By Joe Mullich
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.
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 CPA2Biz.
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.
“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.”
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