Outsourcing Financial services is the process of moving certain Finance & Accounting functions within an organization to a specialized third-party vendor. Effective money management decides the success or failure of any business, particularly one looking to expand. Therefore, it may become increasingly expensive to manage a Finance department in-house for which outsourcing serves as the innovative, cost-saving, scalable alternative in difficult economic times

The global Financial services outsourcing market size was estimated at $130 Billion in 2021 and is projected to grow at a rate of 7.5% annually. Almost 71% of Executives outsource their Financial services to some extent today. (Fortunly)

Forecasting, Financial Strategy, Back-Office Support, Cashflow Management, Accounts Payable and Receivable, Bookkeeping services, etc. are some of Outsourcing in Finance and Accounting services that can be sublet. To successfully outsource part of your Finance department or service banner, it is imperative to pick the right BPO partner. As innumerable bpo companies offer F&A services, not all will be the right fit for your business needs. One may question though, what are the risks and benefits of Outsourcing Finance and Accounting Services?

Benefits And Risks in Outsourcing F&A Services

F&A Outsourcing Benefits vs. Risks

With Covid-19 transforming business processing worldwide, Finance and Accounting Outsourcing (FAO) has also changed in the matter of function, breadth, reach, and application. Today outsourcing is the preference of many SMBs that are looking to expand, particularly based on the vast range of benefits that come with it. Of course, the risks associated with using third-party services cannot be ignored, but vigilance and careful selection can assure a productive and positive outsourcing experience for any company size. Here are a few points below to consider the pros and cons of outsourcing FAO activities: –

1.  Cost-Efficiency

Outsourcing F&A services helps effectively reduce overhead costs (Insurance, Training, PTO, Healthcare, Vacation, etc.) that are often overlooked when managing an internal team. Not only can you optimize existing costs by almost 50%, but also identify saving opportunities like expenses for hiring new employees. The main reason for this is outsourcing allows to utilize talent across geographies, particularly where the cost of living is lower (labor arbitrage). It also reduces capital expenditures, particularly for offshore, remote teams.

On the contrary, the risk associated with hiring some third-party vendors is hidden costs turning up later on. It is important to identify your goals with pre-determined SLAs, which can help achieve targets with your bpo provider, clearly defining the scope of outsourcing. Communicating expectations in the contract or proposal beforehand will put everyone on the same page and can also help with any incremental charges for expansion of services with time; for example, an accounting team handling AP/AR services at a fixed rate.

2.  Greater Focus with Specialized Teams

Reducing the load off of your internal highly paid personnel to focus on higher functions, outsourcing allows access to field experts across the globe (e.g., Bookkeeping). A large talent pool will not only increase the accuracy of operations but also help identify where to utilize your internal talent best. Particularly for managerial roles, you are free to focus on business expansion, rather than workday tasks of statements and accounts up-keep.

The other side is having the perception of lesser control over operations where you can’t delegate everything day-to-day. The solution for that is to select an expert partner with dedicated teams as opposed to shared teams, as the former is completely focused on the client’s business. The team then becomes an extension of your corporate culture, which the outsourcer handles, but works exclusively for you. This provides a deeper level of control and involvement, allowing for long-term partnerships with agreements for in-house rules. Shared teams, on the other hand, work best for part-time or short-term projects; as there is competition for another client’s work also, you may lose control over processes and timelines. A shared team may not fully understand your goals and be immersed in your corporate processes as compared to a dedicated full-time team, where the client has total control.

Additionally, monthly and weekly reports and constant communication on progress will ensure your peace of mind. It is also advisable to identify specific times for information exchange to mitigate lag across different time zones, for which remote team management software is quite handy. An experienced outsourced account manager can also provide an extra set of eyes on all operations, blending resources to ensure consistency while streamlining all processes.

