006) was developed for this study and used to record responses. Each question contained
statements requiring responses, these scales making use of anchor words at each end of the
scale, and being summed to provide composite responses (McMurray et al. 2006)
The following operational interpretations of results of the Likert scaled questions developed
for this study were applied:
• Responses between 6.00 and 7.00 represented very strong support for the provided
response option.
• Responses between 5.00 and 5.99 represented strong support for the provided
option.
• Responses between 4.00 and 4.99 represented moderate support for the provided
option.
• Responses lower than 3.99 would be interpreted as representing marginal or negative

support for the provided response option.
Scales and specific anchors to each of the questions are stated following each data table.
To identify the significant scores displayed in the following tables, the highest and lowest of
the mean scores has been highlighted to allow for easy identification.
4.3.1 Section A – Outsourcing information (Questions 1 & 2)

Section A of the survey questionnaire Outsourcing Information was intended to gather
information from participants regarding perceptions about the level of outsourcing
undertaken. The online survey questionnaire provided the opportunity to collect data to be
contrasted and compared using frequency distribution tables and cross-tabulation. The results
for each of the questions contained in Section A are reported as follows:
Question 1 seeks to identify differences in perceptions between small business and service
providers in relation to levels of outsourcing undertaken by small business compared to other
small businesses.
79
Table 4.9 Question 1 – “Do you think small business outsources more or less of their
accounting activities than other small businesses?”
Survey Group N Mean Median Std. Deviation
SB 71 3.93 4.00 0.834
SP 34 4.41 4.00 0.557
Total 105 4.09 4.00 0.786
(Source: data analysis for the study (SB N = 71 & SP N = 34 respondents in each survey group))
Likert scales were developed on the basis that 1 = “much less” to 7 = “much more”. The mid-
point scale 4 was interpreted as meaning “about the same”.
Scale point responses of 2, 3, 5 and 6 were interpreted as representing an equally spaced value
from the others (McMurray et al. 2006). This interpretation is applied to all questions in the
survey.
Table 4.9 shows small business respondents believed the level of outsourcing activity
undertaken by their business was marginally less (M = 3.93) than other small businesses,
while service provider respondents believed the level of outsourcing activity of their small
business clients was marginally higher (M = 4.41) than other small businesses. The results
indicate a degree of variance between the two surveyed groups as to the level of outsourcing
being undertaken.
Question 2 assesses the attitude of the respondent as to whether small business would
consider outsourcing a range of 13 finance and accounting related activities.
80
Table 4.10 Question 2 – “To what extent do you believe small businesses would consider
outsourcing the following activities?”
Survey Group
SB SP Total
Std. Std. Std.
Mean Median Dev Mean Median Dev Mean Median Dev
Q2a CA Help 5.08 5.00 1.262 5.56 6.00 1.284 5.24 6.00 1.282
Q2b Systems installation 5.38 6.00 1.074 5.82 6.00 1.193 5.52 6.00 1.127
Q2c Business performace rep 4.61 5.00 1.626 4.82 6.00 1.732 4.68 5.00 1.655
Q2d Cash flow report 4.61 5.00 1.785 5.44 6.00 1.397 4.88 6.00 1.708
Q2e Management accounting 4.59 5.00 1.271 4.65 5.00 1.857 4.61 5.00 1.477
Q2f Budget and cashflow serv 4.46 5.00 1.285 4.35 5.00 1.824 4.43 5.00 1.473
Q2g CCH Benchmarking 4.32 4.00 1.984 4.29 4.00 2.038 4.31 4.00 1.992
Q2h Financial diagnosis 4.27 4.00 1.964 4.91 6.00 1.865 4.48 6.00 1.947
Q2i Financial planning service 4.17 4.00 1.875 4.47 5.00 1.542 4.27 5.00 1.772
Q2j Turnkey management sys 3.89 3.00 2.278 4.82 5.50 2.110 4.19 4.00 2.258
Q2k Management software 4.23 5.00 1.742 4.29 5.00 1.915 4.25 5.00 1.791
Q2l Business exit planning 4.56 5.00 1.680 4.88 5.00 1.754 4.67 5.00 1.702
Q2m Business appraisal serv 4.39 5.00 1.960 4.06 3.00 2.159 4.29 4.00 2.023
Table 4.10 lists the 13 variables considered by respondents in respect to activities they believe
small business would consider outsourcing. Likert scales reported responses on the basis of
1 = “not at all”, 7 = “to a large extent”. The mid-point 4 was interpreted as meaning “unsure”.
The total mean for each of the 13 principal outsourcing services indicates marginal to strong
support for these activities, and generally indicates respondents believed small business
would consider outsourcing these activities. Activities that recorded the highest and lowest
responses by both respondent groups are highlighted for easier identification
“Systems installation” (Question 2b) was rated the highest (M = 5.38) outsourcing activity
small business would consider outsourcing by small business respondents and service
providers (M = 5.82). Both survey groups indicated strong support for outsourcing
accounting systems installation and training requirements.
81
“Turnkey management systems” (Question 2j) was rated the lowest (M = 3.89) outsourcing
activity with small business respondents indicating a marginal to low level of support; while
“Business appraisal services” (Question 2m) was rated the lowest (M = 4.06) small business
outsourcing activity with service providers, indicating they believed this service would be less
likely to be outsourced by their small business clients.
Generally all other responses showed marginal to strong support for outsourcing the listed
activities.
4.3.2 Section B – Outsourcing decision factors (Questions 3–7)

Section, B Outsourcing decision factors sought to gather data relating to factors affecting the
outsourcing decision by small business from the perspective of both respondent groups. The
online survey questionnaire provided the opportunity to collect data that could be contrasted
and compared through the use of frequency distribution tables and measures of central
tendency. The results for each of the seven questions contained in Section B are reported as
follows:
Question 3 seeks to identify what respondents consider are core finance and accounting
activities of small business.
Table 4.11 Question 3 – “To what extent do you agree that the following activities are core
activities of small business?”
Survey Group
SB SP Total
Std. Std. Std.
Q3a Payroll 5.54 6.00 1.252 4.91 5.00 1.640 5.33 6.00 1.412
Q3b Accounts receivable 5.82 6.00 0.798 4.97 5.00 1.566 5.54 6.00 1.169
Q3c Hardware support 3.52 4.00 1.361 3.06 3.00 0.952 3.37 3.00 1.258
Q3d Software support 3.62 4.00 1.467 2.97 2.00 1.218 3.41 3.00 1.419
Q3e Management acc serv 4.48 5.00 1.229 3.38 3.00 1.706 4.12 5.00 1.485
Q3f Internal auditing 2.63 2.00 1.551 2.32 2.00 1.199 2.53 2.00 1.448
Q3g HR Management 4.25 5.00 1.933 3.15 2.00 1.941 3.90 5.00 1.995
Likert scales reported responses on the basis of 1 = “strongly disagree”, 7 = “strongly agree”
with the mid-point scale 4 = “unsure”.
82
Table 4.11 lists seven variables to be considered by respondents in respect to core activities of
the business.
The total mean for all variables indicates marginal to strong support by both groups of
respondents for the listed core activities.
Accounts Receivable (Question 3b) was rated as the highest core business activity by small
business respondents (M = 5.82) and service provider respondents (M = 4.97), indicating
both groups believed this activity was the most important activity conducted by small
business. The total rating for this activity was the highest (M = 5.54) overall, and indicates
strong support for this activity.
Internal Auditing (Question 3f) was rated the lowest (M = 2.63) with small business
respondents and (M = 2.32) for service providers, indicating both respondent groups
believed this activity was not a core business activity of small business. The total rating for
this activity was the lowest (M = 2.53) overall, which confirms a low level of support for
outsourcing this activity.
All other activities showed marginal to strong agreement supporting what was considered a
core business activity by both groups of respondents.
Question 4 considers the timing and co-ordination of finance and accounting activities in
small business, and to what extent this is considered critical to the business.
83
Table 4.12 Question 4 – To what extent do you agree with the following statement? “The
timing and co-ordination of the following activities are critical to the overall
performance of small business”
Survey Group
SB SP Total
Std. Std. Std.
Q4a Payroll 5.49 6.00 1.629 5.65 6.00 1.203 5.54 6.00 1.500
Q4g HR Management 4.96 5.00 1.953 5.38 5.50 1.724 5.10 5.00 1.884
and 4 = “unsure”.
Table 4.12 lists seven variables considered critical to the overall performance of small business
in respect to timing and co-ordination.
Accounts receivable (Question 4b) was ranked higher than other outsourced activities, with a
mean of (M = 6.23) by small business respondents and (M = 6.21) by service providers. This
indicates both respondent groups believe timing and co-ordination of the accounts receivable
activity is critical to the overall performance of small business.
Internal auditing (Question 4f) was rated lowest (M = 3.58) of the outsourced activities by
both small business respondents and (M = 3.82) service providers, indicating both groups
believed the timing and co-ordination of internal auditing was not considered critical to the
overall performance of small business.
The total mean for all activities indicated marginal to strong agreement by both groups
relating to all listed activities, while both groups indicated a high level of importance for
timing and co-ordination of outsourced activities
Question 5 seeks to identify the levels of importance placed on criteria for selecting an
outsourcing service provider, as perceived by small businesses and service providers.
84
Table 4.13 Question 5 – “In deciding to outsource their internal accounting activities, what
level of importance do you believe small business would place on the following
criteria for selecting an outsourcing service provider?”
Survey Group
SB SP Total
Std. Std. Std.
Q5a Prior experience 5.46 6.00 1.193 5.56 6.00 0.960 5.50 6.00 1.119
Q5b Cost of services 5.11 5.00 1.090 5.68 6.00 1.199 5.30 5.00 1.151
Q5c Flexibility of services 5.20 5.00 0.804 5.47 5.00 1.022 5.29 5.00 0.885
Q5d Testimonials 4.49 5.00 1.340 5.18 5.00 1.141 4.71 5.00 1.313
Q5e Business ethics 5.38 6.00 0.991 4.88 6.00 1.684 5.22 6.00 1.271
Q5f Levels of expertise 6.10 6.00 0.848 6.24 6.00 0.855 6.14 6.00 0.848
Q5g Industry knowledge 4.92 5.00 0.982 5.12 5.00 1.066 4.98 5.00 1.009
Likert scales reported responses on the basis of 1 = “unimportant”, 7 = “very important” with
4 = “unsure”.
Table 4.13 lists seven variables relating to the level of importance placed on specific criteria by
small business when selecting an outsourcing service provider.
Levels of expertise (Question 5f) were rated highest (M = 6.10) by small business
respondents and service providers (M = 6.24), indicating both groups considered the
provider’s level of expertise was the most important factor when selecting an accounting
service provider.
Testimonials (Question 5d) received the lowest (M = 4.49) response by small business
respondents, indicating they considered this criteria less important than other items. Business
Ethics (Question 5e) were rated lowest (M = 4.88) by service providers.
All other items showed varying levels of importance by small business when selecting an
outsourcing service provider.
Question 6 considers some of the influencing factors small business would, or do, consider
when deciding to outsource finance and accounting activities.
85
are many activities that small business DO outsource or WOULD consider
outsourcing because:”
Survey Group
SB SP Total
Std. Std. Std.
Q6a Provides greater flexibility 4.97 6.00 1.276 4.91 5.00 1.138 4.95 5.00 1.228
Q6b Provides better service 5.69 6.00 0.904 5.79 6.00 0.687 5.72 6.00 0.838
Q6c Provides cost savings 4.96 5.00 1.259 5.53 6.00 1.354 5.14 5.00 1.311
Q6d Other businesses use 3.85 4.00 1.460 4.59 5.00 1.131 4.09 4.00 1.401
outsourcing SP
Q6e Able to manage change 5.46 6.00 1.169 5.50 6.00 1.285 5.48 6.00 1.202
Q6f Able to Minimise risk 4.90 5.00 0.988 4.82 4.50 1.029 4.88 5.00 0.997
Q6g Specialists in their field 5.79 6.00 1.041 5.47 6.00 1.107 5.69 6.00 1.068
Table 4.14 identifies seven reasons why small businesses do, or would, consider outsourcing
their accounting activities.
“Service providers who were specialists in their field” (Question 6g) was rated as the highest
reason by small business respondents (M = 5.79), and “Specialist service providers can
provide a better service” (Question 6b) was rated as the highest reason by service providers
(M = 5.79), indicating differing perception levels between the two respondent groups.
“Other businesses are using outsourcing service providers” (Question 6d) was rated as the
lowest reason by small business (M = 3.85) and service providers (M = 4.59), indicating this
reason was only marginal.
The total rating for “Specialist service providers can provide a better service” (Question 6b)
was rated highest (M = 5.72) overall, showing strong support for this item. “Other businesses
are using outsourcing service providers” (Question 6d) was rated lowest (M = 4.09),
indicating respondents were unsure about how important it was that this decision should be
taken into consideration.
86
All other responses indicated varying levels of support for reasons why small business do, or
would, consider outsourcing their accounting activities.
Question 7 considers nine reasons that may influence small business not to outsource their
finance and accounting activities.
are many activities that small businesses DO NOT outsource because:”
Survey Group
SB SP Total
Std. Std. Std.
Q7a Difficult to appraise 4.13 4.00 1.264 4.32 4.00 1.007 4.19 4.00 1.186
performance
Q7b Act in their own interests 3.24 3.00 1.399 3.09 3.00 1.264 3.19 3.00 1.352
Q7c Timing and co-ordination are 4.32 5.00 1.285 5.12 5.00 1.320 4.58 5.00 1.343
critical to the business
Q7d Core activities 4.61 5.00 1.488 5.29 6.00 1.624 4.83 5.00 1.559
Q7e Levels of trust 4.38 4.00 1.870 5.00 6.00 1.456 4.58 5.00 1.764
Q7f Level of expertise 3.96 4.00 1.439 4.74 5.00 1.421 4.21 4.00 1.472
Q7g Adequate in-house 3.51 3.00 1.319 2.97 3.00 1.507 3.33 3.00 1.398
expertise
Q7h Too expensive 4.48 5.00 1.723 3.94 3.00 1.650 4.30 4.00 1.710
Q7i Resistance by staff 4.54 5.00 1.413 4.97 5.00 1.141 4.68 5.00 1.341
Table 4.15 identifies nine reasons why small business would not consider outsourcing their
accounting activities.
The total mean for all responses clearly shows marginal to low levels of agreement for reasons
why small business would not consider outsourcing their accounting activities.
“The activities are viewed as core to the business” (Question 7d) was rated the highest
(M = 4.61) by small business respondents and (M = 5.29) service providers, indicating a
marginal to low level of support for this activity. Participants perceived this activity as not
being a significant decision consideration.
87
“Service providers could act in their own interests to the detriment of the business” (Question
7b) rated the lowest (M = 3.24) with small business respondents, indicating this reason
was not a significant decision factor. “Small businesses have adequate in-house expertise”
(Question 7g) rated the lowest (M = 2.97) with service provider respondents, indicating this
was not a significant decision factor.
The total response rating for “The activities are viewed as core to the business” (Question 7d)
rated the highest (M = 4.83) overall, and indicates marginal agreement that this is a decision
consideration. The lowest total response rating (M = 3.33) was “Small businesses have
adequate in-house expertise” (Question 7g) indicating marginal to negative agreement that
this activity is a decision consideration.
Generally, all other responses indicated negative to low levels of agreement relating to reasons
why small business would not consider outsourcing their accounting activities.
4.3.3 Section C – Outsourcing benefit factors (Questions 8–11)

