Finance and Accounting Outsourcing to Reduce Cost in Non-Core Processes
Finance and Accounting Outsourcing (FAO) is considered to be one of the fastest segments of business process outsourcing. In FAO, finance and accounting activities or processes are outsourced to reduce overhead costs and to improve performance.
Globally, the use of finance and accounting outsourcing (FAO) is rising. Organizations are extending this partnership beyond transactional processes and are including financial reporting and financial planning/business intelligence processes for their business. Outsourcing is done so that the organizations can focus on key business activities. This approach also helps to improve decision making.
In the past, organizations outsourced non-core, low value processes to achieve better service and to reduce costs in non-core processes. Today, organizations are adopting new business models and strategic approaches to encourage businesses to be more focused on value creation.
As far as Finance and Accounting Outsourcing (FAO) is concerned, the organizations outsource transactional processes such as accounts payable, accounts receivable, billing and cash management. Nowadays, higher value services such as statutory/regulatory accounting, financial reporting and tax are being outsourced. In some cases, strategic processes such as management accounting, budgeting and forecasting and financial analysis are outsourced.
Some of the Common Services provided by Finance and Accounting Outsourcing Companies are as given below:
- General ledger maintenance
- Payroll & sales tax return preparation
- Monthly & year-end closing assistance
- Account reconciliations
- Controller & bookkeeper staffing
- Accounting software assistance
- Depreciation schedules
- Internal audits
- Financial statement preparation
- Payroll & accounts payable processing
- Accounting systems design
- Accounting staff training
Over the years, the market for FAO has matured in terms of the work being outsourced. Nowadays, the type of work varies from transactional work to complex, customized and higher services.
Outsourcing has begun at a more Strategic level because of the following factors:
- Competitive and budgetary pressures
- Advancement in technology and communications
- To reduce overhead cost involved in finance and accounting function
Before taking the final call, organizations need to make sure that the Finance and Accounting Outsourcing decision aligns with the parent company’s corporate strategy, objectives, capabilities, and plans. Given below are the key parameters to be considered before outsourcing:
- Identification of company-specific strategic factors to ensure sound outsourcing
- Evaluation of full range of options taking into consideration the shared services arrangements and outsourcing possibilities
- Determining the scope and logic of the outsourcing company before finalizing an FAO decision
- Assessing the internal potential of each sourcing option
By outsourcing, companies can save a lot of money. The organizations can save money on labor management costs and can improve their accounting management services. Effective outsourcing can improve the company’s growth.