Benefits And Risks in Outsourcing F&A Services

Outsourcing Finance, planning, and accounting services is the process of extending or moving certain Finance & Accounting functions within an organization to a specialized third-party vendor, a business process outsourcer (BPO). Effective accounting practices and more importantly, insights from a good grasp of a firm’s financial standing help leap-frog competitors. But doing so can become increasingly expensive to manage a Finance department in-house due to a scarce talent pool and higher retention costs. That’s why financial services outsourcing serves as the innovative, cost- saving, scalable alternative in volatile economic circumstances.

The global financial services outsourcing market size was estimated at ~$140 bn USD in 2022, with a growth projection of a compound annual growth rate (CAGR) of 7.6% from 2022 to 2028. (Grand View Research)
Almost 71% of Executives outsource their financial services to some extent today. (Fortunly)

Examples of Finance & Accounting Services

Forecasting, Financial Strategy, Scenario Planning, Back-Office Support, Cashflow Management, Accounts Payable and Accounts Receivable (Collections), Financial Reporting, Bookkeeping services and Treasury Management are some Finance and Accounting services that can be outsourced. To successfully outsource Finance department functions, it is imperative to pick the right BPO partner. While numerous BPO companies offer financial services outsourcing, not all will be the right fit for your business needs. One may question then, what are the risks and benefits of Outsourcing Finance and Accounting Services?

Finance and Accounting Outsourcing Benefits vs. Risks

With Covid-19 transforming business processing worldwide, Finance and Accounting Outsourcing (FAO) has also changed in the matter of function, breadth, reach, and application. Today outsourcing is the preference of many firms that are looking to expand, particularly based on the vast range of benefits that come with it. Of course, the risks associated with partnering with an outsourcer cannot be ignored. Below are a few points to consider regarding the pros and cons of outsourcing Finance and Accounting functions: –

1.  Cost-Efficiency with All-in-Pricing

Finance Outsourcing helps effectively reduce overhead and operational costs (Insurance, Training, PTO, Healthcare, Vacation, etc.) that are often overlooked when managing an internal team. Not only can you optimize existing expenses by almost 50%, but also identify saving opportunities like expenses for hiring new employees. The reason is that outsourcing solutions allow the utilization of talent across geographies, particularly where the cost of living is lower (labor arbitrage). It also reduces capital expenditures, particularly for remote teams; ensuring the same functions done in-house are replicated offshore, but cost-effectively.

Meanwhile, one of the risks associated with hiring third-party vendors is that hidden costs turn up later on. It is important to identify your goals with pre-determined SLAs, which can help achieve targets with your BPO provider, clearly defining the scope of outsourcing. Communicating expectations in the contract or proposal beforehand will put everyone on the same page and can also help with any incremental charges. You might be lured in with a low monthly rate and then face add-ons such as trainer charges, QA charges, recruiting charges, charges for standard office tools such as telephones or productivity software, and so on. Be sure you understand what happens after implementation to get a better understanding of future costs.

Did you know that Premier BPO provides a fixed price inclusive of trainers, QA, supervisors, and management layers? In fact, we overstaff at our expense to make sure you don’t face any downtime due to sick days or vacations.

Learn more about Premier BPO’s Finance and Accounting Services

2.  Greater Focus with Specialized Teams

Reducing the load off of your internal highly paid personnel to focus on higher functions, outsourcing allows access to field experts across the globe (e.g., journal entries and reconciliation). A dedicated workforce ensures real-time responses and timely and accurate operations while helping you utilize your internal talent for high-value, strategic roles. You are free to focus on business expansion rather than day-to-day or repetitive tasks such as capturing daily cash balances. Instead, your team can do more impactful work with treasury management.

Often in outsourcing, first-time outsourcers have a perception that they’ll have less control over operations because the work is going “outside”. The solution is to select a co-sourcing partner with dedicated teams as opposed to shared teams. Dedicated teams are completely focused on the client’s business and become an extension of your corporate culture, handled by the outsourcer but working exclusively for you. This provides a deeper level of control and involvement, allowing for long-term partnerships with agreements for in-house rules.

Shared teams work best for part-time or short-term projects. Since you are competing for mindshare with other clients’ work, indeed, you may lose control over processes and timelines. A shared team cannot be immersed in your goals and corporate processes.

Another benefit of a holistic managed relationship is weekly and monthly reporting, tracking of KPIs, and constant communication on progress. A dedicated team allows you to remain in contact all the time, ensuring your peace of mind.

One of the main benefits of Finance and Accounting Outsourcing (FAO) is that it can help mitigate lag in your financial processes, especially when operating across different time zones. Leveraging the expertise and resources of a third-party service provider, you can avoid bottlenecks and delays that can occur when financial processes are handled in-house, especially if your team is already stretched thin. Additionally, outsourcers provide round-the-clock support, which is particularly helpful for international clients or work done outside of regular business hours.