Section C Outsourcing benefit factors, sought to collect data regarding perceptions of the
benefits of finance and accounting outsourcing by small business. The online survey
questionnaire provided an opportunity to collect data that could be contrasted and compared
using frequency distribution tables and measures of central tendency. The results for each of
the questions contained in Section C are reported as follows:
Question 8 seeks to identify respondents’ perceptions relating to control and whether they
believe outsourcing of the accounting functions would provide the same level of control as if
done in-house.
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Table 4.16 Question 8 – To what extent do you agree with the following statement?
“Outsourcing of the following activities would provide the same degree of
control as if the activity were performed in-house”.
Survey Group
SB SP Total
Std. Std. Std.
Q8a CA Help 4.46 5.00 2.027 5.24 5.00 1.075 4.71 5.00 1.807
Q8c Business performace 4.24 5.00 1.967 5.03 5.00 1.314 4.50 5.00 1.814
reports
Q8e Management Accounting 4.66 5.00 1.889 4.53 5.00 1.656 4.62 5.00 1.810
Q8f Budget and cashflow 4.63 5.00 1.929 4.26 5.00 1.943 4.51 5.00 1.932
service
Q8i Financial planning 5.14 6.00 2.113 5.06 6.00 2.103 5.11 6.00 2.100
service
Q8j Turnkey management 4.72 6.00 2.244 4.21 5.00 1.789 4.55 6.00 2.112
system
Q8m Business appraisal service 5.06 6.00 2.117 4.62 6.00 2.437 4.91 6.00 2.224
Table 4.16 identifies 13 activity responses that respondents were asked to identify when
answering Question 8.
The total mean for each activity indicates marginal to low agreement regarding the level or
degree of control existing, if the activity were outsourced.
“Financial planning and forecasting” (Question 8i) rated highest (M = 5.14) with small
business respondents, indicating a low level of agreement that outsourcing this activity would
provide the same degree of control as if the activity were performed in-house. “Accounting
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systems installation and training” (Question 8b) rated highest (M = 5.26) with service
providers, indicating a low level of agreement that outsourcing this activity would provide the
same degree of control as if the activity were performed in-house.
“Monthly business performance reports” (Question 8c) was rated lowest (M = 4.24) by small
business respondents, indicating only marginal agreement that outsourcing this activity would
provide the same degree of control as if performed in-house. “Turnkey management systems”
(Question 8j) was rated lowest (M = 4.21) by service provider respondents, indicating
marginal agreement that outsourcing this activity would provide the same degree of control as
if the activity were performed in-house.
The total response rating for “Financial planning and forecasting service” (Question 8i) was
rated highest (M = 5.11) by both groups, indicating a low level of agreement that outsourcing
this activity would provide the same degree of control as if performed in-house. “Management
software” (Question 8k) and “Budget and cash flow service” (Question 8f), shared lowest
total activity rating (M = 4.51) indicating marginal agreement that outsourcing this activity
would provide the same degree of control as if performed in-house.
Generally, it is noted that all other responses showed only marginal to low agreement that
outsourcing these activities would provide the same degree of control as if the activity were
performed in-house.
Question 9 considers the amount or volume of work the following accounting activities
represent for small business staff.
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Table 4.17 Question 9 – “Please indicate what you believe is the level of work volume the
following activities represent for small business staff ”.
Survey Group
SB SP Total
Std. Std. Std.
Q9a Payroll 3.48 3.00 1.584 4.38 5.00 1.792 3.77 4.00 1.700
Q9g HR Management 4.49 5.00 1.780 4.74 5.00 1.483 4.57 5.00 1.686
Likert scales reported responses on the basis of 1 = “low volume of work”, 7 = “high volume of
work” and 4 = “unsure”.
Table 4.17 lists the seven activity responses respondents were asked to identify in answering
Question 9.
The total mean for each activity response indicates low to marginal levels of work volume that
these accounting activities represent for small business staff.
“Accounts receivable” (Question 9b) was rated the highest (M = 4.62) activity with small
business respondents and service provider respondents (M = 4.85). This indicates both
groups considered this activity represented a slightly higher than marginal level or volume of
work for small business staff.
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“Internal auditing” (Question 9f) rated the lowest (M = 2.54) activity with small business
respondents and service provider respondents (M = 1.74), indicating both groups considered
this activity represented only a low level or volume of work for small business staff.
The total response rating for “Accounts receivable” (Question 9b) rated the highest
(M = 4.70) activity overall, indicating both respondent groups considered this activity slightly
higher than marginal level or volume of work for small business staff, and the greater level or
volume of work activity for small businesses.
“Internal auditing” (Question 9f) rated the lowest total rating (M = 2.28) activity overall,
indicating both groups believed this activity represented a low level or volume of work for
small business staff and the lowest level or volume of work activity for small businesses.
Generally, all other responses showed marginal to low levels of support for activities
representing the greater level or volume of work activity for small businesses.
Question 10 seeks to identify the principal reasons why small business outsource their
accounting functions.
Table 4.18 Question 10 – “How important do you think the following benefits of
outsourcing the internal accounting functions are for small business?”
Survey Group
SB SP Total
Std. Std. Std.
Q10a Cost savings 5.37 5.00 1.456 5.18 5.00 1.696 5.30 5.00 1.532
Q10b Special services 5.38 5.00 1.163 5.53 6.00 1.600 5.43 6.00 1.315
Q10c Internal resources 5.18 5.00 1.366 5.68 6.00 1.430 5.34 6.00 1.399
Q10d Technical expertise 5.99 6.00 1.127 5.85 6.00 1.329 5.94 6.00 1.192
Q10e Improved company focus 5.49 6.00 1.145 5.91 6.00 0.712 5.63 6.00 1.040
Q10f Trained accounting staff 5.49 6.00 1.217 5.26 6.00 1.421 5.42 6.00 1.284
Likert scales reported responses on the basis of 1 = “unimportant”, 7 = “very important” and
4 = “unsure”.
Table 4.18 lists the six principal reasons respondents were asked to identify when answering
Question 10.
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The total mean for each of the 13 benefits when outsourcing the internal accounting function
indicated respondents generally considered these benefits to have some degree of importance
to small business.
“Provision of technical expertise” (Question 10d) rated highest (M = 5.99) with small
business respondents, indicating this was the strongest benefit of outsourcing the internal
accounting function. “Improved company focus” (Question 10e) rated highest (M = 5.91)
with service providers indicating they felt this was the strongest benefit of outsourcing the
internal accounting function by small business.
“Internal resources freed up for other purposes” (Question 10c) rated lowest (M = 5.18) with
small business respondents, indicating this was the lowest ranked benefit of outsourcing the
internal accounting function. “Cost savings” (Question 10a) rated lowest (M = 5.18) with
service providers, indicating this was the lowest ranked benefit of outsourcing the internal
accounting function by small business.
The total response rating for “Provision of technical expertise” (Question 10d) was rated
the highest (M = 5.94) benefit consideration overall, indicating both groups considered this
outsourcing benefit more important than the other benefits to small business. “Cost savings”
(Question 10a) gained the lowest total overall rating (M = 5.31), suggesting both groups
considered this outsourcing benefit marginally less important than other benefits to small
business.
However, in general terms, all other responses showed a positive level of importance in
providing benefits to outsourcing the internal accounting function by small business.
Question 11 sought to identify how successful respondents believed small business would be
in achieving cost reduction through outsourcing their accounting activities.
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Table 4.19 Question 11 – “How successful do you believe small business is likely to be
in achieving cost reduction benefits through outsourcing their finance and
accounting activities?”
Survey Group
SB SP Total
Minimally successful Count 8 3 11
(less than 10% saved) % within Q11 Cost reduction benefits 72.7% 27.3% 100.0%
from outsourcing
% of Total 7.6% 2.9% 10.5%
Moderately successful Count 38 13 51
(10% to 30% saved) % within Q11 Cost reduction benefits 74.5% 25.5% 100.0%
from outsourcing
% of Total 36.2% 12.4% 48.6%
Significantly successful Count 11 7 18
(31% to 50% saved) % within Q11 Cost reduction benefits 61.1% 38.9% 100.0%
from outsourcing
% of Total 10.5% 6.7% 17.1%
Very successful Count 10 11 21
(greater than 50% saved) % within Q11 Cost reduction benefits 47.6% 52.4% 100.0%
from outsourcing
% of Total 9.5% 10.5% 20.0%
Don’t know Count 4 0 4
% within Q11 Cost reduction benefits 100.0% 0% 100.0%
from outsourcing
% of Total 3.8% 0% 3.8%
Table 4.19 shows the distribution of responses, indicating how successful respondents
believed small business would be in achieving cost reduction through outsourcing their
The total percentages indicate that 48.6% (51) of all respondents believed outsourcing would
be moderately successful in achieving cost reductions, with between 10% and 30% of activity
costs saved.
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This was supported by both small business respondents 53.5% (38) and service providers
38.2% (13), indicating outsourcing would be moderately successful in achieving cost
reductions of between 10% and 30%
“Significantly successful” with cost saving of between 31% and 50% was the next highest
rating 15.5% (11) response from small business respondents, and “very successful” with
cost saving of more than 50% was rated the second highest 32.4% (11) with service provider
respondents.
Overall, the responses confirmed that both groups of participants believed cost savings would
be achieved by small business through outsourcing finance and accounting activities.
4.3.4 Section D – Outsourcing impact factors (Questions 12–17)

