Financial planning and accounting are two critical components of running a successful business. This article will guide you through the concept of outsourced finance and accounting services, discuss the latest trends, and help you understand how to outsource these services.
Over the past decade, many companies have decided to outsource these functions to professionals because they can have a tremendous long-term impact on their business. Are you looking for ways to improve your financial reporting? Is it time to invest in additional people and new software to boost your business’ efficiency? Outsourcing some or all financial processes can allow your company more time to focus on core parts of your growing business, offering better opportunities in the long run.
Now that the cost of outsourcing is less than the pay of one financial executive, many companies are beginning to outsource their finance and accounting operations more frequently. Cutting overhead and getting better financial leadership is critical to the success of all companies. By understanding where the industry is currently and where it is moving, you’ll be able to decide whether outsourcing is the right decision for your business.
Finance and Accounting Outsourcing 2020 Trends
Real-time finance and accounting
The F&A industry continues to move steadily into the digital space, making it easier to keep financial reports and books entirely up to date. Thanks to the availability of full-integrated accounting platforms, accountants can help update your books every time a transaction occurs. Companies can understand their financial position and make data-driven decisions using the latest available financial information.
2. Secure audit preparation
Monitoring audit trails will remain important. If you are using paper-based accounting information, you should switch to document management programs or accounting software that can categorize everything for you. This makes it easier to prepare financial statement audits almost instantly.
3. Advanced financial modelling
Advanced technology has made it possible for financial and accounting experts to create better and more accurate financial models than ever before. Without a timely and accurate cash flow forecast, your company may run into future problems and surprises, which is why financial modelling is so important. By creating financial models with a wider range of inputs, you’ll be able to predict future outcomes and opportunities more accurately and plan accordingly.
4. Highly-sophisticated automation
Companies that don’t adopt the automation trend may encounter miscommunication, disorganization, slow processes, and increased staff involvement that could lead to burnout. Ultimately, all this may veer you away from your core function and lead to increased operational costs. Machine learning and artificial intelligence are also important trends in finance and accounting. AI, for example, can help companies efficiently compile big data, identify potential market threats, and offer insights to improve their performance. Outsourcing your finance department can help you eliminate traditional accounting methods that rely on manual financial processing and replace them with automated workflows.
5. Personalized finance and accounting service packages
Many finance and accounting firms used to offer an all-or-nothing approach to accounting, but things have changed. With increased customer-centricity in business and understanding that every business has unique needs, we have seen a major shift towards customization. The a la carte approach allows companies to choose only the services they need, thus maximizing their accounting team’s value but avoiding overpayment. Some companies may need a CPA firm to help them with their taxes, while others may need financial leadership and long-term financial forecasting.
In the past, when the outsourcing industry was getting momentum, companies would hire an accountant that would come into their office on a regular basis. But with recent technological advancements, it’s now common for the business and the accountant to never actually meet in person. Companies have a global pool of experts to tap into, and it has become easier for them to discover a finance and accounting partner that meets their needs. Recent trends have seen companies outsourcing more complex and valuable functions such as financial analysis, forecasting, and budgeting.
Major Benefits of Outsourced Finance and Accounting
Recently, an increasing number of companies has seen that outsourcing their finance and accounting function is a better, more efficient, and cost-effective financial solution that helps them boost business growth. Let’s take a look at the most significant benefits of outsourcing finance and accounting.
Increased in-house efficiency
By outsourcing your finance and accounting functions, you can boost the efficiency of your in-house personnel. There are a few reasons behind this:
Optimizing your current expenditure.
Your outsourced accounting provider will help you identify unnecessary expenses and cost-saving opportunities without compromising work quality and efficiency.
Offload managerial responsibilities.
By outsourcing your financial team, business owners and their financial managers will have more time and energy to focus on their business’ core aspects (because financial and accounting tasks will be taken off their plate). This is important for companies with managers inexperienced in financial management but responsible for other departments.
Frees up time of your in-house staff.
Besides your managers, your in-house employees will also be able to spend more time on other roles important for growing the business.
Cut infrastructural and hiring costs.
First of all, building and managing in-house finance and accounting departments can be costly. From the hiring, onboarding, and training costs to salary and benefits to office space and equipment, you will have to spend thousands of dollars to handle your financial and accounting needs. But if you outsource the finance department, you won’t have to cover many of these costs.
You won’t have to spend time and money finding and hiring the right employees – just hire an outsourced team and get started immediately. The team you hire is already experienced and trained, and their ongoing training is not your concern, which further reduces your expenses.
The outsourced team already uses advanced software and technology, which allows you to benefit from the latest tools at a fraction of the cost you would incur if you invested in them yourself. And ultimately, you won’t need to worry about finding a place for your team to work (renting an office, buying equipment, and paying for utility) because they are not your in-house employees.
Therefore, outsourcing cuts much of the cost that comes with having an in-house team but still allows you to work with the best professionals in the F&A industry.
Limitless access to global talent pools
To build an in-house finance team, you will have to hire experts from your vicinity, meaning that you are limited to the local talent pools. But what if the best fit for your company is not in your city or country? This is not a problem with outsourcing because it allows you to hire the best experts in the financial services industry from across the globe.
These teams are also experienced when it comes to remote work and are dedicated to providing the same (or even more) value when compared to an in-house team. And since your team may be working from a different time zone, you may be able to extend your company’s operational hours and further boost your financial activities’ efficiency.
Access to tax and wealth advisors can assist in building an efficient financial roadmap for your business. They can help you with individual tax planning, business continuity, disaster recovery and risk management, risk mitigation, and other aspects of financial planning.
Is Outsourced Finance and Accounting Right for Your Business?
