What is finance and accounting outsourcing? and why to consider one
The financial operations belonging to any organization are of high importance. Thus, it plays a very decisive role in ensuring the success of any organization. Apparently, it is hard to imagine the outsourcing of the financial process, precisely the finance and accounting processes; since, owing to its importance, prefer having it in-house for having larger control over them makes sense. With that said, outsourcing finance and accounting has become a necessity in this fast-paced, ever-changing, dynamic, and competitive business world.
This article seeks to explore the benefits which come with accounting and finance outsourcing, why it should be considered, areas to outsource in finance and accounting, and finding some reliable financial accounting outsourcing firms.
Benefits of having your financial operations outsourced
The finance and accounting services outsourcing has the following benefits to offer to any organization or company:
Reducing the salary expense: The finance and accounting outsourcing comes with the reduction in the salary expense for a company. As opposed to your full time employee, who you are supposed to, infact obliged to, pay throughout the year, even for the days when there were hardly any tasks pertaining to the finances, the third-party service provider is only paid, when acquired for the service; and are only acquired for the service, when there is a need. Consequently, the cost saved can be used in better ways; elevating the marketing campaign or scaling the operations. This has to be the most primary reason for the companies to have such operations outsourced.
Relieving the HR department: Not only this, but this outsourcing also helps in relieving the human resource department; since, owing to the outsourcing, the need for new hiring lessens. Consider the time a process of placing a suitable employee against a financial post requires. From making hirings to training and getting familiar with the organizational culture, it is a long-road. Also, there’s always a vulnerability of the employee moving-on with some better opportunity. However, with the same services being given by a third-party, it saves much of the hassle, time, and energy.
Helping the CFO and the finance team: A Chief Finance Officer or CFO, is the one who heads and leads the operations pertaining to the finances. However, what makes a good CFO, is not the transactions related work performed, but how the fiances’ team is led and is made to be focused on the tasks beneficial for the company in the long run. With the finance and accounting services outsourced, which are repetitive in nature, CFO and the team, can better utilize their times. Also, as a result of it, the CFO and team both get better support from each other. Additionally, while the financial team gets enabled and empowered in observing and controlling the expenses better respectively, the CFO may implement the enterprise accounting software.
Virtual but skilled: Chances are, with your local and the only ‘willing to relocate’ employees, the skill may not be up to the required mark. Consequently, you may have a financial team, but the skill level of it would be lower than desired. That said, when you do finance and accounting outsourcing, not only you are transiting the local talent, but also the chances of you getting hands on a much skilled employee are brighter. The one performing your outsourced process, may not only be much skilled, but may also bring into use much advanced and efficient technologies, which would take the financial operations to the new heights of productivity for the organization.
Latest Technological Practices: Companies with small or SMB organizational spheres have limited resources to spend on technological advancements. Even with the resources available, limited knowledge and expertise is another obstacle in following the latest technological practices. However, the outsourced firms may have both the means and expertise for the latest technologies.
By having your finance and accounting outsourcing to an experienced service provider, the financial operations are not performed, but with the latest tools, technologies, and latest practices. Thereby, the processes, which used to be performed in the manual ways, are then performed dynamically.
Areas to outsource in Finance and Accounting
What makes accounting and finance outsourcing a ‘win-win’ is that, without having someone else control the financial operations largely, its many areas, or the ones preferred, are made to be performed by someone else. This actually not only helps you keep the larger control, but also helps you gain a better and larger control, since ousting some of the operations provides you with a better and clearer headspace.
Following are some of the areas in the financial operations which can be outsourced, while keeping the primary control over them:
Bookkeeping is mostly about the common issues, which could be resolved by having them outsourced to a third-party without making the staff overly burdened. This results in an enhanced employee productivity. The back office bookkeeping includes:
- General Ledger
- Financial Reporting, Tax Reporting, and Reporting Automation
- Foreign Currency
- Account Reconciliations
- Customer Billing and Payments
- Deferred Revenue
- Subscription/Maintenance Renewals Management
- Time and Expense Management / Expense Services
- Vendor Invoice Processing and Payments
- Employee Expense Processing
- Month Close
- Multi-Entity & Multi-Currency Consolidation
- Order to Cash
- Payroll Administration/Services
- Procure to Pay / E-Payments
Controller Services Processes:
With the controller processes outsourced, an organization makes the most of it by having fine financial analysis, strategies, and accurate reportings. The controller services includes the following:
- Management Reporting
- Policy Adherence
- Compliance Management
- Audit Report
- Policy & Procedures Guidance and Adherence
- Transactional Processing Oversight
- Employee and Vendor Communication
Planning and Analyzing the finances:
We mentioned earlier that outsourcing the finance and accounting services does not take the control over the financial operations; instead, empowers to keep an eye over the finances with more scrutiny and authority. That said, with the planning and analyzing of the finances outsourced, the control over the finances does slip away, even though to a little extent, from the ‘in-house’. Nonetheless, for some organizations, it might become inevitable to have outsourcing of such operations. Reason being, the lack in either required expertise, resources, or the time. Then, by having such operations outsourced, the firm to which such operations are outsourced, does a critical analysis of your current financial standing, while planning and advising in accordance to it.
It helps to recover from the financial turbulence by the following processes outsourced:
- Board & Bank Reporting
- Investor Communication and Reporting
- Management Reporting and Narrative
- Company Financial Data Analysis
- Financial Leadership
- Acquisition Integration Support
- Audit Support
- Planning, Budgeting, and Forecasting
- Business Decision Making
The essence of a reliable third-party
Every third-party service provider varies from its peers; in form or the other. One service-provider may provide a service, which its competitor does not. Likewise, the latter may provide a service, which the former does not. That said, choosing a company or the firm, which is to be entrusted with the financial operations, is significant and tricky; both at the same time. Opting for a third-party therefore should be done after some considerations. Following are some of the creterions, which should be taken into account, when the need and time of choosing an outsourcing company comes.
Empowered by latest technologies:
As we had discussed earlier as well, what role does technology play in opting to outsource certain financial processes; the primary motive for many of the companies and organizations is to have many of the tedious and manual tasks to be performed dynamically and automated respectively. However, if the outsourced company, itself lags behind in implementing latest practices, there is little to no use of having the financial operations outsourced.
The opted third-party should have cloud solutions implemented; for making your systems rather standardized, centralized, and also automated. With the centralization of the system, the data-sharing gets efficient and errors tend to reduce. Also, the solutions based on the clouds are customizable which suits the varying needs of the dynamic and digital world.
From bookkeeping to planning and analyzing finances, the outsourced company ought to be competent in whatever area of the financial process has been outsourced to it. That said, the threshold of competency should never be made on the number of years spent working in a respective area, but the industrial understanding, business intelligence, and the efficacy to be result-driven.
In-depth Financial Reports:
The financial health of a company can be assessed by the stakeholders and the potential investors, by requesting the financial performance anytime. The opted cloud-based outsourced company, therefore, should be capable of sharing data in the real-time. Also, the financial data data should be accessible from anywhere in the world.
The outsourced partner, whilst trying to provide desired results, should also be making compliance to various rules and regulations. The compliance making is especially in the matters related to the taxes, audits, and similar.
Operations involving finance and accounting require more accuracy than any other process. For this matter, the third-party service provider entrusted with performing financial tasks, not only should have the operations performed, but also ensure the accuracy of it as well. Moreover, transaction processing should be error-free; it is inevitable. The outsourced company, therefore, should develop methodologies, KPIs, and different metrics for that matter.