A Complete Guide to Outsource Finance & Accounting in 2021

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The two most important aspects of running a successful business are financial planning and accounting. Controlling your finances entails effectively managing your firm. Simply said, finance and accounting are critical to the success and survival of your business. Effectively controlling income and expenses, as well as having a competent finance and accounting team, are the keys to successfully leading a firm toward success. This article will walk you through the complete guide to outsource finance & accounting services, as well as explore current trends and show you how to outsource these services. Many organizations have elected to outsource these duties to specialists during the last decade because they might have a significant long-term influence on their organization.

  • Are you trying to figure out how to make your financial reporting better?
  • Is it time to hire more workers and buy new software to improve your company’s efficiency?

Guide to Outsource F&A

Guide to Outsource F&AFor every business, being constantly aware of the financial position is integral for a number of reasons. Knowledge about how the enterprise is faring financially results in improving operational efficiency, educated decision-making, strategic forecasting, and management of resources, including talent. Reasonable knowledge of a few key indicators and some simple ratios can reveal plenty.

This Article Includes:

  • Ways to Determine the Financial Position of Your Business
  • Tips to Increase Profit Margins for Your Business
  • F&A Outsourcing Benefits

Let us start,

Ways to Determine the Financial Position of Your Business

  1. Analyze Financial Statements and Ratios:

It is important to create accurate financial statements such as balance sheets and the income and expenditure statement, and calculate related ratios like gross profit, net profit, earnings before interest, taxes, depreciation, and amortization (EBITDA), etc. This will tell you if your business is making a profit or a loss.

2. Analyze Revenue and Accounts Receivable Cycle:

A business needs liquid cash at all times or at least assets that can be converted to cash within short notice. Are your debtors paying you back on time? Is your working capital situation stable? Are your revenues constantly more than your expenses? These are all critical questions to be answered. Revenues must be generated from core operations; a rare case where you monetized some fixed assets cannot be considered a viable revenue stream.

3. Analyze Inventory and Investment:

Wastage of resources must be checked at all times. Investment in the business in terms of capital and raw materials and inventory and the output generated, as a result, must be validated against each other. The proportion of wastage, the number of finished goods, and the products that are eventually sold in the market are all key indicators of business operations.

4. Check Expenses:

Always keep an eye on business expenses. If they are rising all the time, ask the operational heads why that is so and how they can be curbed. Dig deeper into these numbers to find out if they are one-time expenses or an irreversible trend.

5. Analyze Liabilities and Capital:

Examine the borrowings of the company, the proportion of shareholder’s equity, and the owner’s capital. The more you borrow, the more interest you will have to pay. The greater the shareholder’s equity, the higher the possibility that you might not have enough control over the company and the likelihood that you will have to pay dividends from time to time. Ownership numbers are of vital importance to the promoters of the company. Any change in these numbers should only be done with careful consultation and great foresight.

Tips to Increase Profit Margins for Your Business

Generally, higher margins are associated with higher sales. However, it can also be a result of lower costs. Capping expenses can significantly boost profits, and avoiding unwanted overhead costs can give an immediate fillip to the bottom line. The fact is there is no limit to sales, but there can definitely be a limit on costs.

Guide for F&A
Guide for F&A

Spanning both these influencing factors, the following are some tips to increase profit margins for your organization.

  1. Cost of Production:

This is a key factor when calculating profit margins. Find ways to trim the cost of production and services, such as sourcing from cost-efficient suppliers, and procuring cheaper ingredients without compromising quality.

2. Auditing:

Perform regular auditing to know how the sales and expenses are faring. Auditing enables businesses to identify unnecessary costs and sales fluctuations in any segment, and strategize ways for improvement.

3. Supplier Relationship:

Always maintain a healthy relationship with your suppliers and monitor the accounts payable (AP) cycle. Bargain for the best deal possible while procuring materials.

4. Product Comparison:

Compare your products and services with those of competitors for price and quality. Offer value for money for consumers, such as after-sales service, installation, etc.

5. Review Pricing:

Always keep a tab on pricing. Review prices periodically to ascertain whether a business is capable of paying its expenses based on the present pricing. If not, consider a price hike, while taking into account its implications for the customer.

6. Price-Cut:

A price cut is not the best strategy to ward off competition. Maintain high-quality standards, provide superior customer service in the form of chat support, offer online sales, the flexibility of payments, and other such value-add features to attract and retain customers.

