The Evolution of Outsourcing from a Low-Value to High-Value Support System for Financial Services

In the last few years, finance and accounting services have morphed from a transactional to a holistic necessity for businesses. Organizations no longer depend on BPOs for lower-value finance and accounting tasks. Instead, they seek support on a range of value creation and specialized activities that involve a higher level of thinking and analysis. In the process, the divide between tasks that can be outsourced and those that weren’t outsourced before is growing thin. This growing trend is expected to become the norm in the coming years.

Did you know?
According to a report by ResearchAndMarkets, the global finance and accounting outsourcing market size is expected to reach $427.68 billion by 2028, growing at a CAGR of 8.6% from 2021 to 2028.

Financial Services Moving Out of the Closet

Activities like local sourcing, financial management, local tax filings, customs, and trade management, all hitherto considered in-house activities, are increasingly being outsourced to third-party partners. As a result, tax management services providers are now able to manage business taxes end-to-end.

Likewise, higher-value processes such as strategic planning, variance analysis, operational analytics, and financial analysis are no longer bound to the higher echelons of an organization. Instead, third-party partners are being called upon to support the decision-making body in making up their minds.

Did you know?
A survey conducted by Deloitte found that outsourcing high-value finance and accounting services, such as financial planning and analysis (FP&A), can lead to increased efficiency and cost savings. The survey found that companies that outsource FP&A functions achieve a cost reduction of up to 40%.

This transition can be partly attributed to the lack of higher-value skills needed to match bigger decision-making abilities and partly to the growing competency of BPOs in matching organizational needs with the expertise of an unmatched kind.

A Partner Knows the Exact Figures

“F&A vendors can do this because the systems they utilize to perform these functions are purposefully and thoughtfully built for that particular service,” says Joe Mack, CEO of a famous IT company based in the UK. “Because of this niche focus, outsourcers have evolved to become better and more efficient at delivering processes that previously belonged to the realm of their in-house counterparts.”

Did you know?
A survey conducted by Deloitte found that 81% of high-growth companies are outsourcing their finance and accounting functions.

The Managing Director of a motor parts manufacturing company, who has been delegating financial data analysis to a specialized data analytics services provider since 2018, says, “It all started with a shortage of skilled financial analysts during the pandemic. The column-wise representation of variance provided quite insightful suggestions on corrective actions. Much of their suggestions preempted our line of thinking.”

Like variable analysis and complex and high-end finance functions like strategic planning and financial analysis, many companies outsource reporting services. Outsourcing critical in-house services such as finance and accounting services has allowed providers to step up their scope and capabilities to deliver more meaningful and comprehensive insights into these functions.

It Pays to Rely on Higher Capabilities Driven by One Robust Model

Andy Robert, the CFO of an Automobile Accessory Plant, believes “Strategic planning can be effective only when the right measures and metrics drive it. Vendors can help you identify the right ones because their knowledge of your costs and margins and projected sales and profits are just as good as, if not better than, you. Therefore, as a logical extension of your team, having them as part of your strategic planning makes perfect business sense.”

Did you know?
A study by Aberdeen Group found that companies that outsource their accounting and finance functions have a higher focus on strategic initiatives, with 87% of outsourcers indicating that they have more time to focus on strategic initiatives compared to non-outsourcers.

Most small and medium-sized companies prefer to outsource bookkeeping services because they are looking for one model to manage them. Also, they need to scale. Achieving scale within a company is possible only when you bring different function-centric centers together. This takes time and effort and considerable resource training. But outsourced providers can achieve optimal scale by the nature of their well-integrated processes. This makes scaling effortless.

High-Value F&A Outsourcing – A Trend Set to Grow Stronger with Time

All said and done, in-house finance functions are being outsourced largely because of the constant value being derived from third-party partners. Over the years, they have emerged as long-term assets committed to maximizing value for their clients. As a result, most organizations favor nurturing, and growing relationships with them to sustain the bond of cooperation as technologies and challenges keep changing. Outsourcing service providers, on the other hand, are committed to bringing added value which is why they are investing in skills through industry-leading managed training services providers and in technology to outperform in-house functions. This growing interdependence between the two will ensure that the fine line between in-house and out-house functions gets blurred with time.

Thus follow for more financial guidance.

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