Long Day's Journey Into Finance Outsourcing

by Cesar Bacani, 07 September 2010

0 comments

Facebook

Digg

Twitter

topics:
Outsourcing and Shared Services

tags:
BPO BPR finance and accounting outsourcing LinkedIn

I’m a member of the LinkedIn group Finance & Accounting Shared Services/Outsourcing. Another member recently posed this question: Which areas should you begin your finance and accounting outsourcing journey? The responses by business process outsourcing providers, consultants and actual users make for interesting reading.

The first thing you should know is that it will apparently take a long time to complete the entire outsourcing process. Anand Pvrk, head of BPO Operations at Spanish trust and fiduciary services provider Amicorp India Management, estimates the time that will be needed at nearly five years, in part because outsourcing finance and accounting should be done in stages, each one requiring a period of stabilisation and another period of process improvements.

Five-Year Journey?

The typical journey for finance and accounting outsourcing, Pvrk wrote, begins with rule-based processes such as account payables and account receivables (excluding collections). Companies can expect delivery of outsourced services to stabilise in six to eight months, after which process improvements can be made in another six-to-seven month period. The total time: 15 months.

After that, the company can start transitioning general ledger processes, collections, financial accounting and close processes. You can expect delivery of outsourcing services to stabilise within eight to 12 months, and then process improvements can be made during another six-month period. Total time: 18 months.

Finally, the company can turn to transition financial planning and analysis and related processes. He estimates the period for stabilisation for these higher level processes at 12 to 15 months. After that, process improvements may need another six to eight months. Total time for FP&A: 23 months. In all, the outsourcing journey can take 56 months.

Or more than that. “I agree with all the points,” wrote Shakeeb Husain of Indian BPO provider Caliber Point Business Solutions, except that “typically it would take much longer.” Don’t forget that you may need to undertake business process re-engineering (BPR) before actually outsourcing, and this can take several months as well.

“You would be able to provide value-add [with BPR] by ensuring all processes lead to operational efficiency and also [take] comfort [in the knowledge] that when the processes are outsourced, they are actually 100% error free,” wrote another member, Madhu Rao, senior controller at Pierian Services, an Indian provider of finance and accounting, HR, payroll and associated business support services.

Shortening the Process

But the finance outsourcing journey can be considerably shorter, depending on the complexity and objectives of the company. “Although I would agree the transactional processes tend to be the starting points, companies under significant cost pressures may look at potentially larger and more expensive processes (or take on larger groups of processes) to help move the cost dial more quickly,” commented Jason Pikoos, Director, Advisory Services, at KPMG Peat Warwick in the U.S.

“I am commonly seeing companies looking at finance in a broader fashion,” he added, “examining all areas of finance for outsourcing opportunities, then sequencing the process based on a variety of drivers – process complexity, process stability, process risk, expected changes in the near future (e.g. new system being implemented), need for speed, etc.”

Indeed, wrote Adam Dearnley, commercial finance manager in the U.K. for marketing consultant dunnhumby, “sometimes outsourcing is used to address knowledge gaps in complex areas, e.g. expat payroll, compliance in a new market. This is very relevant to fast growing companies.” In other words, you don’t have to start with A/P and A/R, although these high-volume transactions would be the priority if your goal is to cut costs.

Comment on this article

Accounting and Regulations

CFO innovation Asia Accounting and Regulation the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Accounting Regulation, IFRS, US GAAP, Tax, investor relations, corporate governance, Corporate Law, Financial Regulators, Internal Audit, Audit, Corporate Law.

Auditing, Investor Relations, Law and Compliance, Tax

Finance and Banking

CFO innovation Asia, Finance and Banking the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Corporate Finance, trade finance, treasury and risk management, capital expenditure, Banking, mergers and acquisitions

Cash and Liquidity Management, Corporate Finance, Insurance, Treasury Management

Management

CFO innovation Asia the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Management, Corporate Governance, Human Resource Management, Compensation and Benefits, Mergers and Acquisitions, Professional Development, Corporate Real Estate, Risk Management, Budgeting and Forecasting, Business Process Management, Business Process Reengineering, Outsourcing.

Budgeting and Planning, Business Expense Management, Human Capital Management, Outsourcing and Shared Services, Risk Management

Metrics

Corporates, Financial Services

Technology

CFO innovation Asia Technology the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Systems, Business Intelligence, EPR, Accounting software, CRM, Cloud Computing, Telecommunications, Business Process Outsourcing, Business Process Management Software.

Business Intelligence, Enterprise Software and Systems, Financial Systems, Security

CFO innovation ASIA