Section D Outsourcing impact factors, sought to collect data regarding participants’ perceptions
of the impacts of finance and accounting outsourcing on small business. The online survey
questionnaire provided an opportunity to collect data that could be contrasted and compared
by means of frequency distribution tables and measures of central tendency. The results for
each question contained in Section D are reported as follows:
Question 12 – In determining both positive and negative impacts of outsourcing on the small
business, respondents were asked what outsourcing services they believed were susceptible to
exploitation, and to what extent, by the service provider in providing those particular services.
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what extent could the service provider exploit their position through providing
these services?”
Survey Group
SB SP Total
Std. Std. Std.
Q12a Payroll 3.32 3.00 1.940 3.09 3.00 1.990 3.25 3.00 1.950
Q12g HR Management 3.13 3.00 1.985 3.56 4.00 1.812 3.27 4.00 1.933
Likert scales reported responses on the basis of 1 = “very little”, 7 = “very much” and
4 = “unsure”.
Table 4.20 lists the seven principal outsourcing services respondents were asked to identify in
The total mean for each of the seven principal outsourcing services generally indicates only a
marginal to low belief that the service provider could exploit their position through providing
these services.
“Management accounting” (Question 12e) rated the highest (M = 5.06) with small business
respondents and service provider respondents (M = 4.41), with both groups indicating they
considered this service the most susceptible to exploitation by service providers.
“Hardware support” (Question 12c) rated the lowest (M = 2.32) with small business
respondents and service provider respondents (M = 2.44), with both groups indicating they
considered this service the least susceptible to exploitation by service providers.
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The total response rating for “Management accounting” (Question 12e) rated the highest
(M = 4.85) overall, indicating all respondents considered this service the most susceptible to
exploitation by service providers. The total response rating for “Hardware support” (Question
12c) rated lowest (M = 2.36) overall, suggesting all respondents considered this service the
least susceptible to exploitation by service providers.
As mentioned earlier, generally speaking all other responses showed marginal to low belief
that the service provider could exploit their position through providing these services.
Question 13 sought to identify how difficult respondents thought it would be to measure the
performance of the service provider in performing these activities.
As businesses attempt to identify the impacts of outsourcing, it becomes important to

determine whether the performance of the outsourcing service provided is satisfactory.
what extent would it be difficult to measure whether the activity is performed
satisfactorily?”
Survey Group
SB SP Total
Std. Std. Std.
Q13a CA Help 1.99 2.00 0.686 2.85 2.50 1.234 2.27 2.00 0.983
Q13c Performace rep 1.97 2.00 0.774 2.15 2.00 0.436 2.03 2.00 0.686
Likert scales reported responses on the basis of 1 = “not difficult”, 7 = “very difficult” and
4 = “unsure”.
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Table 4.21 lists the 13 activities respondents were asked to identify in answering Question 13.
The total mean for each of the thirteen principal outsourcing services indicates respondents
believed it was not very difficult to determine whether outsourcing activities were performed
satisfactory.
“Turnkey managements systems” (Question 13j) rated highest (M = 3.54) with small
business respondents and service provider respondents (M = 3.85), indicating both groups
believed there was only a low degree of difficulty in determining whether the activity were
performed satisfactorily.
“Accounting systems installation and training” (Question 13b) rated lowest (M = 1.92)
with small business respondents, indicating once again that the degree of difficulty in
determining whether the activity were performed satisfactory was very low. “Quarterly cash
flow reporting” (Question 13d) rated lowest (M = 1.94) with service provider respondents,
meaning the degree of difficulty in determining whether the activity were performed
satisfactory was very low.
The total response rating for “Turnkey managements systems” (Question 13j) rated
highest (M = 3.64) overall, indicating both groups believed that the degree of difficulty in
determining if the activity were performed satisfactory was low.
“Quarterly cash flow reporting” (Question 13d) rated lowest total rating (M = 2.02)
supporting a belief that both groups believed the degree of difficulty in determining if the
activity were performed satisfactory was very low.
Generally, all other responses indicated a strong to very high belief that it would not be
difficult to measure whether the service provider had performed these activities satisfactorily.
Question 14 sought to identify how difficult the respondents thought it would be to

determine the contractual performance of the service provider in performing these activities.
As businesses attempt to identify the impacts of outsourcing, it is important to determine

whether the service provider performs according to contractual obligations.
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what extent would it be difficult to determine whether the service provider had
performed according to contractual obligations?”
Survey Group
SB SP Total
Std. Std. Std.
Q14a CA Help 2.70 2.00 1.580 2.97 2.00 1.527 2.79 2.00 1.561
Q14f Budget and Cashflow Serv 2.45 2.00 1.392 2.71 2.00 1.194 2.53 2.00 1.331
Q14i Financial planning serv 3.39 3.00 2.032 3.76 3.50 1.458 3.51 3.00 1.866
Likert scales reported responses on the basis of 1 = “not difficult”; 7 = “very difficult”; and
4 = “unsure”.
The total mean for each of the 13 principal outsourcing services confirms an impression that
respondents believed it was not very difficult to determine whether the outsourced activities
had been performed according to contractual obligations by the service provider.
“Business exit/Succession planning” (Question 14l) rated highest (M = 3.93) with small
business respondents, indicating the degree of difficulty in determining whether the activity
had been performed according to contractual obligations was low to marginally difficult
to determine. “Business appraisal services” (Question 14m) rated highest (M = 3.85) with
service provider respondents, indicating the degree of difficulty in determining whether
the activity had been performed according to contractual obligations was low to marginally
difficult to determine.
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“Budget and cash flow services” (Question 14f) had the lowest ranking (M = 2.45) with small
business respondents, indicating the difficulty in determining whether the activity had been
performed satisfactory was considered too low to determine.
“Budget and cash flow services” (Question 14f) and “Monthly business performance
reporting” (Question 14c) had the lowest ranking (M = 2.71) with service provider
respondents, indicating the degree of difficulty in determining whether the activity had been
performed satisfactorily was considered too low to determine.
The total response rating for “Business exit/Succession planning” (Question 14l) was
rated highest (M = 3.83) overall, indicating both respondent groups believed the degree of
difficulty in determining whether the activity had been performed satisfactorily was only
marginal “Budget and cash flow services” (Question 14f) was rated lowest (M = 2.53),
indicating both respondent groups believed the degree of difficulty in determining whether
the activity had been performed satisfactorily was too low to determine.
Generally, all other responses indicated it would not be difficult to determine whether the
service provider had performed their duties according to contractual obligations.
Question 15 sought to identify how difficult respondents thought it would be to arrange for
an alternative service provider at short notice, should it be required.
As businesses seek to identify the impacts of outsourcing, it is important to understand the

importance of maintaining continuity of service.
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to what extent would it be difficult for them to arrange for an alternate service
provider at short notice?”
Survey Group
SB SP Total
Std. Std. Std.
Q15a CA Help 2.96 3.00 1.736 2.38 2.00 1.670 2.77 2.00 1.728
Q15k Management Software 4.66 5.00 1.183 3.56 3.00 1.236 4.30 4.00 1.302
Likert scales reported responses on the basis of 1 = “not difficult”; 7 = “very difficult”; and
4 = “unsure”.
The total mean for each of the 13 principal outsourcing services shows respondents believed
there was some degree of difficulty in arranging an alternative service provider at short notice.
“Financial diagnosis” (Question 15h) and “Turnkey management systems” (Question

