Finance outsourcing: Should it be the new norm?

Finance and accounting is a delicate task that requires attention to detail and expertise.

The cost of hiring an in-house professional finance team to handle your accounting process and other related tasks may be too high and eat deep into your budget. At the same time, it may be detrimental to compromise the quality of your finance functions. 

Finance outsourcing is a cost-saving strategy that allows a company or business to enjoy the benefit of professional accounting management without spending much on recruiting accountants or accounting software.

What is outsourcing? 

Outsourcing is a common cost-saving and business efficiency strategy employed by companies to cut the cost of labor by contracting out business functions to external companies or specialized contractors. Typically, businesses seek to concentrate on their core competencies by outsourcing services that are not directly related to business value creation. 

Business Process Outsourcing (BPO) also helps companies cut back on costs such as labor, salaries, overhead, technology, and equipment costs. Outsourcing can be a way to go for a company looking at adjusting things on the balance sheet without compromising quality results. 

Tasks that may be outsourced include; 

  • Accounting
  • Facility management
  • Customer support
  • Bookkeeping services
  • CFO services
  • Supply chain management 
  • Business Consulting 

What is finance outsourcing? 

Finance outsourcing occurs when a company transfers its financial and accounting operations to a third-party company or contractor specializing in financial accounting services.

Finance outsourcing is a popular strategy in the finance industry that involves transferring financial accounting, tax accounting, and reporting to independent accounting specialist companies based on agreed terms. For small businesses and large organizations, outsourced finance reduces the costs of recruiting in-house accounting teams and brings about business efficiency.

Benefits of outsourcing finance 

Why do businesses outsource their accounting and finance operations? There are several benefits the company stands to gain from utilizing the service of third-party finance professionals, which include

Cost savings

Outsourcing finance functions saves the cost of employing full-time finance and accounting professionals. You can scale the high cost of recruitment and staff benefits by hiring the service of independent accounting firms or finance professionals who would only be paid for their work. 

To recruit an in-house finance team, your HR departments will bear more burden of the recruitment process, such as sifting through several applications and conducting numerous interviews to get the right talent. After that, recruits may need onboarding and training on company culture and services. All these processes cost more money and productivity since other staff may also be involved in the activity. 

After recruitment, you will also need to bear the cost of employee benefits such as medical insurance, vacation allowance, retirement plan, and payroll taxes.

Access to advanced technologies and software 

Technology keeps evolving. Medium companies and small businesses may not be abreast of the latest financial technologies. Accounting software is quite expensive; purchasing such software along with your core equipment may affect your budget. 

Aside from that, your account team may lack the expertise and knowledge to take advantage of sophisticated accounting software effectively. 

Accounting outsourcing firms invest in sophisticated software and have the expertise to leverage these technologies for better results. By hiring the service of these accounting service providers, you will have access to up-to-date technology and best practices without expending extra costs. 

Efficiency and accuracy 

Finance and accounting is a delicate task that requires attention to detail and expertise. Accounting outsourcing firms have a highly experienced, dedicated team of professionals with years of experience whose only job is to help your business scale its financial goals with the suitable skill set and technological tools. 

They ensure efficiency and accuracy by replacing old accounting practices with new processes and automating tasks such as; analytics calculations, expense claim audits, analyzing and matching payments to invoices, bank reconciliation, and risk assessment. 

It makes CFOs more efficient

Certain traits distinguish CFOs as business leaders. Efficiency, quick decision-making, analytical skills, and creativity are distinguishing qualities of 21st-century CFOs. To exude these traits and maximize their skill in leading the finance team towards achieving the company's financial goals and maintaining other business affairs, the last thing on their table should be time-consuming, redundant, and repetitive tasks. 

CFOs will become efficient and focus on achieving business success when they are assured that their daily financial functions are being handled by an experienced and qualified independent finance team. 

Finance and accounting outsourcing firms will save the CFO the supervision and financial control time by taking care of the company's budget forecasting, financial reporting, revenue, and expenditure monitoring and implementation. 

Access to global talent 

Outsourcing your financial services to remote international accounting firms and finance professionals gives you access to global talents and fresh perspectives. Constituting an In-house finance team may restrict your staff's population to the local workforce since they have to reside around your company's locations. 

