The Benefits Of Outsourcing Finance And Accounting

By Joe Mullich, freelance writer

Finance and accounting (F&A) was one of the first processes that companies outsourced, and the practice continues to boom: Ed Thomas, an analyst for Ovum research, found the number of F&A outsourcing projects valued at $1 million or more increased in 2012 compared to the year before.

As the market matures, companies contracting for outcomes are exploring fresh ideas and seeking new answers to streamline F&A processes. They are expanding outsourcing to new areas of finance and accounting, new industries, and new sizes of companies than in the past.The Benefits Of Outsourcing Finance And Accounting

Driving efficiency is a high priority for CFOs who want to outsource F&A processes, according to an Ovum study of 150 large companies in the United States, United Kingdom and Canada. Most survey respondents saw the main strategic aim of the accounting department as delivering efficiencies, whether that is within the department itself or across the company as a whole.

“This is a wider trend in outsourcing as a whole,” Thomas explains. “Cost reductions are the table stakes, and companies want to know what else their outsourcers can do to make their processes and technology run more efficiently.”

The most commonly outsourced services within accounting are payroll accounting, accounts payable, and accounts receivable. The Ovum study found companies are “moving up the value chain” in the types of F&A functions they outsource.

“They are looking to move from relatively basic transactional processes, such as accounts payable to more strategic functions, like budgets, forecasts and internal audits,” Thomas says. “More than a third of respondents had outsourced internal auditing, which is a high-level function.”

Simplifying and standardizing F&A processes is a key characteristic of well-run companies, and by instilling good F&A processes these companies can achieve a variety of good outcomes—such as more information, more service and more cash. By simplifying their F&A processes, companies have found they can reduce the cycle it takes to close books, and they can develop better benchmark and baseline financial processes to help them meet regulatory requirements.

Expanding the scope of outsourcing can multiply such benefits, some experts say. “One simple example is accounts payable and receivables,” says Jag Dalal, managing director of thought leadership at the International Association of Outsourcing Professionals (IAOP). “If you outsource only one function, you limit your benefits. If you outsource both, you get a value beyond improving the transactional component because the outsourcer can see when cash comes in and goes out. That can help the company take best advantage of the cash on-hand and optimize internal processes.”

As companies look to leverage the power of their data, they are turning to outsourcers with greater expertise and technology resources than they have in-house. “An outsourcer is going to have access to state-of-the-art technology, and experts who use those software packages every day,” says Greg LaFollette, a spokesperson for American Institute of CPAs.

More and more, companies are looking for end-to-end F&A capabilities from outsourcers. Consider how outsourcing can help a company get a better handle on its pay-to-procure process. Powerful analytics can help a company better understand their spending through the entire supply chain in order to control budgets and standardize procedures company-wide.

This approach allows companies to identify cost savings through supplier consolidation and duplicate payment analysis. Automating the process can improve policy compliance and reduce order errors by ensuring employees around the world can order what they need when they need it, while enforcing business rules and limits that prevent employees from making costly mistakes.

While CFOs of large companies are focused on outsourcing to improve far-flung global operations, smaller companies, who have typically eschewed outsourcing of F&A, are beginning to embrace it as well. Outsourcers have expanded their offerings to the small- and mid-size company segments and developed solutions targeted toward specific vertical industries.

A recent report from the Association of Chartered Certified Accountants (ACCA) found that companies using F&A outsourcing believe they will reduce costs but lose control. However, as they realize those cost advantages, they see that quality is rising because benchmarks are being applied to their performance. In the end, the report concludes, companies could see control was improving, too.

“Many companies don’t realize going in that they manage an outsourced provider more stringently than their in-house resources were managed,” Dalal says. Outsourcing outcomes are more likely to use clear metrics, such as savings and service-level achievement. That allows a company to have continuous improvement in their accounting and finance operation, while the company itself can focus on its core competencies.”

 

This post originally appeared on Forbes

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9 Comments

  1. Fern Carlos September 4, 2013 - Reply

    One of the most helpful tips when outsourcing finance and accounting or bookkeeping is this – – ask about the quality assurance. What is your service provider’s guarantee that they can consistently deliver quality accounting/finance/bookkeeping work on time? A quality assurance system should be sound and should help make sure that you get the kind of outputs that you need.

  2. Book Keepers September 13, 2013 - Reply

    Nice Post.. Excellent Info.. Really amazing.. This was a fantastic article… really superb….

  3. Micheal Bian October 9, 2013 - Reply

    One of the benefits of outsourcing is that it can control IT costs. Outsourcing converts fixed IT costs into variable costs and allows you budget effectively. In other words, only pay for what you use when you need it.

  4. Alexander Broman October 22, 2013 - Reply

    Excellent thinking on outsource of bookkeepers and financial services. You have mention in details why it’s important to outsource a bookkeeping services for a small or any business. keep going on.

  5. Nice post. It is actually amazing how a company more stringently manages an outsourced firm than their own, but like you said that leads to continuous improvement without sacrificing core competencies.

  6. Cindy November 14, 2013 - Reply

    Outsourcing finance and accounting save a company from further problems because they can focus more on their other issues while their finances goes smoothly.

  7. Kantoor September 4, 2014 - Reply

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  8. robert May 26, 2015 - Reply

    Good information. This shows that the use of financial management outsourcing services so is advantageous. where an action will be carried out without the intervention and influence there. very interesting. great post.

  9. Tom Hardy June 29, 2017 - Reply

    Efficiency is the major reason why businesses should outsource their finance and accounting. With outsourcing they can save hack lot of money.
    Consider outsoucring your accounting to us at redcliffe:
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