The concept of outsourcing is relatively straightforward – it refers to contracting out a segment of the work that a company regularly performs in hours to someone outside the company (ex: a third-party CPA firm or a payroll provider). Outsourcing comes in various sizes and shapes, and regardless of their revenue share, most businesses engage in some type of outsourcing. Many of them use a third-party vendor to represent their online presence, host and manage the website, print branded assets, or warehouse their goods, for example.
When it comes to outsourcing finance and accounting service, it is categorized as business process outsourcing, and it refers to managing the processes that supplement everyday business operations. Finance and accounting operations make up a significant portion of those processes for many businesses. When deciding to outsource the F&A function, you should know that it doesn’t require an all-or-nothing approach, and many companies decide to outsource a small set of processes to “test the waters.”
Which Finance and Accounting Functions Can You Outsource?
When most businesses begin with finance and accounting outsourcing, they start with the highly repetitive, highly transactional tasks to assess the changes, challenges, and benefits of outsourcing your finance and accounting functions. For example, Accounts Payable and Accounts Receiving are two such transactional functions that are popular to outsource. These processes are manual and are typically assigned to entry-level accountants in an in-house accounting team. Because employees progress along their career paths, new talent has to be sourced to fill those roles, which means downtime, lost productivity, and additional cost in hiring and training new team members. With that in-house model, there is a lot of effort and money dedicated to a routine bookkeeping process. Using an outsourced model helps reduce the burden because the third-party vendor manages sourcing, training, and deployment of talent.
Companies can outsource finance and accounting tasks, such as:
- Tax planning, filing, and reporting
- Expense reporting
- Fixed asset reporting
- Account reconciliation
- Order to cash
- Employee expense processing
- Month-end close, etc.
These are all low-value tasks that business owners and executives feel most comfortable assigning to a remote team. However, these are not the only types of finance and accounting tasks that an outsourced team can handle. Some third-party vendors that specialize in high-level accountancy can handle the work that typically falls to CFOs, senior-level accountants, and controllers. This can be useful for investors, company executives, and businesses of any size or shape (especially those that do business in markets where labor is inaccessibly expensive and increasingly scarce, as well as companies that need to scale quickly).
More complex and intensive finance and accounting processes a company can outsource include:
- Financial Planning and Analysis leadership
- Process oversight
- Debt management
- Financial auditing and audit reporting
- Forecasting and budgeting
- Data extraction and financial analysis, etc.
The individual needs and goals of a company will drive the processes they choose to outsource.
How to Choose a Finance and Accounting Partner?
Once you decide that outsourcing fits into your finance and accounting operations strategy, the next step is to look at potential service providers and choose the one that feels like the best fit for your workflow, goals, and values. A reputable finance and accounting partner will be able to provide the right knowledge, case studies, client referrals, and a test project agreement, along with a bid or quote when you put out your request for proposals. There are various considerations that a company needs to address when comparing outsourcing providers.
Understanding how an F&A provider handles the onboarding process (from knowledge-sharing to implementation) is essential to choosing between potential vendors. Be sure to look for a provider that can provide a transparent and thorough rundown of how everything happens because you will want to know what to expect from the first day.
Next, you will want to outsource your accounting and finance function to a vendor with a proven track record for success. Look beyond the amount of time they’ve been in business and ask them to speak directly to the partnerships they have with other clients. If a provider can grow and maintain the service it offers to individual clients year after year, it’s a clear sign that they are successful in what they do.
Does a provider utilize cloud-based technology and other such software solutions? Suppose an outsourced accounting firm doesn’t offer cloud solutions to potentially siloed information and data with the option to move yours to the cloud. In that case, they are not prepared to help you scale quickly and effectively when you need to. Cloud accounting relies on the latest cloud-based accounting programs that are integrated with your bank accounts and other cloud-based accounting systems, such as human resource systems, payroll systems, bill pay solutions, etc.
Also, the purpose of F&A outsourcing is to be relieved of manual, laborious, and mundane tasks that cost you time and money. That is why your third-party vendor must be equipped with the right accounting software (preferably AI-powered) and tools to automate those tasks. A good F&A team will implement efficient software solutions that will streamline your operations as much as possible.
When it comes to your company culture, you should make sure that your partnership comes with certain commonalities. When deciding which vendor to go with, take note of whether a vendor listens to your concerns and shares your values. With a good culture fit, you will make the process of onboarding and continued communication seamless. Eventually, you will feel like the vendor is a part of your team, not a separate entity.
How will your vendor measure and deliver financial data, performance metrics, and other vital metrics? That’s an important thing to determine when looking for a provider, and it can be helpful to discuss things with them that you would like to see improved, as well as the KPIs you want to meet. Also, your provider should be able to provide detailed financial reports (e.g., balance sheets, income statements, statements of your cash flows, and other financial statements) about the financial health for your company.
Security is always a top priority concern when it comes to financial data. Whether a company has decided to outsource a part of their F&A operations or not, data security breaches can be catastrophic. Your provider should be able to show you that they have security protocols in place and that they’re SOC 1 certified.
More Tips for Hiring an Outsourced F&A Provider
When choosing outsourced accounting services, it’s important to be strategic. Take a look at a few more things that you should pay attention to when comparing third-party accounting service providers in the finance and accounting industry:
- Customer-centricity. In other words, you would want to hire someone who is focused on providing the best service and customer experience. Whenever you have a question about your business finances, it’s imperative that you can get someone on the phone or online. When hiring a finance and accounting outsourcing company, ask about ongoing support throughout the year. Many businesses make the mistake of talking to their accountant once or twice a year (usually at tax time). You want to regularly examine real-time information about your business’ financial health because it improves financial visibility and influences your strategic business decisions. You’ll get the most value through working with a finance and accounting team that provides strategy implementation, support, and communication all year long.
- Certifications and licensing. Does the F&A provider you’re hiring hold the right licenses and certifications? If they do, it means that they’re true professionals because the certifications show the years of education, training, and experience that went into their professional development.
- Scope of services. Before you hire someone, you need to know what services your company needs. Do you need help with ongoing bookkeeping tasks, or financial leadership? Perhaps you need a full-service financial solution that includes financial strategy, account reconciliations, payroll processing, and more?
Consero delivers a flexible approach for its clients by developing unique and custom financial reports, as well as finance and accounting solutions. The scope of financial support services we offer is wide, so you can rest assured that they will meet the unique needs of your board and staff. Whether it’s a review of your books, performing financial statement audits, risk mitigation, disaster recovery, or providing CFO consulting, we are here to help you get your finance and accounting departments in order.
Reach out to Consero today if you’re ready to professionalize your finance and accounting function.