An experienced outsourced account manager can also provide an extra set of eyes serving as the primary point of contact between the outsourcing provider and the organization. They are responsible for overseeing the day-to-day management of financial operations. Companies can tap into the expertise of a highly skilled professional and mitigate perceived notions of loss of control by outsourcing this role. However, you can also choose to keep this role in-house, depending on your organizational needs and available resources. Outsourced Account managers also blend resources as a key strategy for optimizing clients’ financial operations. By working closely with clients, they can identify areas where outsourced expertise and resources can complement their in-house capabilities, and develop a customized outsourcing solution that leverages the strengths of both teams.

3.  Higher Quality and Standardization

Finance and Accounting Outsourcing companies provide a reliable course of action for any procedure through their time-perfected services. You may not be aware of best industry practices trying to do it all yourself; something BPOs excel at. A seasoned outsourcing company offers a competitive edge derived from past experiences and interactions by utilizing these methodologies for multiple customers over the years. Hence, your service contracts are embedded with only tested procedures, leading to Process Improvement according to your specific set outcomes.

Diligently check the viability of your service provider to avoid any risks in business dealings. Mature, well-established, professional outsourcing firms provide a healthy portfolio of clients and references, documentation enclosed within their service offerings, and assurances for cloud and physical security. Specific data confidentiality measures and global standardization protocols for sensitive transactions such as credit card information, etc. are also part of the contract and the responsibility of the third-party vendor.

4.  Competitive Advantage

Value-added services such as a knowledge exchange culture or process improvement are also provided by a Co-sourcing company (a better form of outsourcing) to help you match up to the competition in the marketplace. Business Intelligent solutions created through techniques like Pareto Analysis, AGILE Development, and Lean Six Sigma are the mark of a BPO partner devoted to augmenting every process within your organization. Application of the latest technology and tools also help apply best practices, ensuring mutual growth. Some outsourced accounting companies, particularly those that Co-source, employ customer-centric cultures for Customer Lifecycle Management. This benefits your clients with the best service possible, expanding upon Customer Loyalty, and allowing further acquisition of new clients.

The con is that a knowledge gap may arise if the right bpo partner is not employed and quality may also suffer. A solution is to conduct thorough internal research to identify requirements, while selecting a partner that employs Co-sourcing values to share risk and reward, along with bringing fresh ideas to the table.

5.  Improved Productivity

With operations more accurate and fast-paced, productivity increases alongside outsourcing. Particularly for office operations like financial reporting and outsourced accounting services, accuracy is of the essence, which demands expertise that comes from a professional firm. You also get the option to scale up and down as and when needed. Teams operating across different time zones ensure round-the- clock services so that your business is running perpetually producing greater outcomes. You receive expert insight at a lower cost, and consequently, quality and productivity improve.

To make sure there is no lag, choose an outsourcing partner that pre-defines expectations and has a contingency in the event of failure. Comprehensive and detailed analytics on performance will also help identify any disparities. Sometimes language barriers may create problems in communication, which can be easily sorted with a BPO having multiple geographical outlets. This ensures service to agreed- upon standard procedures and deliverables.

While many advantages and disadvantages associate with outsourcing Finance and Accounting services, they depend upon the scope of outsourcing solutions employed. It is prudent to do a thorough background check before selecting a seasoned outsourcing partner that fully comprehends your business needs and its future. Opt for someone willing to customize their plans to your requirements, aiming for mutual progress and a long-standing relationship.

Outsource Finance and Accounting with Premier BPO

Premier BPO’s Finance and Accounting services are tailored to each client’s business requirements and values. We understand the need for critical decision-making in a timely and effective manner for financial operations, therefore, we provide outsourced finance support across all stages of a company’s development and progress. One of our differentiators is proactive Account Management. In addition to your dedicated team, we have account managers, operations leaders, and supervisors that are involved and personally take time to ensure you receive proactive insights and perspectives to align with your objectives. Recently named among the key global F&A BPO players, our range of solutions includes:

  • Bookkeeping, General Ledger, Journal Entries, Reconciliation

  • Billing, Collections (Accounts Receivable / AR Aging)

  • Accounts Payable, Vendor Management, AP Aging

  • Travel and Expense, Timesheet

  • Payroll Processing and Preparation, Commission Calculations

  • Asset Management and Depreciation Schedules

  • Treasury Management, Budgeting, and Forecasting Revenues

  • Loan Management, Cash Projections, and Account Balancing

  • Quarterly and Annual Tax Return Preparation with CPA

  • Benefits and Insurance Plan Analysis

  • Risk and Value-Chain Management

  • Auditing and Compliance

  • Customized Software Development and Business Intelligence, AI Integration

To learn about the full extent of our outsourced Finance and Accounting services, visit our services page. You can also reach out to us for a free consultation.

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