Outsourcing a company’s finance and Accounting operations is a major decision for key stakeholders due to the sensitivity of the information involved. Organizations tend to exercise extreme caution while selecting a Finance and Accounting Outsourcing Services partner.

While Finance and Accounting Outsourcing (FAO) services have been around for long – at least since the early 90s – their usage was dominated by firms located in the United States. However, with the passage of time, companies from other regions around the world started using these services, and they have grown phenomenally since then.

Not only cumulative business, but the kind of work being handled by FAO services has evolved. Initially, companies would only handover repetitive and simple tasks to these firms. Today, Outsourced Financial Services have expanded their scope across accounts payable and receivable, travel expense management, supply chain accounting, payroll processing, payment processing, pricing administration, bookkeeping, record to report, joint venture accounting, and financial analysis reporting to name a few. Apart from this wide array of services, FAO firms are also being entrusted with more complex tasks like treasury planning and tax strategy.

Before a company decides to employ the services of an FAO firm, it needs to lay the groundwork for it. Given the long-term nature of such contracts and the sensitive nature of details to be shared, some pre-preparedness is essential to ensure a smooth transition of services from the company to the FAO firm.

All key stakeholders of the company need to be on-board with the rationale behind the employment of a Finance and Accounting Outsourcing Services firm as well as the services which would be outsourced. All points of view in both these regards should be considered before arriving at a common ground in order to ensure that there are no speed bumps internally going forward. Further, there are several methods that a company can decide upon to outsource finance and accounting services: they can set up a captive unit, use shared services, or opt for on/offshore units. Depending on the outsourcing requirements and the views of key stakeholders, a certain mode can suit a specific company better than others.

Key personnel from the division of the company who has been managing the process which is to be outsourced should be identified, their capabilities of handing over the process to an FAO firm assessed, and their eventual appointment for managing the transition should be made. If this internal team does not have personnel which can handle these important tasks, then senior management should appoint a team from other divisions which can manage this transition smoothly. Hiccups here could jeopardize the process and compromise the reason for outsourcing.

Once these internal decisions have been taken and readiness achieved, then the company can move forward with assessing the fitment of the FAO firm from the array of options available to it.

7 Factors Play an Important Role in Finance and Accounting Outsourcing Services

• Cost saving: Whenever any company is considering outsourcing a portion of its work, the reason almost always is cost. Though it may not be the only reason, it certainly is a big factor in not only choosing to outsource work but also preferring one Outsourcing Accounting Firms over others. Cost saving is specifically important if the work being outsourced is repetitive but loses some importance if such work is highly specialized. For all jobs in between repetitive and highly specialized, cost-saving needs to be considered with reference to some other factors below.

• Talent pool and skill set: One of the most important aspects to analyze while outsourcing finance and accounting services are the talent pool available at an Outsourcing Accounting Firms and their skill level. This has to be done in comparison with the existing team in the company whose services are being outsourced. While this aspect assumes less importance when outsourcing repetitive tasks as basic skills would suffice, it assumes importance for skilled and highly specialized tasks. The Finance and Accounting Outsourcing Services firm being considered should at least have a similar talent pool compared to the existing team performing the function in the company, else outsourcing work to a diminished talent pool would be counterintuitive. Though cost saving is important, when it comes to complex tasks like treasury planning and tax strategy, a better talent pool and skill set takes precedence over cost.

• Size of the FAO firm: This is another important issue when it comes to making the right choice regarding a company’s outsourcing partner. While large FAO firms may bring in wide-ranging experience and imply higher service standards, firms lower on the scale of operations barometer may bring in higher customization in their product offering and more flexibility in operations. As far as choosing the right-sized FAO firm, it comes down to the right fitment for the company outsourcing the process. For a particular service, a larger FAO firm may be better suited than a smaller firm while for another service, the opposite may be the case.

• Management stability: Since finance and accounting operations are vital to any company, it is essential for it to find an outsourcing partner which is stable in terms of management and ownership. A high rate of churn at the top echelons of management or ownership does not read well for an FAO firm and may arouse suspicion in the mind of companies which are interested in offshoring some or all of their finance and accounting work to it.

• Scalability: Companies which are experimenting with outsourcing for the first time may decide to handover only a small portion of their work to Finance and Accounting Outsourcing Services firm. 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 scalability of its partner is not an important factor, but for those deciding to outsource their processes in steps, scalability is a vital factor to consider while choosing the right Finance and Accounting Outsourcing Services partner.

• Adaptability: The world of accounting and finance is very dynamic with several changes in rules and regulations impacting the entire landscape. It is important for an FAO services firm to be able to adapt to and implement these changes quickly, with minimal turnaround time, in order to maintain its efficiency towards the outsourced work. Unlike some attributes outlined in this article, adaptability is essential regardless of the kind of work outsourced or the size, talent pool, or scalability of an FAO firm.

• Technology: Since finance and accounting details are quite sensitive, it is vital for an FAO service provider to use top-notch security standards and have the required technological infrastructure in place. Any lacunae here can be read as a red flag by a potential client company. Depending on the complexity of the process being outsourced, companies contemplating outsourcing should ensure that potential FAO firms should meet a basic compliance security standard before proceeding with doing business with them.

Outsourcing finance and accounting processes can help companies streamline their business and reduce costs. Whether they want to handover repetitive work to let their in-house finance and accounting function concentrate on more complex tasks or turn over the reins of the entire function to Finance and Accounting Outsourcing Services partner, putting in an effort to find the right firm to assist them in doing that is time well spent. Because this relationship is one which will last a long time and can pay great dividends if done right.

If you are ready to free up capital and grow your business, Contact us at Rayvat Accounting.

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