15j) rated highest (M = 5.68) with small business respondents, who believed it would be
moderately difficult to arrange for an alternative service provider at short notice. “Turnkey
management systems” (Question 15j) received the highest ranking (M = 4.74) with service
providers, indicating they believed the degree of difficulty in arranging for an alternative
service provider was marginal to low.
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“Computer accounting help and training” (Question 15a) rated lowest (M = 2.96) with small
business respondents and service providers (M = 2.38) showing both groups believed it
would not be too difficult to arrange for an alternative service provider at short notice.
The total response rating for “Turnkey management systems” (Question 15j) was the highest
(M = 5.37) overall, indicating both respondent groups believed it would be moderately
difficult to arrange for an alternative service provider at short notice.
“Computer accounting help and training” (Question 15a) was rated lowest (M = 2.77),
indicating both groups believed it would not be too difficult to arrange for an alternative
service provider at short notice
Generally, all other responses indicated the degree of difficulty in arranging for an alternative
service provider was moderate to marginally low.
Question 16 sought to identify how both respondent groups believed small business had
performed in critical accounting activities over the past three years.
As small business seeks to identify the impacts of outsourcing, it is important to understand

the importance of business performance by small business.
Table 4.24 Question 16 – “What do you consider the business performance of small
business has been in respect of the following activities in the past three years?”
Survey Group
SB SP Total
Std. Std. Std.
Q16a Payroll 4.01 4.00 0.918 5.12 5.00 1.343 4.37 4.00 1.187
Q16g HR Management 3.08 3.00 1.025 3.00 3.00 1.497 3.06 3.00 1.192
Likert scales reported responses on the basis of 1 = “not very good”; 7 = “very good”; and
4 = “satisfactory”.
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Table 4.24 lists the seven principal outsourcing services respondents were asked to identify in
The total mean for each of the seven principal outsourcing services generally indicates both
groups of respondents believed small business performance in each of the activities over the
past three years ranged from satisfactory to low.
“Payroll administration” (Question 16a) rated highest (M = 4.01) with small business
respondents and service providers (M = 4.37), indicating both groups believed small business
performance over the past three years was satisfactory, and therefore this level of performance
had been acceptable.
“Internal auditing” (Question 16f) rated lowest (M = 2.11) with small business respondents
and service provider respondents (M = 2.06), indicating both groups believed small business
performance in this function over the past three years had been less than satisfactory.
The total response rating for “Payroll administration” (Question 16a) was rated highest
(M = 4.37) overall meaning both groups believed small business performance over the past
three years had been about satisfactory.
“Internal auditing” (Question 16f) was rated lowest (M = 2.10) overall indicating both groups
believed small business performance over the past three years had been somewhat less than
satisfactory.
Generally, all other responses indicated both groups believed small business performance in
these areas had been marginally less than satisfactory over the past three years.
Question 17 sought to identify which positive impacts of outsourcing are likely to be

experienced by small business.
As businesses attempt to identify the impacts of outsourcing, it is important to identify the

positive impacts on their business.
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Table 4.25 Question 17 – “Which of the following POSITIVE impacts do you believe
will be experienced by small business because of outsourcing their finance and
accounting activities?”
Survey Group
SB SP Total
% of % of % of
Count Total Count Total Count Total
Do fewer routine activities 30 28.6% 22 21.0% 52 49.5%
Able to devote more time to strategic activities 62 59.0% 32 30.5% 94 89.5%
More face to face time with customers and staff 54 51.4% 27 25.7% 81 77.1%
More training time 26 24.8% 21 20.0% 47 44.8%
No positive impacts 0 0.00% 0 0.00% 0 0.00%
Other 0 0.00% 0 0.00% 0 0.00%
Table 4.25 identifies six positive impacts of outsourcing finance and accounting activities.
“Able to devote more time to strategic activities” was rated the highest (89.5%), with 94
respondents believing this was a positive impact of outsourcing.
“More face to face time with customers and staff ” was rated the next highest (77.1%), with 81
respondents believing this was a positive impact of outsourcing.
Generally, all other responses (excluding “No positive impacts” and “Other”) indicated
both groups believed positive impacts would be experienced by small business as a result of
outsourcing finance and accounting activities.
4.4 Conclusions
This chapter presented the findings of the research based on data collected from 105 online
survey respondents, who comprised 71 small businesses and 34 finance and accounting
service providers.
Cross tabulations were used to compare demographic characteristics (Section D) between

the two participant groups, and frequency analysis was used to compare perceptions relating
to decision, benefit and impact factors (Sections A, B and C) between the two participant
groups.
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The data analysis enabled use of a quantitative research approach focusing on a comparison
of small business and services provider perceptions relating to decision, benefit and impact
factors.
Chapter Five will consider the implications of the data analysis relative to the research
questions developed for and discussed in this study.
105
Chapter 5
Conclusions and implications
5.1 Introduction
Chapter Four presented the results of data analysis associated with this study, which included
descriptive and associated findings related to the research objectives and questions developed
in Chapter Three.

Chapter Five will systematically present the findings of the research study, and draw
quantitative conclusions and implications from the survey data analysed in Chapter Four. The
results of this analysis will be presented in order to identify a theoretical framework for small
business outsourcing its finance and accounting activities and to outline the limitations of the
study and propose possible future research opportunities emanating from this study.

Chapter Five comprises six sections. Section 5.1 introduces the chapter, its objectives
and structure. Section 5.2 summarises the outcomes of the data analysis, interprets the
significance of the findings of the data analysis carried out in Chapter Four, and presents a
revised theoretical framework. Section 5.3 considers the implication of the research in regard
to theory, service providers and small business. Section 5.4 considers the limitations of the
research, while Section 5.5 considers future research opportunities, and Section 5.6 concludes
the thesis with an overview of the study as a whole.
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Chapter 5: Conclusions and implications
Chapter 5 Conclusions and implications
5.1 Introduction

5.2.1 Outcomes - Outsourcing decision factors

5.2.2 Outcomes - Outsourcing benefit factors
5.2.3 Outcomes - Outsourcing impact factors
5.2.4 Revised theoretical framework
5.3.1 Implications for theory

5.3.2 Implications for service providers
5.3.3 Implications for small business
5.6 Conclusions
Figure 5.1 Outline of Chapter Five with section numbers and their relationships

The following section discusses the outcomes identified by the data analysis carried out in
Chapter Four. Implications flowing from these outcomes in relation to the stated research
objectives and questions in Section 2.4.1 (page 39) will be discussed in Section 5.3 (page 113)
5.2.1 Outcomes – Outsourcing decision factors

As stated in Chapter One (page 1), a key objective of this study was to identify the principal
decision factors and their level of importance to small business and accounting service
providers in deciding to outsource finance and accounting activities.
Frequency distributions of outsourcing decision factors were examined and reported in 4.3.2
of Chapter Four (Tables 4.11, 4.12, 4.13, 4.14 and 4.15, pages 82–87). From these tables the
following conclusions relating to outsourcing decision factors can be drawn:
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• Accounts receivable was considered a core activity of small business, and timing and
co-ordination of this activity deemed critical to small business performance (Table
4.11, page 82 and Table 4.12, page 84).
• Levels of expertise were considered the most important consideration in selecting

outsourcing service providers, considered specialists in their fields (Table 4.13, page 85
and Table 4.14, page 86)
• Core activities of the business were less likely to be outsourced (Table 4.15, page 87)
Section B of the survey contained five questions designed to gather data to enable analysis of
the principal factors affecting respondents’ outsourcing decisions.
There is an evident alignment of perceptions by both respondent groups that small businesses
were less likely to outsource activities considered as core to the business where the timing and
co-ordination of the activity is critical to overall performance. Respondents also considered
the service provider’s levels of expertise as a significant factor in deciding whether to
outsource, as they were considered specialists in their field.
Table 5.1 provides a summary of the outcomes and conclusions relating to Section B of this
research study.
Question
number Question Perception gap
3 To what extent do you agree that the following activities are No perception gap identified
core activities of small business?
4 To what extent do you agree with the following statement? “The No perception gap identified
timing and coordination of the following activities are critical to
the overall performance of small business”
5 In deciding to outsource their internal accounting activities, No perception gap identified
what level of importance do you believe small business would
place on the following criteria for selecting an outsourcing
service provider?
6 To what extent do you agree with the following statement? No perception gap identified
“There are many activities that small business DO outsource or
WOULD consider outsourcing because:”
7 To what extent do you agree with the following statement? No perception gap identified
“There are many activities that small business DO NOT
outsource because:”
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In summary, Table 5.1 provides conclusive proof of confirmed alignment of small business
and service providers concerning outsourcing activities.
5.2.2 Outcomes – Outsourcing benefit factors

The second objective of this study outlined in Chapter One (page 1) was to identify the
benefits to small business of outsourcing finance and accounting activities, as perceived by
small business and accounting service providers.
Frequency distributions of outsourcing benefit factors were investigated and reported in

Section 4.3.3 of Chapter Four (Tables 4.16, 4.17, 4.18 and 4.19, pages 89–94). From these tables
the following conclusions related to outsourcing benefit factors are:
• Levels of control over outsourced activities (Table 4.16. page 89) indicated respondents
had different perceptions as to which activities provided the greater degree of control.
Small business respondents considered outsourcing financial planning services would
provide marginally good levels of internal control.
• Outsourcing accounts receivable was considered by both participant groups as the

activity providing greater benefit by reducing the volume of work for small business
(Table 4.17, page 91)
• Respondents considered technical expertise a very important benefit of outsourcing

(Table 4.18, page 92)
• 48.6% of respondents believed that outsourcing the accounting activities would

provide moderately successful cost reduction of between 10% to 30% (Table 4.19,
page 94).
Section C of the survey contained four questions providing data to enable analysis of the
perceived benefits to small business through outsourcing accounting activities.
The responses show a consensus that outsourcing provides benefits to small business,
although perceptions of the degree of those benefits differs between the two groups in some
instances, as do the activities providing those benefits.
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Table 5.2 provides a summary of the outcomes and conclusions related to Section C of this
research study.
Question
8 To what extent do you agree with the following statement? Minor differences in
“Outsourcing of the following activities would provide the perceptions as to degree of
same degree of control as if the activity were performed in- control – these differences
house” were considered insignificant
9 Please indicate what you believe is the level of work volume the No perception gap identified
following activities represent for small business staff.
10 How important do you think the following benefits of No perception gap identified
outsourcing the internal accounting functions are for small
business?
11 How successful do you believe small business are likely to be No perception gap identified
in achieving cost reduction benefits through outsourcing their
finance and accounting activities?
5.2.3 Outcomes – Outsourcing impact factors

As identified in Chapter One (page 1), the third objective of this study was to identify impacts
upon small business of outsourcing finance and accounting activities, as perceived by small
business and accounting service providers.
Frequency distributions of outsourcing impact factors were reported in 4.3.4 of Chapter

