 Today’s F&A outsourcing initiatives differ from those of the past in the breadth of the scope of services being put out to bid and is not restricted to single functions such as payroll or benefits administration, however, the FAO market reaching towards the saturation point sends out a strong signal for stirring up the vendors that they need to increase mastery of more specialised finance and accounting services and expand global offerings.
CFOs are seldom concerned only about cost cutting in the present scenario. Since the economic crisis a few years ago, they are exercising extreme caution to be efficient to balance cost pressures against business outcomes. The traditional FAO model of ‘as is’ used by corporations reaping benefits of lower cost through labour arbitrage, increased core competency focus, and access to talent are no longer sufficient as in the process, the process defects also get transferred in their transition phase. This is where the “partnership model” within transition will help the vendors. By implementing this model, outsourcing companies will be able to transfer the lift off benefit of as much as 10-15% to customers during the transition phase itself. Companies are compelling their vendors to streamline financial processes and reduce cycle times as well as improve quality and accuracy simultaneously – drawing on Lean Six Sigma methodologies can produce systemic and sustainable business process improvement. The underpinning theory for Six Sigma is to identify and reduce variations which will ensure that business processes are standardised, repeatable and reliable for both internal and external customers, while Lean helps to reduce waste and increase value by seeking to remove non-value adding steps in a particular process. The tangible outcomes that outsourcing service providers can achieve through implementation of multiple Six-Sigma projects across F&A processes are:
The broader implications are:
Mature outsourcing providers are therefore being punctilious as well as robust in their approach and re-engineering the entire F&A processes. Author: Debaleena Debnath Debaleena is a digital media consultant @ speradigital. To know more about our services, click here. Follow us Linkedin, Facebook and Twitter.
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Small and medium Enterprises (/Businesses) (SMEs/SMBs) worldwide are driving significant growth in today’s economy and have a cumulative influence on the agility of the marketplace. To keep pace with the current exigent market scenario, SMEs should try to optimise their technological foundation and delivery & operational models. For instance, finance executives looking for new approaches to optimize business performance should start with easy processes and low hanging fruits of the finance & accounting which are not core to the business but are important functions on their own, and in an attempt to save precious little time and resources for everyday activities. One major challenge in F&A is that organisations are trying to drive quality, standardisation and transparency across fragmented processes.
According to a research by the Association of Accounting Technicians (AAT), UK in 2015, SMBs are losing nearly £2.9 billion due to unqualified finance staff which implies there is skills gap which can be easily fulfilled by an external service provider rather than going through a tedious and costly hiring and training process. SMEs need to consider the value they are getting out from outsourcing, rather than just follow the trend or because they just do not want to do it. For SMEs, outsourcing processes would be beneficial when these fall into any of the following three categories:
In addition, the presence of an external, objective and expert vendor can reduce the possibility of fudging of numbers, and thus improve the corporate governance process. Finding the right contractors is not easy for SMBs, nevertheless they should take into account someone who can offer the right value combined with the way the outsourcing arrangement is managed, rather than thinking on the lines of who is the biggest or where the service provider is. However, for both client and vendor to be on the same page, it is essential that they have clearly-defined key responsibility areas (KRAs) and confidentiality agreements. SMEs need to partner with vendors who can achieve automation of time-consuming mundane tasks; leverage data science to provide reliable, predictable and accurate financial information, alongside maintaining transparency over both internal operations and customer preferences. Author: Debaleena Debnath and Suraj Poddar Debaleena is a digital media consultant, and Suraj is the founder and CEO @ speradigital. To know more about our services, click here. Follow us Linkedin, Facebook and Twitter. In an endeavour to remain competitive in the market, along with the pressure of providing consistent quality enhancements with cost reduction, businesses are trying to get the most out of their people, process and technology. CFOs play a strategic role and they should be always ready to face volatile and uncertain market challenges. Outsourcing has proven to be a win-win solution by creating synergies between the three drivers of an organisation and enabling value creation. Creating value has emerged as an important outcome of the process. Businesses, particularly SMEs, have been outsourcing back-office processes such as finance and accounting (F&A) in order to achieve offshore labour arbitrage by lowering the human costs of performing the associated services.
F&A Outsourcing (FAO) benefits are overwhelming in terms of cost of ownership of resources and technology, saving on time and expertise for concentrating on the core business areas, and security and confidentiality of the data even in case of business emergencies. Businesses can profit from their F&A operation’s performance and seize opportunities for significant process improvement by using bundled and customisable standalone services that focus on people, processes and technologies and help buyers improve their operations and achieve measurable results, in: · order-to-cash process which includes requisition-to-purchase, invoice processing and accounts payable & travel and expenses, · record-to-report process consisting of treasury and risk management, regulatory compliance and taxation, balance sheet commentary among others · procure-to-pay process including billing, order management, accounts receivable, dispute and deduction management · document management services, and · web-enabled process management tools. However, the FAO market has begun to reach saturation with organisations seeking out new ways to be more cost efficient. This fact is evident from the estimated growth rates tapering to approximately six percent by 2015 from a moderate growth rate of 8 percent in 2014. With maturation of the market, the buyers have become more value-centric wanting more than labour costs advantage. Although, contract termination rate has declined in 2014 after a spur in 2013, the contractual scope is increasing in terms of both processes as well as geographies being served. Consequently, the providers are coming up with outsourcing ‘as a Service’ with robust offerings like Robotic Process Automation, predictive & prescriptive analytics, judgment-oriented processes, and hybrid pricing models so as to capture the productivity aspect, rather than taking a dogmatic approach with no differentiation. For instance, according to an IBM report, although 82% of CFOs see the value in integrated enterprise-wide data analytics, only 24% think their teams are up to the task is a troubling trend. Another interesting insight from the same study is that of the highest performing CFOs, 44% combine internal and external data to produce insights. Thus, automation combined with advisory and analytic services present not only an end-to-end process driven approach to FAO but also a promise for consistent, improved and optimised service, including delivery and enterprise-wide integration. Author: Debaleena Debnath Debaleena is a digital media consultant @ speradigital. To know more about our services, click here. Follow us Linkedin, Facebook and Twitter |
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