How to Select a Finance and Accounting Outsourcing Services Partner

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Tips on Selecting a Finance and Accounting (FAO) Partner
Factors for Deciding on a Finance and Accounting Outsourcing Partner

Finance and Accounting Outsourcing (FAO) services have been growing rapidly since the practice first began in the early 1990s. In the beginning, most of the companies that outsourced this kind of work were from the United States. However, as more companies around the world began to realize its benefits, work starting flowing in from Europe, Middle East and Africa.

A wide range of processes can be outsourced, including: Accounts Payable (AP), Accounts Receivable (AR), pricing administration, Record to Report, bookkeeping, financial analysis reporting, supply chain accounting, payroll processing, joint venture accounting, payment processing and even travel expense management. Today as the business grows, Chief Finance Officers are even prepared to give more complex work like treasury, tax strategy, and financial planning to their FAO partners. According to a report by HfS Research and KPMG titled ‘Finance and Accounting BPO Market Landscape, 2013’1, 43% of high-end enterprises among the respondents planned to increase the FAO scope in 2013.

FAO contracts are signed for a long period of time. In that duration, both parties have to communicate extensively with each other, transition accounting roles, complete projects through technology upgrades and manage a relationship that can get rocky at times. With so many service providers in the market, the question naturally arises as to how a CFO should choose his or her company’s FAO partner.

Key Factors for Deciding on a Finance and Accounting Outsourcing Partner

When a company decides to outsource, they should first implement the following steps within the organization structure:

  • The company has to identify the strategy that is driving the outsourcing decision and communicate it to all stakeholders so that their views can be considered.
  • Then the company has to examine the full range of options at their disposal. Should they open a captive unit; should they go for a shared services arrangement; should they go for near shoring or off shoring?
  • The internal capabilities of the division whose work is being outsourced should be analyzed and whether the team has the skills to transfer and manage the outsourcing of the process.
  • The scope and logic of the business line that is going to be outsourced should be finalized.

Once they have the list of service providers in their hands, the enterprise should evaluate each one based on the benefits they offer:

1. Quality of Resources:

The organization will need to look at the skill set of the outsourcing company and determine if they will they gain access to better talent and advanced technology by outsourcing. Will the work be completed more efficiently? Will they be able to take advantage of the time difference? Will they have to deal with staffing and labor issues? All these critical questions must be answered.

2. Cost-Effectiveness and Capability:

In most cases of F&A outsourcing, the primary motive is usually cost saving. However, companies should also examine the efficiency of services provided. In some cases, the parent company might lack in a certain capability and they will choose a service provider who has those set of skills.

3. Scale of Operations:

Some companies go for large service providers believing that their scale and experience will offer them a better quality of services. On the other hand, other companies feel that they will get ignored by outsourcing giants, and they would much rather go with a small firm that will give them their undivided attention.

4. Agility of Team:

In the world of finance, changes are a constant. Regulations, tax policies, accounting rules; they all change with alarming regularity. The FAO partner should be able to adapt to these changes quickly and continue providing an equally efficient level of service.

5. Stability and Continuity:

Some companies are very apprehensive that their service provider might undergo a change in management, and they are thus looking for stability in ownership and a single point of contact for the entire duration of the contract.

6. Adherence to SLAs:

While there are many FAO firms, only some truly understand the needs of the client they are catering to and provide services accordingly. In fact, many of the disagreements between the FAO firm and the client company arise because there is a misunderstanding in the requirements of the contract. Therefore, it is advisable for companies to choose an FAO partner who will work well with them, understand the functioning of the company, provide the right kind of services in adherence with the Service Level Agreement (SLA).

7. Scalability:

If the initial outsourcing contract goes smoothly, then many companies often take a decision to outsource more work. The capability levels of the service provider should be considered, so that when the parent company plans to outsource more work, the FAO partner would be able to handle it.

8. Experience and Credentials:

The track record of the FAO firm should be looked at. What kind of clients have they serviced in the past? Which clients are they handling now? How successful have their previous contracts been? Have former clients renewed their association with them?

Besides these factors, each company will have its own set of questions that they want answered. With the FAO industry growing by the day, there are plenty of options. Clients can take their time in selecting the right Finance and Accounting Outsourcing firm so that they can have a long and fruitful association.

Also Read Related  Articles:

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1 6 Reasons Businesses Must Outsource Finance and Accounting
2 5 Ways to Determine the Financial Position of Your Business
3 How to Improve Finance and Accounting Department Efficiency

For information on how Invensis Technologies can deliver value to your business through end-to-end Finance and Accounting (F&A) Outsourcing Services, please contact our team on US +1-302-261-9036; UK +44-203-411-0183; AUS +61-3-8820-5183; IND +91-80-4115-5233; or write to us at sales {at} invensis {dot} net.

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