Outsourcing the finance and accounting function is not an easy call to take; do you know why? It’s because of highly sensitive data that is involved. Though there are various companies into Finance and Accounting Outsourcing (FAO) services starting the beginning of the 1990s, it was more predominant in the United States. Though now, there are many companies emerging in other parts of the world which have begun using these services and are growing consequently.

There has also been a lot of evolvement in terms of the work being managed by various FAO services. Nowadays, the FAOs deal end-to-end solutions right from accounts payable, receivable, payroll processing, supply chain accounting, management of travel expense, pricing administration, processing of payments, bookkeeping, record to report, and also more complex tasks like joint venture accounting and even financial analysis reporting. Other than this, a few FAO firms also take up in-depth tasks such as planning a tax strategy and treasury.

Before deciding to hire the services of some FAO firm, a company has to do some groundwork so that the transition of these services is smooth. Then, there could be various ways for a company to make up their mind on which finance and accounting services to outsource; for example, a captive unit could be set up, shared services can be used, or offshore offices or units are another options. This completely depends on the requirements and the decision of the main stakeholders.

The important factors in deciding the finance and accounting outsourcing services

  1. Cost saving: One of the most important reasons for any organization to think of outsourcing is cost. However, it may not be one and the only reasons, but it surely is a major factor in deciding to outsource a portion of work and also deciding which accounting outsourcing firm to opt for.
  2. Talent pool and skill set: Another important factor to consider is the resources or talent pool that particular outsourcing accounting firm has and what is their experience and level of skill-set. But if the task being outsourced is repetitive work, then even basic skills would be sufficient; however, this factor is very important in case of skilled and very specialized work. Though saving costs is essential, in case of a highly-complex job such treasury planning and working on a tax strategy, the cost isn’t an important factor and an experienced and upskilled talent pool gains more crucial.
  3. How big is the FAO firm: How is the size of an FAO important? Though large FAO organizations boast for an array of experienced resources and have better service standards, smaller companies might at times provide better customization to their product offerings and could be more flexible as well. Having said that, there’s no set formula to decide this. Maybe for a specific service, a bigger FAO firm would be better as compared to a small-sized firm or vice versa.
  4. Management stability: It is important to find the best-suited partner to outsource, with regards to both management and also ownership. If there is a lot of upheaval at the top level of management or ownership, it isn’t a good sign for an FAO firm and it could raise various doubts for the companies who want to offshore a part or all of their finance and accounting tasks.
  5. Scalability: Companies which are experimenting with outsourcing for the first time may decide to handover only a small portion of their work to accounting outsourcing firms. If the firm proves to be effective and efficient with that work over a sizable period of time, the company may decide to outsource more processes. But in order to do that, the FAO firm needs to have the resources and the capability to take on the additional work, i.e., it should be scalable. If a company is firm on its decision to outsource only one part of its finance and accounting process, then the scalability isn’t an important factor; but if a company is going to outsource its processes in some steps, then this factor should be definitely considered when you opt for the suitable Finance and Accounting Outsourcing Services.
  6. Adaptability: The finance and accounting sector is quite dynamic as a lot of changes keep happening in the rules and regulations, which in turn influences the entire economy and industries. It is necessary for an FAO firm to be quick to adapt to new guidelines so as to efficiently manage the outsourced work.
  7. Technology: As we discussed earlier, the data handles in finance and accounting functions is very sensitive, and therefore, it is imperative for any FAO firm to implement highest-quality standards of security and also have the needed infrastructure and technologies. If there are any glitches or loopholes, the potential client could view it as a red flag. They should also be meeting all compliance and security standards before they start out on the business with them.
  8. Method: The method or way a company outsources is also an important factor in deciding success. The method of outsourcing should be based on a company’s structure and requirements. One option is to outsource the complete F&A function or maybe opt to first outsource a few areas like accounts receivables or the procurement part. A company could also decide to outsource various processes to various FAOs or service-providers. This decision should be based on why is outsourcing being done in the first place. If the main reason is commercial or saving costs and better core competencies, then it makes more sense to outsource the complete process. If you chose the correct method, your cost savings will be definitely higher and it’s easier to streamline all the processes.

How to decide if it will work for your organization?

If the right FAO is chosen, client relationships will definitely grow as the interactions increase and the sensitive and confidential data is maintained properly.

If in due course of time the FAO is able to win the trust of the company, it could also lead to getting additional services such as CFO advisory services etc. However, there’ a downside to it too; if it is not executed properly and with a planned timeline and structure, then it can lead to a collapse of the company’s resources too.

However, there are about four areas, which should be considered when there’s a plan for this service line. They are:

  • Management of client relationships
  • Overall resources
  • The service philosophy
  • The cost agreement

If the above four factors are in your company’s favour, then your decision would be a win-win for both the parties involved.

So, are you ready yet to outsource your accounting services and need a professional Finance and Accounting Outsourcing firm? Do contact us at IMC, and we will be happy to assist you.

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