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What are the pros and cons of finance outsourcing?
Our company is rapidly growing and we're considering outsourcing some of our finance processes to an outside company like Accenture. What are the pros and cons of this type of strategy? Are there certain finance processes that you shouldn't outsource? Would outsourcing our financial processes reduce the need for an accounting team on staff?
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2 Answers
Hi Jeff,
especially for a fast-growth company, F&A outsourcing (FAO) can hold significant advantages in terms of operational cost and flexibility (esp. as regards personnel), as well as access to best practice processing. There are a number of FAO vendors with different offerings and models ranging from single process to full FAO, a highly customized offering vs. a standardized, platform-based service, onshore vs offshore delivery, industry know-how etc... Which vendor is best for you really depends on your specific requirements, scope and attitude to outsourcing. NelsonHall, as an independent analyst and consulting firm specialized on BPO, we have detailed information on vendor capabilities and can advise you on your FAO sourcing. You are most welcome to get in touch with me (katharina.grimme(at)nelson-hall.com), or you might want to get more information on the NelsonHall website: www.nelson-hall.com.
The finance function can be almost completely outsourced. The question is whether this is a good idea or not and for what part of the function.
For a rapidly growing business, I think outsourcing works well for high transaction areas, such as invoicing and bill paying. These functions tie up floor space and may not be considered fundamental business processes that are critical to business success. Few growing companies take the time to optimize these functions which become overstaffed and use inefficient procedures. Larger companies have offshored these functions successfully at lower cost.
In my experience, offshoring saves money mostly by salary savings rather than efficiency. For those organizations willing to really optimize their internal processes, I think many can be done cost efficiently in the US with employees.
I work as a consulting CFO for early to mid stage firms; even the CFO position can be successfully outsourced for a period of a company's growth, but this model should not be permanent as the finance manager should be a key team member and when a part time person can no longer handle things, a full time manager makes sense.
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