Four (Tables 4.20, 4.21, 4.22, 4.23, 4.24 and 4.25, pages 96–104). From these tables the following
conclusions related to outsourcing impact factors are stated:-
• “Management accounting services” was considered by both respondent groups as

the principal activity possibility susceptible to exploitation by accounting service
providers, and delivering a negative impact on the business. “Hardware support
services” however, were considered to have the least impact as a result of exploitation
by accounting service providers (Table 4.20, page 96).
• “Turnkey management systems” was considered by both respondent groups as the

most difficult to determine if the service has been performed satisfactorily, and
represented the activity most likely to impact negatively on small business. “Systems
installation and help” was considered by small business as the least difficult to
determine, and any impact would be minor (Table 4.21, page 97).
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• “Business exit or succession planning services” were considered by both respondent

groups the most difficult activity to determine if the service was performed according
to contractual obligations, and represented the activity most likely to impact negatively
on small business. “Budget and cash flow services” was considered the least difficult to
determine (Table 4.22, page 99).
• “Turnkey management services” were considered by both groups as the most difficult
of all activities to arrange for an alternate service provider, and represented the activity
most likely to have a negative impact upon small business. “Computer accounting
help and training” was considered the least difficult to arrange an alternative service
provider, and likely to cause only minimal negative impact upon the small business
(Table 4.23, page 101).
• “Payroll” was the activity having the least negative impact upon small business
performance over the past three years (Tables 4.24, page 102).
• “Being able to devote more time to strategic activities” was considered by 89.5% (94)
of respondents as having the most positive impact on small business (Table 4.25, page
104).
Section D of the survey contained six questions intended to gather data to enable analysis
of perceived positive and negative impacts upon small business by outsourcing accounting
activities.
There is conclusive evidence that outsourcing impacts small business. Negative impacts were
considered minor, while positive impacts were expected to flow from outsourcing finance and
111
Table 5.3 provides a summary of the outcomes and conclusions relating to Section D of this
research study.
Question
12 If the following activities were outsourced by small business, No perception gap identified
to what extent could the service provider exploit their position
through providing these services?
13 If the following activities were outsourced by small business, to No perception gap identified
what extent would it be difficult to measure whether the activity
is performed satisfactorily?
to what extent would it be difficult to determine if the service
provider had performed according to contractual obligations?
to what extent would it be difficult for them to arrange for an
alternative service provider at short notice?
16 What do you consider the business performance of small No perception gap identified
business has been in respect of the following activities in the
past three years?
17 Which of the following POSITIVE impacts do you believe will No perception gap identified
be experienced by small business because of outsourcing their
5.2.4 Revised theoretical framework

The theoretical framework developed in Chapter Two to identify perceptions gaps (Figure
2.2, page 23) and discussed in Section 2.1.4 (page 22) identified three principal factors considered
by small business and accounting service providers.
As a result of the data analysis carried out in Chapter Four (Sect 4.3, page 78) a revised
theoretical framework (Fig 5.2, page 113) is now proposed that identifies three dependent
variables consisting of decision, benefit and impact factors, and fifteen independent variables
influencing each of the factors.
112
Key considerations for outsourcing
Core activities
Timing and coordination

Outsourcing
Perception
decision Service provider criteria
gap
factors
Positive decision factors
Negative decision factors
Degree of control
Outsourcing Work volume level

Perception
benefit
gap
factors Importance of benefits
Cost reduction
Ability to exploit position
Ability to determine performance
Outsourcing Contractual performance obligations

Perception
impact
gap
factors Alternate service provider
Small business performance
Positive impacts
Alignment of understanding
the service arangements
Figure 5.2 Revised theoretical framework for factors affecting the outsourcing of finance and
accounting activities by small business

As in all academic research studies, the focus is on testing and/or creating theory. This study
has been exploratory in nature, and sought to address three objectives and subsequently
answer three questions derived from the three established research objectives. To extract
value from this study, it is essential to evaluate the outcomes considered in Section 5.2 and
identify implications in respect of policy and practice applications for both accounting service
providers and small business.
113
What follows are the identified implications for theory, service providers and small business
of F&AO.
5.3.1 Implications for theory

In synthesising and extending existing theory in the BPR and BPO domains, the proposed
approach is to apply multiple theoretical perspectives to better understand the F&AO activity.
Subsequently this study suggests a greater insight into the why and what of outsourcing is
needed, rather than use a single perspective.
Accounting service providers and small business defined in this study are the stakeholder
groups involved in outsourcing finance and accounting activities, and within this context, that
these stakeholders will obtain the greatest value from the findings of this research.
Broadly speaking, service providers and small business have similar objectives, perceptions
and considerations when outsourcing, suggesting it is useful to develop a decision-making
guide, rather than treating each F&AO decision as unique.
When commencing this study it was believed a diversity of perspectives would exist between
service providers and small business. However, it now appears the interaction between the
perspectives of service providers and small business is less complex than anticipated.
The findings and contributions of this research have several theoretical implications about
perceiving the importance and performance held by F&AO service providers and small
business.
The theoretical implications of the research carried out and reported in this thesis include, but
are not limited to, the following areas:
1. Extending theory to an area not previously addressed through expending identified

drivers for outsourcing by small business and identifying factors influencing their
outsourcing decision, other than those previously identified through the literature
review and this research study.
2. Developing a research framework for critical decision factors for finance and
accounting outsourcing by extending the framework proposed in Figure 5.2 (page 113) as
an outcome of future research and extending theory discussed in point 1 above.
114
The implications of this research to accounting service providers and small business are now
considered in more detail:-
5.3.2 Implications for service providers

The previous section discussed implications for theory. In turn, this section now addresses the
practical implications of the findings of this research for accounting service providers, based
on the revised theoretical research framework of factors affecting the outsourcing of finance
and accounting activities by small business in Figure 5.2 (page 113).
The outcomes considered in Section 5.2 in connection with the three stated objectives (page
107) of this research may provide potential in upgrading the accounting service providers’ ability
to manage outsourcing services to small business, and strengthening relationships between
the two parties.
It is recommended that accounting service providers gain an understanding of issues and

concerns affecting small business, and as such could benefit from reading the literature review
chapter highlighting accounting issues associated with outsourcing (Chapter Two).
The findings of this research provide first-hand information to accounting service providers,
as front line practitioners, that they should actively collaborate and communicate with small
business clients about their finance and accounting activities.
In particular, this study provides accounting service providers with knowledge of a specific
set of factors that impact upon small business in relation to outsourcing decision making,
benefits and impacts. By developing a checklist to address the key factors highlighted in this
research, accounting service providers are afforded a deeper understanding of the finance and
accounting outsourcing issues considered by small business clients.
This knowledge can assist in developing, maintaining and improving accounting services, as
well as aiding communication between service providers and small business clients.
115
5.3.3 Implications for small business

The research findings have the potential to improve productivity by helping small business
focus on factors providing greater benefit, lower negative impact and higher positive impact,
thereby attaining greater benefit from less effort. Such outcomes help small business achieve a
better understanding of finance and accounting outsourcing.
There is a need to consider factors impacting on the perceptions that small business has of
service providers. This research provides insight into factors positively affecting the decision
to outsource the finance and accounting activities by small business.
Small business should be aware of both the more and less important factors and
considerations that affect outsourcing arrangements. How this awareness is created is the
responsibility of the service provider, who must be fully informed about benefits and impacts
of finance and accounting outsourcing. Small business managers can use the checklist,
provided by accounting service providers, in determining their accounting outsourcing
requirements.
Based on this research, the most critical factors influencing the outsourcing of finance and
accounting activities have been identified and defined, so small business managers can use
them as a guide for focusing their attention and resource allocation.
5.4 Limitations of the study

Most research studies have limitations, and as such a number of limitations not evident when
this study commenced were encountered during the course of this research project.
The study was limited to Australian small businesses, therefore the conclusions drawn from
this study face a potential problem of generalisability.
Although the results of this study have been drawn only from Australian organisations, there
is a possibility of obtaining similar results, if a study were replicated in other industrialised
countries. Should one find similarities and/or differences between Australia and other
countries, it may call for further investigations.
116
It is also acknowledged that cultural differences may impact upon results, where such issues
could be addressed by further research.
Three predominant limitations were identified in this study, which are now discussed:
5.4.1 Service provider limitations

As stated in Chapter Three at 3.4.2.1 (page 58), the number of service provider respondents
were 34, from a sample population of 61. This small number could affect generalisation in
terms of quantitative results and statistical convention.
The issue of biased perceptions from service providers should also be considered as a
limitation, as their primary business activity lies in providing outsourced accounting services
to small business. Consequently, this may impact upon respondents’ perceptions regarding
decision, benefit and impact factors relating to the outsourcing of finance and accounting
activities by small business.
5.4.2 Small business limitations

As stated in Chapter Three at 3.4.2.1 (page 58), the number of small business respondents was
71 from a sample population of 314, and while this represented a response rate of 22.6%, it is
considered satisfactory for the purposes of this study. However, this relatively small sample
could affect generalisation in terms of quantitative results and statistical convention.
5.4.3 Analytical limitations

As a result of the limited number of respondents noted in Sections 5.4.1 and 5.4.2, descriptive
analysis and simpler inferential statistics were used in preference to a more formal multivariate
approach.
It was considered necessary to adopt a trade-off between the exploratory issues being
investigated and the scope of the research. Consequently, this study infers a causal
relationship between independent and dependent variables. Ambiguity concerning these
causal relationships may provide potential exposure to the issue of internal validity.
The generalisation of findings, measures and populations included in this study reflects issues
of external validity, and might be considered a possible limitation to this research study.
117