3.  Higher Quality and Standardization

Finance Outsourcing firms provide a reliable course of action for any procedure through their time-perfected services. As an SMB trying to do it all yourself, you may not be aware of industry best practices, which a BPO is quite familiar with, due to exposure to other industry clients. Having utilized these methodologies for multiple customers over years, a seasoned bpo has the competitive edge you need, learning from past experiences and interactions. This means you will get only tested procedures embedded into your service contracts, leading to better possibilities for Process Improvement according to your specific set outcomes.

It is important to diligently check the viability of your service provider to avoid any risks in business dealings. It is wise to choose a mature, well-established organization with a healthy portfolio of clients and references. A professional outsourcing firm usually provides documentation for all such things enclosed within their service offerings, along with assurances for cloud and physical security. Specific confidentiality measures in place assure all global standardization protocols are followed for sensitive transactions such as credit card information, etc. It is imperative that all security measures be in place as data confidentiality is also the responsibility of the third-party vendor.

4.  Competitive Advantage

An outsourcing partner may also provide value-added services such as a knowledge exchange culture or process improvement, that may help you match up to your competition in the marketplace. Business Intelligent solutions created through techniques like Pareto Analysis, AGILE Development, and Lean Six Sigma show the true mark of BPO partner devoted to augmenting every process within your organization. With the latest technology and tools often utilized by outsourcing firms for improving outcomes, your organization would always apply best practices, ensuring mutual growth. Some BPO providers employ customer-centric cultures for Customer Lifecycle Management, which benefits your clients by receiving the best service possible, expanding upon Customer Loyalty, and further acquisition of new clients.

The con is that a knowledge gap may arise if the right vendor is not employed for the specific set of tasks outsourced; quality may also suffer because of it. A simple solution is to conduct thorough internal research to identify requirements, while selecting a partner that employs Co-sourcing values to share risk and reward, along with putting in the effort for giving fresh ideas to the table.

5.  Improved Productivity

As all operations are more accurate and faster, productivity increases alongside outsourcing. You also get the option to scale up and down as and when needed. With redundant teams operating across different time zones, round-the-clock services are available, ensuring your business is running all the time, producing greater outcomes. Since you get expert insight at a lower cost, quality and consequently results improve on that front too.

To make sure there is no lag in productivity, choose an outsourcing partner that pre-defines expectations and has a contingency in place in the event of failure. Comprehensive and detailed analytics on performance will also help identify any disparities. Sometimes language barriers may create problems in communication, affecting productivity overall. This can be easily sorted by selecting a bpo organization with multiple geographical outlets, that can ensure service up to agreed-upon standard procedures and deliverables.

There are many other advantages and disadvantages associated with outsourcing Finance and Accounting services, depending upon the scope of the services that need outsourcing. The main essence is to do a thorough background check and choose a seasoned outsourcing partner that fully comprehends your business needs and its future. It is best to opt for someone willing to customize their plans to adjust some of your requirements, aiming for mutual progress and a long-standing relationship.

Types of F&A Services Offered by Premier BPO

Possessing an executive team of industry experts with over 17 years of company experience, Premier BPO provides tailored Finance & Accounting services to its vast clientele. We understand the need for critical decision-making in a timely and effective manner for Financial operations, therefore, we provide support across all stages of a company’s development and progress. One of our differentiators is proactive Account Management, where our C-suite personally gives exclusive insight and consultancy to expand your business while adding value to it. We support dedicated teams working full-time for the client ensuring Recently named among the key global F&A bpo players, our range of solutions includes:

  • Bookkeeping, A/P, A/R, and Invoice Management

  • Collections, Order Processing, and Billing

  • Payroll Processing and Data Services

  • Asset Management and Depreciation Solutions

  • Treasury Services, Budgeting, and Forecasting Revenues

  • Loan Management, Cash Projections, and Account Balancing

  • Quarterly and Annual Returns

  • Ledger Management and Financial Statements

  • Investment, Consultancy, and Insurance Plans

  • Risk and Value-Chain Management

  • Auditing, T&E, Customized Software Development

To learn about the full extent of our outsourced Finance and Accounting services, visit our web page.