According to a survey conducted by Financial Executives International, 80% of CFOs agreed that finance & accounting outsourcing is a significant transformation in the area of financial services to increase growth velocity of an organization. As per surveyed CFOs, it brings several benefits to the organization. These benefits include:
- Cost reduction
- Saving cost for fund transformation
- Access to external skills
- External knowledge utilization
- Function specific expertise
Most of the CFOs are on the same page while considering benefits of F&A process outsourcing. Finance and accounting function has various processes. The most difficult part of F&A outsourcing is to zero down on the process to be outsourced to begin with. The same survey reveals mind of CFOs on this parameter.
- 49.5% of companies believe that finance and accounting outsourcing is a helping hand to execute administrative and transactional operations.
- 50.5% of organizations consider F&A outsourcing as a tool to be applied on both operational and strategic level. Outsourcing can bring great value to transactional back office function as well as financial planning, forecasting and also for budgeting and analysis.
It indicates shifting thought process of organizations in finance and accounting outsourcing. It also reveals that businesses are ready to embrace F&A outsourcing and use it as strategic tool. Businesses don’t consider FAO only a mean for cost reduction. The whole financial processes are being outsourced to service provider giving more importance to financial insight rather that process of creating the same.
Each company has its own distinctive array of issues to address. These challenges range from raising cost, process complexity, and available technologies to amount of process. It could be bad experience with previous outsourcing service provider. Evaluating these aspects comes into the picture while taking decision on amount of outsourcing in finance and accounting function.
There are two theories while determining velocity and extent of outsourcing.
Inch wide and mile deep – In this approach companies outsources a couple of transactional process completely to service provider.
Mile wide and inch deep – Organizations choose several processes and outsource the same to vendor by taking this route. Initially companies pick low risk process to outsource.
The inch wide and mile deep route is simpler to execute considering internal change management. In this approach number of stakeholders affected by outsourcing would be minimal which helps to implement and evaluate the outsourcing program easily and effectively. It is also considered as pilot program. Businesses weigh the success of pilot program prior to using service provider to the maximum.
Organizations which have already taken decision on outsourcing and are convinced with its benefits takes mile wide and inch deep route. They use outsourcing not only to execute transactional process efficiently but also for corporate strategy. Outsourcing process and amount of the same is one of the most important aspects of their decision making process. Outsourcing gets implemented on a large scale if it is a part of corporate strategy. In this case, outsourcing implementation affects entire finance division as well as other functions.
Every business should create a finance and accounting outsourcing strategy that fulfils their unique requirements. Business objectives should be always kept in mind while formulating their outsourcing strategy. Senior management involvement and commitment are needed get best out of outsourcing and achieve their business goal.