This study set out to examine the perceptions of accounting service providers and small
business with regard to outsourcing the finance and accounting activities by small business.
Limitations of the study were considered in Section 5.4, and while these limitations were of
a general nature, they suggest further research in this area could usefully be undertaken to
expand and supplement the findings emanating from this research.
The following represents some possible areas of future research:
• Further examination of the relationships between accounting service providers and

their clients within large Australian accounting firms
• Replication of this study within Asian industrialised and developing economic

communities such as Singapore and Vietnam
• Replication of this research with a large multi-national accounting firm and their
clients
• Further research into the relationships between decision, benefit and impact factors.
While this research focused on identifying differences in perceptions held by the two
respondent groups, further research linking these factors to the outsourcing activity
should provide a wider view of the issues involved, and assist towards building a better
understanding of the cause-effect relationships between the different variables in the
finance and accounting outsourcing area.
Research on finance and accounting outsourcing and comparison of factors impacting upon
the decision process is important and useful for theory building, as well as providing practical
implications. Not only can this enhance the literature, it can also provide a useful benchmark
for real-world practice, as small business needs to be more competitive to survive within a
more open and international business environment.
118
5.6 Conclusions
This chapter discussed the study’s main findings, addressed the limitations associated with the
study and considered areas for future research that could prove useful in extending the revised
theoretical model proposed in Figure 5.2 (page 113).
In summarising this research, the following points need to be pointed out:
This research set out to determine whether perception gaps existed between accounting
service providers and small business, by identifying variables considered by both groups when
considering outsourcing internal accounting activities and the how these perceptions align.
The rationale for the study was defended in reviewing the decision, benefit and impact factors
of outsourcing (particularly finance and accounting outsourcing), that failed to identify
differences in the perspectives of the two parties involved in the outsourcing arrangement.
Differences in perceptions were shown to be significant, as they impact upon the expectations
of small business and how the service provider satisfies the needs and wants of small business
in the outsourcing arrangement.
The study involved data collection from two sub-groups. Service provider participants
were sourced from a national organisation whose members provide finance and accounting
services to small business, where respondents numbered 34 from a sample population of
61. Small business participants were randomly sourced from a national database, With the
number of respondents being 71 from a selected population of 314. Respondents were
considered to be a reliable representation of the population of both groups as a whole.
This study employed a positivistic/hypothetico, deductive approach to the research objectives

stated in Section 2.4.1 (page 39) and assessed the main factors involved in the outsourcing
decision as considered by accounting service providers and small business in Australia. It
identified relationships between the variables in the theoretical model formulated from
findings of relevant existing literature.
The research study was confined to accounting service providers and small businesses
operating within Australia, and conducted during the period July and October 2007.
Responses may vary if the survey were replicated in the future.
119
Findings emanating from this study confirm an alignment of perceptions and a consensus
by both respondent groups concerning outsourcing activities, benefits to small business and
impacts on small business.
The findings provide first-hand, relevant information for accounting service providers (as
frontline practitioners), emphasising that they should actively collaborate and communicate
with small business clients when dealing with finance and accounting activities.
In particular, this study provides accounting service providers with knowledge of a specific set
of factors that impact upon small business in relation to outsourcing decision making, benefits
and impacts.
The lack of prior research regarding the outsourcing decision by small business demonstrated
a need for further in-depth research, and should focus on the developing and changing face
of business, as well as the relationships between small business and outsourcing service
providers. Research on finance and accounting outsourcing and comparison of factors
impacting upon the decision process is shown to be important and useful for theory building,
as well as for providing practical applications. The findings not only enhance the literature,
but also provide a useful benchmark for real-world practice, as small business needs to be
more competitive to survive within an increasingly more open and international business
environment.
This research contributes to the general body of knowledge by proving a theoretical

framework (Figure 5.2, page 113) for accounting service providers and small business to
further explore the issues examined in this study. While this research focused on identifying
differences in perceptions held by the two respondent groups, further research linking these
factors to the outsourcing activity should provide a wider view of the issues involved, and
thus assist towards building a better understanding of the cause-effect relationships identified
between the different variables in the finance and accounting outsourcing area.
120
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Quinn, JB (1995). “On the edge of outing”, The Alliance Analyst, available at www.alliance.
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Ray, G (2007a) “Finance and Accounting Outsourcing - The Next Logical Step for Small
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130
Appendix 1
CAD partner online survey
information sheet and consent form
SOUTHERN CROSS UNIVERSITY
INFORMATION SHEET and SURVEY CONSENT
(Please take the time to read this important information)
CAD Partners Pty Ltd – Service Provider Survey Questionnaire
An exploratory survey on the factors and importance of the variables

considered by Small Business Owners in the decision to outsource the
internal accounting function.
You are invited to participate in a study to explore the proposition “That while it is possible that outsourcing
the internal accounting function by small businesses to organisations, regarded as experts in their field, can
provide increased levels of performance, control and sustainability, the decision drivers, benefits and impacts
of FAO remain obscure to the small business operator”. This research forms part of a Doctor of Business
Administration thesis being conducted by Graham Ray and supervised by Dr Philip Neck.
While great ideas and entrepreneurial skills are fundamental to the business start-up, good financial
management is considered critical to the business survival. The reason most small business fail is that they
are not up to the challenges of effective financial management and decision-making. This is where
outsourcing of the internal accounting function comes in and is an alternative, which small businesses might
need to consider in order to remain competitive.
The purpose of this study will be to explore and identify the issues and factors considered by small
businesses on the decision to outsource their finance and accounting functions. As you may be aware,
research on small business, behavior is used in many industries to improve the quality of service to
consumers of small businesses. This research will attempt to develop a model, of those issues and factors,
which drive the decisions of small business in outsourcing the finance and accounting functions.
We are not seeking information on the issues and factors that you think you should consider, but on those
issues and factors that you think your clients or prospective clients will consider when deciding to outsource
some or all aspects of their finance and accounting functions.
Risks and Benefits
There are no risks involved in participating in this survey. Benefits of this survey will assist us to provide a
better and more professional understanding of your needs. Your opinions and experiences will contribute to
our understanding of how Small Businesses perceive the function of outsourcing their internal accounting
needs.
Procedures to be followed
The survey will take approximately 20 minutes in total to complete. The demographic information that will be
collected will consist of the location of your business, business owner gender, number of years in business,
turnover of business, number of employees and business type. This information is necessary to provide group
related statistics. No other personal information will be collected by the researcher.
You are asked to logon to the online survey by clicking on the “I AGREE” button at the bottom of this page.
When you click on the “I AGREE” button, you will be taken to the Online Survey and you are asked to
complete all the questions presented.
Participation is purely voluntary. There are no costs associated with participation in this research only some of
your valuable time.
When you finish the survey and click on the “Submit” button, your data will be automatically stored as
anonymous data in an electronic file and no record will be made of who submitted the survey.
131
Appendix 1: CAD partner online survey information sheet and consent form
Responsibilities of the Researcher
It is our duty to make sure that any information provided by you is protected. Your name and other identifying
information will not be collected or attached to any data collected. The information collected will be presented
as overall data, and the aggregated research findings emanating from the analysis of this research will be
made available to CAD Partners Pty Ltd and no details as to individual responses will be disclosed, only the
analysed results.
Subject’s Rights
Your participation is voluntary. You have the right to withdraw your consent or discontinue participation at
any time without penalty. Your individual privacy will be maintained in all published and written data resulting
from or involved in this survey.
Freedom of Consent
Clicking on the “I AGREE” button at the bottom of this screen is considered implied consent of your
participation. If you do not wish to continue with the Online Survey, simply click on the “I DON’T AGREE”
button and you will be returned to the home page.
Inquiries
If you have any questions, we expect you to ask us.
Graham Ray Dr Philip Neck (Supervisor)

School of Commerce & Management Graduate College of Management
Southern Cross University Southern Cross University
Lismore NSW 2480 Lismore NSW 2480
Email : graham.ray@scu.edu.au Email : philip.neck@scu.edu.au

Phone : (02) 6620 3843 Phone : (07) 5599 3125
Do you agree to do the CAD Client survey?
I AGREE I DON'T AGREE

[Take me to the survey] [Return to home page]
The ethical aspects of this study have been approved by the Southern Cross University Human Research
Ethics Committee. The Approval Number is ECN-06-138. If you have any complaints or reservations about
any ethical aspect of your participation in this research, you may contact the Committee through the Ethics
Complaints Officer:
Ms Sue Kelly
Ethics Complaints Officer and Secretary
HREC
PO Box 157
Lismore, NSW, 2480
Telephone (02) 6626-9139 or fax (02) 6626-9145
Email: sue.kelly@scu.edu.au
All complaints, in the first instance, should be in writing to the above address. All complaints are investigated
fully and according to due process under the National Statement and this University. Any complaint you make
will be treated in confidence and you will be informed of the outcome.
132
Appendix 2
CAD partner online survey
questionnaire
CAD Partners Pty Ltd
Service Provider Survey Questionnaire
considered by Small Business Owners in the decision to outsource their
Please answer all questions. This questionnaire is anonymous and shall remain private and
confidential. Only the researcher will use individual data, for the purposes of research. Any enquiry
should be directed to Graham Ray, email: graham.ray@scu.edu.au
Individual responses to this questionnaire are confidential The findings from this survey and report will not
enable any individual or organisation to be specifically identified.
Section A: Outsourcing Information – Please tick the appropriate box
Definition of Outsourcing: Outsourcing refers to the process where activities traditionally carried
out internally are contracted out to externals service providers
For the following questions, please circle the number corresponding most closely to your
answer.
Example:
Much less Much more
. 1 2 3 44 5 6 7
The rating of ‘4’ in this example would indicate that you believe your clients outsource about the
same as most other small businesses.
1. Do you think your clients outsource more or less of their accounting activities than
other small businesses?
Much less Much more
. 1 2 3 4 5 6 7
Level of outsourcing by small business clients 1 2 3 4 5 6 7

compared to other small businesses.
133
Appendix 2: CAD partner online survey questionnaire
2. To what extent do you believe small businesses would consider outsourcing the
following activities?
For the following services, please circle one number to indicate your choice, where 1 = Not at all and
7 = To a large extent.
To a large
Not at all extent
Computer Accounting Help & Training 1 2 3 4 5 6 7
Accounting Systems Installation & Training 1 2 3 4 5 6 7
Monthly Business Performance Reports 1 2 3 4 5 6 7
Quarterly Cash-flow Report 1 2 3 4 5 6 7
Management Accounting Service 1 2 3 4 5 6 7
Budget & Cash-flow Service 1 2 3 4 5 6 7
CCH Benchmarking & KPI Service 1 2 3 4 5 6 7
Financial Diagnosis using Optimist 1 2 3 4 5 6 7
Financial Planning and Forecasting Service 1 2 3 4 5 6 7
Turnkey Management System 1 2 3 4 5 6 7
Job Costing / Management Software 1 2 3 4 5 6 7
Business Exit / Succession Planning 1 2 3 4 5 6 7
Business Appraisal Service 1 2 3 4 5 6 7
134
Section B: Outsourcing Decision Factors – Please circle the appropriate number