If you are considering outsourcing your finance and accounting function and whether it’s the right move for your company, there are several key factors to consider.
If you cannot handle a full-time, in-house staff, outsourced finance and accounting services may be the right choice for you. You will benefit from timely financial statements to improve your financial visibility and reflect your company’s activity and progress without the hassle of managing multiple people. Outsourcing this function will eliminate the need to manage sick leave, vacation time, or other workplace disruptions.
Outsourced finance and accounting services will bring you a competitive advantage in the marketplace thanks to the advanced technology it brings to the table. Perhaps you cannot afford to invest such technology, but finding a cloud-based financial team that already works with the latest cloud-based accounting software will allow you to access outstanding bills, AP and AR aging, general ledger reports, and financials within a mobile app or web browser. This type of automation and mobility will allow you to have real-time, accurate financials delivered to you instantly.
3. Work quality
Quality of work and quality of team members are both equally critical for those considering outsourcing their financial department. If you are unable to find quality workers in your area, then outsourcing might be the only option left for you. Quality is probably the most important factor that drives companies to outsource their financial department.
4. Don’t have the numbers
The most obvious red flag telling you that it’s time to outsource is not having the critical numbers you need to make the right business decisions. It isn’t easy when your financial situation is a huge question mark, but spending the money on an outsourced team of financial professionals is the first step to getting your financial situation under control.
Even if you have the numbers, not being able to interpret and understand them also calls for an outsourced financial backup to ensure that your business is heading in the right direction.
5. Too many errors
If errors in your books keep appearing, that means the person taking care of your books is not doing the right job. Resolving such errors can be very time-consuming and expensive. By outsourcing these services, you can take advantage of the multiple layers of review built into your provider’s processes, which allows them to detect most errors on time. And even if any error creeps up, you won’t be the one that has to deal with it.
How to Choose an Outsourcing Provider?
When you decide that outsourcing is the right choice for your company, it’s time to find the provider that meets your finance and accounting needs. How do you pick the right outsourcing company? Let’s go through the process step by step.
Determining your business needs
Are you looking for complete financial service outsourcing, or do you need to outsource specific tasks? What kind of privacy or security measures does your business require (depending on the operations and data that you will share with the outsourced team)? Do you need to outsource common finance and accounting services, or do you need CFO consulting services? These are all factors that you need to consider before you even begin to look at all the financial services available. List out your business needs and always keep them in mind when looking for the perfect outsourcing service.
Also, you should know the roles you should outsource. The roles you can outsource include tax accounting, bookkeeping, management accounting, payroll processing, financial data analytics, and Chief Financial Officer (CFO) for financial leadership services.
2. Determine your budget
You probably won’t be able to accurately calculate your outsourcing costs yet, but you can make a rough estimate to make sure you don’t risk overspending. While estimating your outsourcing budget, keep in mind things such as:
What your organization can afford to spend.
The exact type of services your organization needs.
The value that outsourced services will bring to your organization.
The cost of hiring an in-house finance and accounting team and technology to perform the same work (compared to the price of the outsourced team and technology stack).
These figures should serve as a rough guideline to estimate the range of your budget for outsourced finance services.
3. Narrow down the list of Outsourced Finance as a Service providers
Once you determine what you can afford and what your company needs, the next step involves searching for finance and accounting service providers. Narrow down your choices by using these two main factors, but also consider all the benefits that each vendor provides, which may include:
Infrastructure and software used by the outsourced finance and accounting provider.
Internal control measures.
Advanced processes and controls that increase speed to market and efficiency.
Advanced financial reporting that can significantly increase your company’s financial visibility.
4. Check the providers’ reputation
Check your providers’ reputation by looking at client testimonials and reviews. Take a look at their testimonials of clients that the outsourcing service provider has worked for in the past. Also, pay attention to businesses with the same financial service needs or those in industries similar to yours. Read what their past clients have to say about the finance provider’s quality of work, performance, and employees, and use those impressions to narrow down your choices to 2-3 companies.
5. Culture fit
Your company has its vision and mission for growth, which is why it’s best to work with a Finance as a Service (FaaS) provider that is willing to align with your vision and mission. The best financial service providers are keen on providing financial visibility through financial reporting. A company’s culture is inextricably connected with its financial success and its perceived value in the world, and your financial service provider needs to understand that.
6. Trial project
The final step of choosing the right Finance as a Service provider includes working on a trial project (a task or short project) that will allow you to properly evaluate their performance and how well they suit your requirements. You should pay attention to factors such as:
Compatibility and communication. How well does the outsourced company work with your staff? Are there any gaps or barriers in communication that may negatively affect your business operations?
Efficiency and performance. How efficient was the outsourced team performing the work they were given?
Value. How well does their work meet your business needs? To determine the value an outsourced finance and accounting provider brings to your company, use an objective KPI (key performance indicator) or metric.
Once the trial project is done and analyzed, you should have a clear picture of how well an outsourcing provider fits your financial and accounting needs.
The outsourced finance and accounting industry continues to demonstrate its value to companies of all types and sizes, which is why it has begun to secure their trust. As a result, many companies are now more willing to outsource complex financial functions. Instead of just outsourcing for bookkeeping services, they are now looking for partners to help them create project valuations, IRR forecasts, cash flows models, and other complex financial functions.
The FaaS service provider and CPA firm that you decide to outsource to should understand the financial aspect of your business, while also having an in-depth understanding of the industry it operates in. By using best practices and modern software solutions, they should be able to fill all your finance and accounting gaps, as well as learn the uniqueness of your business.
With M&K as your partner, we will be able to bridge the gap between your organization’s financial goals and numbers together and increase your financial visibility. Furthermore, you’ll get the opportunity to strategically outsource your accounting while maintaining a core finance team.