7. Look for Growth Opportunities:

A business should always seek growth opportunities. Try to find new markets, and launch new products and services in the existing markets. Use digital avenues of selling to increase your customer base. Take a call whether to consider acquisitions, enter into a strategic alliance, or a joint venture to tackle competition.

8. Innovation:

Always try to improve the existing product by adding new features that offer value to customers. Ensure that the product or service is relevant to the current market conditions. Follow industry best practices and management methodologies to ensure a high-quality result.

9. Focus on Profitability:

A business is run for making profits and the management should always stress this factor when making decisions. Use performance indicators to check how the company is faring against forecasts and budgets. Even if cash flow is your top priority, it should not come at the cost of profitability.

10. Planning:

Good planning always helps businesses to anticipate problems and take corrective measures. Make sure that the plans are implemented properly and set up a review system to monitor progress. Be flexible to change strategy, if necessary.

11. Improve Communication with Customers:

Without customers, there is no business. Take the feedback provided by customers to identify the reasons your business may be falling behind and the scope for growth.

12. Commitment:

In some cases, businesses actively take orders but fail to fulfill them. This will hamper the reputation of the business. Always deliver quality goods or services ahead of the specified time frame, leaving no room for complaints.

These are just a few ways in which businesses all over the world are successfully improving their bottom lines. Each and every function of the business will always have scope for improvement, and close monitoring of these will enable the organization to move up to the next growth milestone.

The importance of reducing the burden of manual reporting on internal employees cannot be underestimated. This might be the reason why many businesses are looking at outsourcing their Finance and Accounting (F&A) functions to an expert BPO company.

Apart from saving valuable time for CFOs and other executives, outsourcing F&A has several benefits:

F&A Outsourcing Benefits

Benefits of Outsourcing F&A

1. Focus on Outsourced Task:

A specialist finance and accounting services company would give utmost priority to manage the business of their customers well. If this function is executed in-house, it would be of secondary importance to the business, and revenue-generating processes would be given priority. Hence, outsourcing your finance and accounting process would ensure that the tasks are in safe hands and are given the importance they deserve.

2. Focus on Revenue Generation:

Outsourcing F&A would allow your business to focus on revenue generation instead of worrying about issues emanating from accounting processes and systems.

3.  Lowers Costs of Keeping up with Trends:

Outsourcing is that you can keep pace with advanced technology solutions at lesser costs. A proficient finance and accounting outsourcing company may be able to provide the improved technology for less than the cost of the firm’s old technology. The costs could be even lesser than the upgrade costs that the business would have to invest in.

4. Capitalize on Special Expertise:

Your business can take advantage of the fact that the outsourcer is likely to have a much larger and more specialized staff than you do. The provider can ensure that there is a small group of expert outsourced accountants working on its projects at crucial times or for complex rules and regulations. This would probably never be cost-effective if done in-house.

5. Takes Away Hassles of Sub-Contracting:

There might be peaks and valleys in the monthly, quarterly, and annual F&A cycles. This requires businesses to budget for their in-house baselines and manage the costs of outsourced staffing during peak workloads. Therefore, companies need to handle staffing for F&A on a regular basis and ensure the cost-effectiveness of the activity. In contrast to this, outsourcing can help firms to make minimum cost commitments for such staff. An experienced finance and accounting outsourcing provider will perform resource management planning and ensure the delivery of lower per-unit resource costs. Scalability will be accounted for in the project scope.

6. Minimizes Risks:

By freeing up intellectual and financial capital, outsourcing F&A can help minimize risks. Here’s how:

Shifting the Burden of Risk:

When you shift functions to an outsourcer, you also shift the associated risks, to them. This is because it is the responsibility of the outsourcer to deliver the functions without errors and on time. The client business need not handle risks such as expert employees falling sick before important deadlines or systems crashing at inappropriate times.

This is the complete guide to outsource finance & accounting services. By outsourcing F&A services, you get direct access to a team of experts. This takes away the burden of hiring a finance and accounting team, paying salaries or benefit costs, and even training them. As a leading F&A service provider with extensive experience providing effective finance & accounting solutions for numerous businesses across the globe, Invensis augments your enterprise Finance and Accounting capabilities in areas such as procurement and supply chain (the Procure-to-Pay and Order-to-Cash process), Collections and Receivables, General Accounting, Record-to-Report, and Financial Planning & Analysis.

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