(Data from this section will enable an analysis of the factors affecting the outsourcing decision)
answer.
Example:
Strongly Strongly
Disagree Agree
1 2 3 44 5 6 7
3. I consider the following activities as core activities in small business.
Strongly Strongly
Disagree Agree
Payroll 1 2 3 4 5 6 7
Accounts Receivable 1 2 3 4 5 6 7
Computer Hardware Support 1 2 3 4 5 6 7
Computer Software Support 1 2 3 4 5 6 7
Management Accounting Services 1 2 3 4 5 6 7
Internal Auditing 1 2 3 4 5 6 7
Human Resource Management 1 2 3 4 5 6 7
To what extent do you agree with the following statement: (please circle the number
corresponding most closely to your answer)?
4. “The timing and coordination of the following activities are critical to the overall performance
of small business”.
Strongly Strongly
Disagree Agree
Payroll 1 2 3 4 5 6 7
135
5. In deciding to outsource the internal accounting activities, what level of importance do you
believe small business would place on the following criteria for selecting an outsourcing
provider?
For the following services, please circle one number to indicate your choice, where 1 = Unimportant
and 7 = Very Important.
Very
Unimportant Important
Prior Experience with service provider 1 2 3 4 5 6 7
Cost of services provided 1 2 3 4 5 6 7
Flexibility of services provided 1 2 3 4 5 6 7
Testimonials from other businesses 1 2 3 4 5 6 7
Business ethics 1 2 3 4 5 6 7
Level of expertise of service provider 1 2 3 4 5 6 7
Industry knowledge 1 2 3 4 5 6 7
6. “There are many activities that small businesses “DO” outsource or “WOULD”
consider outsourcing because:”
Strongly Strongly
Disagree Agree
Outsourcing provides greater flexibility

in their accounting activities. 1 2 3 4 5 6 7
Specialist service providers can provide

a better service. 1 2 3 4 5 6 7
Outsourcing can yield cost savings. 1 2 3 4 5 6 7
Other businesses are using outsourcing

service providers. 1 2 3 4 5 6 7
Service providers are in a better position

to manage changes in technology etc. 1 2 3 4 5 6 7
Outsourcing allows small business to

minimise risk. 1 2 3 4 5 6 7
Service providers are generally specialists

in their field. 1 2 3 4 5 6 7
136
7. To what extent do you agree with the following statement: (please circle the number
“There are many activities that small businesses “DO NOT” outsource because:”
Strongly Strongly
Disagree Agree
It would be difficult to appraise the

service providers’ performance. 1 2 3 4 5 6 7
The service providers could act in their own

interest to the detriment of the business. 1 2 3 4 5 6 7
Timing and co-ordination of the activities

are critical to the success of the business. 1 2 3 4 5 6 7
The activities are viewed as core to their

business. 1 2 3 4 5 6 7
It is difficult to find service providers they

can trust. 1 2 3 4 5 6 7
It is difficult to find service providers that

have the level of expertise that they require. 1 2 3 4 5 6 7
Small Businesses have adequate in-house

expertise. 1 2 3 4 5 6 7
It would be too expensive for their business. 1 2 3 4 5 6 7
There would be resistance by existing staff. 1 2 3 4 5 6 7
137
Section C: Outsourcing Benefit Factors – Please circle the appropriate number

(Data from this section will enable an analysis of the benefits of outsourcing on the business)
8. To what extent do you agree with the following statement

“Outsourcing of the following activities would provide the same degree of control as if
the activity were performed in-house”?
Strongly Strongly
Disagree Agree
138
9. Please indicate what you believe is the level of work volume the following activities
represent for small business.
Low volume High volume
of work of work
Payroll 1 2 3 4 5 6 7
10. How important do you think the following benefits of outsourcing the internal accounting
functions are for small business?
Please circle one number to indicate your choice, where 1 = Unimportant and 5 = Important.
Very
Cost savings 1 2 3 4 5 6 7
Provision of special services 1 2 3 4 5 6 7
Internal resources freed up for other purposes 1 2 3 4 5 6 7
Provision of technical expertise 1 2 3 4 5 6 7
Improved company focus 1 2 3 4 5 6 7
Provision of trained accounting staff 1 2 3 4 5 6 7
11. How successful do you believe small businesses are likely to be in achieving cost reduction
benefits through outsourcing their finance and accounting activities? (Please place an X in the
box that best describes the level of success you believe will be achieved.)
Not at all successful
Minimally successful – (less than 10% saved)
Moderately successful – (10% - 30% saved)
Significantly successful – (31% - 50% saved)
Very successful – (more than 50% saved)
Don’t know
139
Section D: Outsourcing Impact Factors – Please circle the appropriate number

(Data from this section will enable an analysis of the impact of outsourcing on the business)
answer.
Example:
Very Little Very Much
1 2 3 44 5 6 7
12. If the following activities were outsourced by small business, to what extent do you think the
service provider could exploit their position through providing these services?
Payroll Processing 1 2 3 4 5 6 7
Accounts Receivable Management 1 2 3 4 5 6 7
Management Accounting 1 2 3 4 5 6 7
Human Resources Management 1 2 3 4 5 6 7
140
13. If the following activities were outsourced by small business, to what extent would it be
difficult to measure whether the activity is performed satisfactorily?
Not difficult Very difficult
141
difficult to determine if you the service provider had performed according to contractual
obligations?
142
difficult for them to arrange for an alternate service provider at short notice.
16. What do you consider the business performance of small business in general has been in
respect of the following activities in the past 3 years?
Not Very Good Very Good
Payroll Administration 1 2 3 4 5 6 7
143
17. Which of the following POSITIVE impacts do you believe would be experienced by your clients
because of outsourcing their finance and accounting activities? (Please tick ALL that apply)
Do fewer mundane or routine activities
Able to devote more time to strategic activities
More face to face time with customers, staff etc
More training time
No positive impacts
Other
144
Section E: Background Information – Please tick the appropriate box
18. Gender
Male
Female
19. How many years have you been in business or held your current position.
(Please indicate the number of years or part thereof.
Less than 1 year.
1 year – 2 years
2 years – 3 years
3 years – 5 years
More than 5 years
20. Where does the business operate from?

(Please indicate if your business is operated primarily from home or from an external location).
Home
Office (external location)
21. What is the location of your business?

(Please indicate the state where your business is located and whether the location is classified as
Rural, Regional or CBD)
QLD Rural Regional CBD
NSW Rural Regional CBD
VIC Rural Regional CBD
SA Rural Regional CBD
WA Rural Regional CBD
NT Rural Regional CBD
TAS Rural Regional CBD
Other (please specify)……………………………………………
22. What is the business structure?

Sole Trader
Partnership
Company Ltd
Trust (Family or other)
Other (please list):………………………………………………..
145
23. What is the number of employees in your business?

(How many employees are employed in your business, including working partners or directors).
1–5
6 – 10
11 – 20
21 – 50
Greater than 50
24. What is the annual gross turnover of your business?

Less than $100,000
$100,000 – $250,000
$250,000 – $500,000
$500,000 – $1 million
$1 million - $5 million
Greater than $5 million
Thank you for taking the time to complete this survey. Your participation and contribution is very much
appreciated.
146
Appendix 3
Small business survey letter
GRADUATE COLLEGE OF MANAGEMENT

Faculty of Business
Lismore Campus
Telephone: 02 6620 3843
email: graham.ray@scu.edu.au
17th August 2007
Dear Business Principal,
My name is Graham Ray and I am a Doctor of Business Administration (DBA) candidate at the
Graduate College of Management (GCM) of Southern Cross University in Australia. As part of the
course, all candidates are required to undertake a research project that examines a significant issue
relating to business.
The purpose of this study will be to explore and identify the issues and factors considered by small
businesses on the decision to outsource their finance and accounting functions. As you may be
aware, research on small business, behavior is used in many industries to improve the quality of
service to consumers of small businesses. This research will attempt to develop a model, of those
issues and factors, which drive the decisions of small business in outsourcing the finance and
accounting functions.
We are seeking information on the issues and factors that you would consider when deciding to
outsource some or all aspects of your finance and accounting functions.
In this regard, I have attached a survey questionnaire. Completion of the survey questionnaire is
voluntary and will take approximately 20 minutes to complete. Please answer all questions. When
you have completed the survey questionnaire, please return it to me. Surveys are private and
confidential. The information you give will be kept in a secure place and used only for the purposes
stated here.
Your assistance in completing the survey is appreciated and participants may withdraw at any time
without consequence.
The ethical aspects of this study have been approved by the Southern Cross University Human
Research Ethics Committee. The Approval Number is ECN-06-138. If you have any complaints or
reservations about any ethical aspect of your participation in this research, you may contact the
Committee through the Ethics Complaints Officer, Ms Sue Kelly, Telephone (02) 6626-9139 or fax
(02) 6626-9145, Email: sue.kelly@scu.edu.au. Any complaint you make will be treated in
confidence and investigated and you will be informed of the outcome.
Kind regards
Graham Ray. PNA, B.Bus, MPA
147
Appendix 4
Small business online survey
information sheet and consent form
SOUTHERN CROSS UNIVERSITY
INFORMATION SHEET and SURVEY CONSENT
(Please take the time to read this important information)
Small Business Survey Questionnaire

considered
by Small Business Owners in the decision to outsource the internal
accounting function.
You are invited to participate in a study to explore the proposition “That while it is possible that outsourcing
the internal accounting function by small businesses to organisations, regarded as experts in their field, can
provide increased levels of performance, control and sustainability, the decision drivers, benefits and impacts
of FAO remain obscure to the small business operator”. This research forms part of a Doctor of Business
Administration thesis being conducted by Graham Ray and supervised by Dr Philip Neck.
While great ideas and entrepreneurial skills are fundamental to the business start-up, good financial
management is considered critical to the business survival. The reason most small business fail is that they
are not up to the challenges of effective financial management and decision-making. This is where
outsourcing of the internal accounting function comes in and is an alternative, which small businesses might
need to consider in order to remain competitive.
Risks and Benefits
There are no risks involved in participating in this survey. Benefits of this survey will assist us to provide a
better and more professional understanding of your needs. Your opinions and experiences will contribute to
our understanding of how Small Businesses perceive the function of outsourcing their internal accounting
needs.
Procedures to be followed
The survey will take approximately 20 minutes in total to complete. The demographic information that will be
collected will consist of the location of your business, business owner gender, number of years in business,
turnover of business, number of employees and business type. This information is necessary to provide group
related statistics. No other personal information will be collected by the researcher.
You are asked to logon to the online survey by clicking on the “I AGREE” button at the bottom of this page.
When you click on the “I AGREE” button, you will be taken to the Online Survey and you are asked to
complete all the questions presented.
Participation is purely voluntary. There are no costs associated with participation in this research only some of
your valuable time.
When you finish the survey and click on the “Submit” button, your data will be automatically stored as
anonymous data in an electronic file and no record will be made of who submitted the survey.
Responsibilities of the Researcher
It is our duty to make sure that any information provided by you is protected. Your name and other
identifying information will not be collected or attached to any data collected. The information collected will
be presented as overall data, and the aggregated research findings may be submitted for publication.
148
Appendix 2: Small business online survey information sheet and consent form
Subject’s Rights
Your participation is voluntary. You have the right to withdraw your consent or discontinue participation at
any time without penalty. Your individual privacy will be maintained in all published and written data resulting
from or involved in this survey.
Freedom of Consent
Clicking on the “I AGREE” button at the bottom of this screen is considered implied consent of your
participation. If you do not wish to continue with the Online Survey, simply click on the “I DON’T AGREE”
button and you will be returned to the home page.
Do you agree to do the CAD Client survey?
I AGREE I DON'T AGREE

[Take me to the survey] [Return to home page]
Inquiries
If you have any questions, we expect you to ask us.
Graham Ray Dr Philip Neck (Supervisor)

School of Commerce & Management Graduate College of Management
Southern Cross University Southern Cross University
Lismore NSW 2480 Lismore NSW 2480
Email : graham.ray@scu.edu.au Email : philip.neck@scu.edu.au