Accounting outsourcing gives you access to varieties. Specialized software and tools allow outsourcing firms and professionals to operate remotely. Such practices give your business access to various ideas and vast skill sets. 

Business scalability

Whether you own a large organization or a medium-sized business, scaling your business is one of the top priorities. Business scalability may be slow if your in-house team is cut up in the web of mundane back-office operations instead of focusing on high-value business activities. 

Outsourcing these non-value-related tasks, such as accounting, bookkeeping, and regulatory compliance will free your employees' tables. It will allow your team members to harness their time and core competencies toward decision-making and high-value creation.

Types of finance and accounting functions that can be outsourced 

Financial Planning and Analysis (FP&A)

If you lack an in-house finance team with the expertise, resources, and time to analyze data and make sustainable decisions that drive financial growth, you can outsource your FP&A. 

You can get the following support by outsourcing your FP& A; 

  • Financial planning, Budgeting, Forecasting and Reforecasting 
  • Business Financial Data Analysis
  • Management Reporting and Narrative
  • Board & Bank Reporting
  • Audit Support
  • Acquisition Integration Support
  • Investor Communication and Reporting
  • Financial leadership 

Bookkeeping and back office operations 

 Bookkeeping and back office operations are mundane tasks that can consume time and unnecessarily increase the employee population. By outsourcing your bookkeeping and back office tasks, you can get efficient services without expending more costs. Functions that can be outsourced in this regard include; 

  • Customer billing and payments
  • Account payable 
  • Account receivable 
  • Employee expense processing
  • Payroll administration/services
  • Financial reporting, tax reporting, and reporting Automation
  • Subscription/maintenance, renewals, and management
  • Vendor invoice processing and payments

Controller services 

Recruiting and maintaining a high-class finance controller may cost you a fortune. 

Instead of investing in recruiting competent in-house financial controllers, you can outsource financial controller services to experienced professionals who only get paid for their fractional services. 

Despite that, they will take care of your financial management, accurate financial analysis, and prompt reporting. Controller services you can outsource include; 

  • Business compliance management 
  • Policy & procedures guidance and adherence
  • Audit Report
  • Transactional Processing Oversight
  • Employee and Vendor Communication

 What to look out for in financial outsourcing firms and professionals 

Whether local outsourcing or offshore finance outsourcing, you can only enjoy the benefit of finance and accounting outsourcing (FAO) if you take your time to sift through available services and choose the best service provider that suits your business needs. 

The following are qualities you should look out for in finance and accounting outsourcing companies; 

Expertise in providing the required service

The first important factor to consider when getting an FAO service is whether the company offers the service your business requires. You need to verify if they have certified, experienced finance professionals who have the specialized skills to handle the outsourced services. 

Sophisticated accounting software and AI-powered technologies 

Typical accounting outsourcing firms and professionals should have access to accounting software and advanced technological tools for effective and accurate service delivery.  

To enhance efficiency and eliminate errors, your service provider should be able to use cloud-based solutions to centralize all your accounting data into one cloud-based folder. 

Data privacy and security 

Financial data is sensitive information that needs the utmost protection. You must hand over sensitive information and data to outsourcing firms by outsourcing your financial work.

To protect your company, data security is a crucial consideration. It would help if you were sure you could trust the firm with your data. The firm must have a robust data privacy protocol and cybersecurity mechanisms to safeguard clients' data. 

Cooperation and good working culture 

To work towards achieving your financial goal, the outsourcing firm should be ready to cooperate and collaborate with your team. They should maintain good working relationships and be open to incorporating feedback. They should also imbibe a good working culture such as courtesy, executing the outsourced services diligently, and working within deadlines.  

Cost of services 

One of the reasons you are outsourcing your accounting process is to cut costs. It would help if you considered firms with affordable services without compromising quality. The price shouldn't be way higher than having things done in-house. 

You should also consider a convenient payment method that suits your budget. Some FAOs charge per hour, monthly, or fixed prices. 

Final words 

Finance and accounting outsourcing is an effective business operation strategy that saves money and time. It also ensures business efficiency. However, consider carefully and look for the necessary qualifications before choosing an FAO. 

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