Outsourcing a company’s finance and accounting operations is a significant decision for crucial 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 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 hand over repetitive and straightforward 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 have also been 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.
Key personnel from the company’s division, which has been managing the process which is to be outsourced, should be identified, their capabilities of handing over the means to an FAO firm assessed, and their eventual appointment of managing the transition should be made. If this internal team does not have personnel who can handle these essential tasks, then senior management should appoint a group from other divisions that can manage this transition smoothly. Hiccups here could jeopardize the process and compromise the reason for outsourcing.
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 of managing the transition should be made. If this internal team does not have personnel who can handle these important tasks, then senior management should appoint a team from other divisions that 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 is achieved, the company can move forward with assessing the fitment of the FAO firm from the array of options available to it.
Top 7 Factors for Finance and Accounting Outsourcing
Whenever any company is considering outsourcing a portion of its work, the reason almost always costs. Though it may not be the only reason, it certainly is a significant factor in not only choosing to outsource work but also preferring one Outsourcing Accounting Firm over others. Cost-saving is specifically essential if the work being outsourced is repetitive, but loses some importance if such action is highly specialized. For all jobs in between repetitive and highly skilled, cost-saving must be considered regarding 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. That has to be done compared to the existing team in the company whose services are being outsourced. While this aspect assumes less importance when outsourcing repetitive tasks as necessary skills would suffice, it understands the importance of skilled and highly specialized jobs. 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. Otherwise, outsourcing work to a diminished talent pool would be counterintuitive. Though cost saving is essential, 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:
That is another crucial issue when it comes to making the right choice regarding a company’s outsourcing partner. While large FAO firms may bring in a wide-ranging experience and imply higher service standards, firms lower on the scale of operations barometer may bring in more top 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 another service may be the opposite.
Since finance and accounting operations are vital to any company, it is essential to find an outsourcing partner that is stable in management and ownership. A high rate of churn at the top echelons of control or property does not read well for an FAO firm. It may arouse suspicion in the mind of companies which are interested in offshoring some or all of their finance and accounting work to it.
Companies that are experimenting with outsourcing for the first time may decide to hand over only a small portion of their work to Outsourcing Accounting Firms. If the firm proves to be active and efficient with that work over a sizable period, the company may decide to outsource more processes. But 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 in its decision to outsource only one part of its finance and accounting process, its partner’s scalability is not an essential factor. Still, scalability is a vital factor to consider when choosing the right Finance and Accounting Outsourcing Services partner for those deciding to outsource their processes in steps.
The world of accounting and finance is dynamic, with several changes in rules and regulations impacting the entire landscape. An FAO services firm needs to be able to quickly adapt to and implement these changes with a minimal turnaround time to maintain its efficiency towards the outsourced work. Unlike some attributes outlined in this article, adaptability is essential regardless of the work outsourced or the size, talent pool, or scalability of an FAO firm.
Since finance and accounting details are quite sensitive, and FAO service provider needs to use top-notch security standards and have the required technological infrastructure. 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 likely FAO firms should meet a basic compliance security standard before proceeding with doing business with them.
Rayvat Accounting can help companies streamline their business and reduce costs. Whether they want to hand over repetitive work to let their in-house finance and accounting function concentrate on more complex tasks or turn over the reins of the entire service to Finance and Accounting Outsourcing Services partner, putting to find the right firm to assist them in doing that is time well spent because this relationship is one that 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.