Phone : (02) 6620 3843 Phone : (07) 5599 3125
The ethical aspects of this study have been approved by the Southern Cross University Human Research
Ethics Committee. The Approval Number is ECN-06-138. If you have any complaints or reservations about
any ethical aspect of your participation in this research, you may contact the Committee through the Ethics
Complaints Officer:
Ms Sue Kelly
Ethics Complaints Officer and Secretary
HREC
PO Box 157
Lismore, NSW, 2480
Telephone (02) 6626-9139 or fax (02) 6626-9145
Email: sue.kelly@scu.edu.au
All complaints, in the first instance, should be in writing to the above address. All complaints are investigated
fully and according to due process under the National Statement and this University. Any complaint you make
will be treated in confidence and you will be informed of the outcome.
149
Appendix 5
Small business survey questionnaire
Small Business Survey Questionnaire

considered by Small Business Owners in the decision to outsource the
Please answer all questions. This questionnaire is anonymous and shall remain private and
confidential. Only the researcher will use individual data, for the purposes of research. Any enquiry
should be directed to Graham Ray, email: graham.ray@scu.edu.au
Individual responses to this questionnaire are confidential The findings from this survey and report will not
enable any individual or organisation to be specifically identified.
Section A: Outsourcing Information – Please tick the appropriate box
Definition of Outsourcing: Outsourcing refers to the process where activities traditionally carried
out internally are contracted out to externals service providers
answer.
Example:
Much less Much more
. 1 2 3 44 5 6 7
The rating of ‘4’ in this example would indicate that you believe that your business outsources about
the same as most other small businesses.
1. In general, do you think your business outsources more or less than other small
businesses?
Much less Much more
1 2 3 4 5 6 7
Level of outsourcing compared to other 1 2 3 4 5 6 7

small businesses.
150
Appendix 2: Small business survey questionnaire
2. To what extent would you consider outsourcing the following activities?

For the following services, please circle one number to indicate your choice, where 1 = Not at all and
7 = To a large extent.
To a large
Not at all extent
151
Section B: Outsourcing Decision Factors – Please circle the appropriate number

(Data from this section will enable an analysis of the factors affecting the outsourcing decision)
answer.
Example:
Strongly Strongly
Disagree Agree
1 2 3 44 5 6 7
3. I consider the following activities as core activities in my business.
Strongly Strongly
Disagree Agree
Payroll 1 2 3 4 5 6 7
4. “The timing and coordination of the following activities are critical to my businesses overall
performance”?
Strongly Strongly
Disagree Agree
Payroll 1 2 3 4 5 6 7
152
5. In deciding to outsource your internal accounting activities, what level of importance would
you place on the following criteria for selecting an outsourcing provider?
For the following services, please circle one number to indicate your choice, where 1 = Unimportant
and 7 = Very Important.
Very
Prior Experience with service provider 1 2 3 4 5 6 7
Cost of services provided 1 2 3 4 5 6 7
Flexibility of services provided 1 2 3 4 5 6 7
Testimonials from other businesses 1 2 3 4 5 6 7
Business ethics 1 2 3 4 5 6 7
Level of expertise of service provider 1 2 3 4 5 6 7
Industry knowledge 1 2 3 4 5 6 7
6. “There are many activities that we DO outsource or WOULD consider outsourcing

because”:
Strongly Strongly
Disagree Agree
Outsourcing provides greater flexibility

in our accounting activities. 1 2 3 4 5 6 7
Specialist service providers can provide

a better service. 1 2 3 4 5 6 7
Outsourcing can yield cost savings. 1 2 3 4 5 6 7
Other businesses are using outsourcing

service providers. 1 2 3 4 5 6 7
Service providers are in a better position

to manage changes in technology etc. 1 2 3 4 5 6 7
Outsourcing allows us to minimise risk. 1 2 3 4 5 6 7
Service providers are generally specialists

in their field. 1 2 3 4 5 6 7
153
7. To what extent do you agree with the following statement: (please circle the number
“There are many activities that we DO NOT outsource because”:
Strongly Strongly
Disagree Agree
It would be difficult to appraise the

service providers’ performance. 1 2 3 4 5 6 7
The service providers could act in their own

interest to the detriment of the business. 1 2 3 4 5 6 7
Timing and co-ordination of the activities

are critical to the success of the business. 1 2 3 4 5 6 7
The activities are viewed as core to our

business. 1 2 3 4 5 6 7
It is difficult to find service providers we

can trust. 1 2 3 4 5 6 7
It is difficult to find service providers that

have the level of expertise that we require. 1 2 3 4 5 6 7
We have adequate in-house expertise. 1 2 3 4 5 6 7
It would be too expensive for our business. 1 2 3 4 5 6 7
There would be resistance by existing staff. 1 2 3 4 5 6 7
154
Section C: Outsourcing Benefit Factors – Please circle the appropriate number

(Data from this section will enable an analysis of the benefits of outsourcing on the business)
8. To what extent do you agree with the following statement? “Outsourcing of the
following activities would provide the same degree of control as if the activity were
performed in-house”
Strongly Strongly
Disagree Agree
155
9. Please indicate the level of work volume that the following activities represent for
your staff.
Low volume High volume
of work of work
Payroll 1 2 3 4 5 6 7
10. How important are the following benefits of outsourcing your internal accounting functions?
Please circle one number to indicate your choice, where 1 = Unimportant and 5 = Important.
Very
Cost savings 1 2 3 4 5 6 7
Provision of special services 1 2 3 4 5 6 7
Internal resources freed up for other purposes 1 2 3 4 5 6 7
Provision of technical expertise 1 2 3 4 5 6 7
Improved company focus 1 2 3 4 5 6 7
Provision of trained accounting staff 1 2 3 4 5 6 7
11. How successful do you believe your business has been in achieving cost reduction
benefits through outsourcing your finance and accounting activities? (Please place an X in
the box that best describes the level of success you believe will be achieved.)
Not at all successful

Minimally successful – (less than 10% saved)
Moderately successful – (10% - 30% saved)
Significantly successful – (more than 31% - 50% saved)
Very successful – (more than 50% saved)
Don’t know
156
Section D: Outsourcing Impact Factors – Please circle the appropriate number

(Data from this section will enable an analysis of the impact of outsourcing on the business)
answer.
Example:
1 2 3 44 5 6 7
12. If the following activities were outsourced, to what extent could the service provider exploit
their position through providing these services?
Payroll 1 2 3 4 5 6 7
157
13. If the following activities were outsourced, to what extent would it be difficult to measure
whether the activity is performed satisfactorily?
158
14. If the following activities were outsourced, to what extent would it be difficult to determine if
the service provider had performed according to contractual obligations?
159
15. If the following activities were outsourced, to what extent would it be difficult to arrange for an
alternate service provider at short notice.
16. What do you consider your businesses performance in the past three years has been in
respect of the following activities?
Not very Very

Good Good
Payroll Administration 1 2 3 4 5 6 7
160
17. Which of the following POSITIVE impacts do you experience because of outsourcing your
Do fewer mundane or routine tasks

Able to devote more time to strategic activities
More face to face time with customers, staff etc
More training time
No positive impacts
Other
161
Section E: Background Information – Please tick the appropriate box
18. Business Owners / Principals

Male
Female
19. Number of years in business.

(Please indicate the number of years or part thereof that your business has been operating).
Less than 1 year.
1 year – 2 years
2 years – 3 years
3 years – 5 years
More than 5 years
20. Where does the business operate from?

(Please indicate if your business is operated primarily from home or from an external location).
Home
Office
21. What is the location of your business?

(Please indicate the state where your business is located and whether the location is classified as
Rural, Regional or CBD)
QLD Rural Regional CBD
NSW Rural Regional CBD
VIC Rural Regional CBD
SA Rural Regional CBD
WA Rural Regional CBD
NT Rural Regional CBD
TAS Rural Regional CBD
Other (please specify)……………………………………………
22. What is the business structure?

Sole Trader
Partnership
Company Ltd
Trust (Family or other)
Other (please list):………………………………………………..
162

Finance and Accounting Outsourcing - An Empirical Study of Service

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Finance and Accounting Outsourcing - An Empirical Study of Service

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Southern Cross University

Finance and accounting outsourcing: an empirical

A Dissertation by Graham Ray

Submitted to the Graduate College of Management,

Print Name:_ __________________________

The epistemology employed for this study adopted a positivistic/hypothetico, deductive

Key Words: Outsourcing, Business process outsourcing, Finance and accounting

Presenter: DBA Symposium Southern Cross University – Peer review of research

Presenter: “Outsourcing in Australia and New Zealand by Small Business”. Presented at

Presenter: “FAO Outsourcing – An Exploratory Study of Service Providers and their

Presenter: “Outsourcing – An Exploratory Study of Accounting Service Providers and

Table 3.1 Characteristics of quantitative and qualitative research paradigms.............................47

ABS - Australian Bureau of Statistics

ASP - Accounting service provider

BPO - Business process outsourcing

BPR - Business process reengineering

CAD - Computer Accounting Doctor Partners Pty Ltd.

CBD - Central business district

DBA - Doctor of Business Administration

F&AO - Finance and accounting outsourcing

KPI - Key performance indicator

SCU - Southern Cross University

SME - Small medium enterprise

SPSS - Statistical package for the social sciences

1.1.1 Chapter objectives

1.1.2 Chapter structure

Methodology and research processes covering questionnaire development sampling, data

1.1.1 Chapter objective

1.2 Background to the research

1.3 Research questions, objectives and proposition

1.3.1 Research questions

1.4.1 Theoretical framework

1.5 Research limitations

1.6 Definitions of terms

1.7 Research structure

(Source: Developed for this study)

1.2 Background to the research

Current literature on outsourcing identifies differing viewpoints on what outsourcing covers.

Outsourcing evolved from activities normally regarded as peripheral (such as cleaning,

Outsourcing is gaining popularity as a means of reducing financial and operational risks

1.3 Research questions, objectives and proposition

1.3.1 Research questions

1.3.2 Research objectives

The aim of the research is to:

1.3.3 Research proposition

1.4.1 Theoretical framework

1.4.2 Research design

1.4.3 Research paradigm

Two widely-accepted research paradigms are quantitative (hypothetico, deductive,

According to Bryman and Bell (2003), quantitative research is presumed to be exemplified by

This study adopts a positivistic/hypothetico, deductive approach to the research objectives

1.4.4 Research method and data collection

The second participant group to be surveyed will be randomly-selected small businesses

1.4.5 Analysis and interpretation of findings

1.5 Research limitations

1.6 Definitions of terms

Business operator(s): There is no standard definition of a small business operator, and no

Outsourcing: An arrangement in which one organisation provides a service or services

Research: The process of systematically obtaining accurate answers to significant and

Strategic outsourcing: an organising arrangement that emerges when firms rely on

1.7 Research structure

Chapter 2 Literature review

Chapter 4 Findings and data analysis