Finance Outsourcing: Dealing With the Unexpected Pitfalls

by Angie Mak, 08 February 2012

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topics:
Management Outsourcing and Shared Services

tags:
A/P and GL processes finance and accounting outsourcing

When Lawrance Lee flew to India in 2010 to check out the 140,000-strong business process outsourcing (BPO) company that was to take over the GL and A/P of Linklaters, an international law firm, the Asia finance chief was impressed. The planning meetings went well, the vendor’s facilities were top-notch and the people Lee spoke to appeared to know what they were doing, having worked with a number of Global 2000 companies, including other law firms.

But the process was anything but quick, straightforward and cost-effective. The initial three-month handover period had to be extended to 18 months, leaving Lee with unexpected expenses.

“Previously, I was in the BPO industry as well,” he says. “I’ve implemented the shared service centre for my clients, similar to what this outsourcing firm is doing for us. I wouldn’t say three months is impossible. Six months definitely should have been possible.”

Lee (pictured) spoke to CFO Innovation’s Angie Mak about Linklaters’ experience and the lessons learned that could be useful to other CFOs.

Linklaters already has shared services structures serving finance functions across Asia. Why outsource?

Whether it’s shared services or not, I'm constantly looking at improving our efficiencies in delivering our services in Asia. I just centralised an in-house shared services centre on our billing processes, and now I'm revisiting our process structure to see if there are ways I can make it more efficient.

We went through a rigorous selection process, including site visits to a number of offshore locations and presentations to and from senior management, and we concluded that there are advantages for the business in outsourcing some of our transactional process work.

Linklaters Asia had established an APGL shared services centre for a few years, but as part of the global initiative, we moved towards outsourcing to a vendor in India.

What were your expectations of the vendor?

When we first negotiated the project, the vendor told us it would take about three months to implement it. In the end, because Asia and London were the offices to go through the first phase of the implementation, it took almost 18 months before we could sign off to go live.

Our London office finished about two months ahead of us, but it was still longer than expected. Asia has six offices and therefore is more complicated than our London office, which has only two locations.

I had expected the vendor to have a strong project implementation team and also an experienced and diversified operational team who could advise on best practices, but I haven’t seen the vendor display these skills for Linklaters yet.

The project team assigned to Asia wasn’t as strong as I had expected and I had to get quite involved. Also, Linklaters decided to use a “shift & fix” approach, so we didn’t expect the vendor to make significant changes to our current processes. That has resulted in minimal advice on best practices on the processes.

Do law firms have complex and specialised accounting processes that perhaps explain why it took much longer than anticipated for the project to go live?

The accounting is simpler and quite straightforward. I would say it’s much easier than property developers and manufacturing firms.

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