A highly effective way of easing the pressure on a growing company’s systems and management is financial outsourcing. Alfred Levy, director at Artaius Limited, who specialise in the provision of financial outsourcing solutions, provides a seven step guide on how to successfully outsource the finance and accounting business process.
There are a number of important reasons why financial outsourcing is worth considering. By handing over non-core activities to a third party allows business owners to focus their full attention on the areas in which they specialise. It can potentially save a company time and money, whilst still enabling them to have accounting flexibility. Financial systems such as bookkeeping, payroll, expense payments and debt collection, amongst other areas, are all increasingly popular functions to be outsourced.
However, outsourcing is not a quick fix and should not be regarded as one. To achieve the best possible results from outsourcing, companies need to consider several factors to ensure they gain the intended benefits and avoid being affected by the inherent risks. Implemented properly, it will provide many benefits to a company including improved services and new technology and efficiencies. If approached incorrectly, the partnership will more than likely fail to meet expectations.
So how should a company go about outsourcing? The below Seven Steps, if addressed early on, will ensure your outsourcing has the greatest chance of success.
Step 1: Determine potential outsourcing targets
Although nearly any financial function could be eligible for outsourcing, the most beneficial will be those that are outside a company’s core strategic competencies, those that are difficult to manage or require capital expenditures for specialised technology, or consume too many resources. Therefore, performing a strategic analysis to determine the company’s core competencies is crucial as it will identify what will be most profitable to outsource and what to in-source.
Step 2: Research the market
Choosing the right partner is essential when looking to outsourcing. However, it can be a difficult decision so it is important to take time to find a provider who has knowledge of your industry and can demonstrate experience and the specialised skills needed for the job.
Step 3: Choose a partner you can trust
The partnership will be more effective if you can trust your outsourcing provider as it will give you peace of mind in matters of fraud and mismanagement. Therefore, always look for a partner with credibility and who shows willingness to be flexible in response to your needs.
Step 4: Scalability
Look beyond your immediate needs. It is important to find an outsource partner that is able to meet your growth requirements as this will be more beneficial in the long term.
Step 5: Communication
A key factor for maximising the value of the relationship with your external provider is communication. It should be clearly defined and established from the beginning exactly what you hope to achieve from the partnership and what kind of policy you want to adopt. The initial period should be spent reviewing systems and processes already in use to examine how they operate and to identify areas for improvement. It is then crucial that you maintain regular communication with your outsource provider to ensure you are getting what you want throughout the partnership.
Step 6: Assign a dedicated executive
Companies should assign an executive to the task of supervising and effectively managing the arrangement as outsourcing demands focused attention and specialised skills.
Step 7: Risk analysis
Companies should regularly review the risks associated with outsourced functions as well as the costs and benefits to ensure that it remains a competitive advantage rather than a risk to the business. Risk and/or reward incentives can be adopted to encourage the outsourcer’s performance.
Outsourcing is an increasingly beneficial and common way of improving business practice. If your company is contemplating or pursuing outsourcing, it is wise to take time to consider these seven steps and ensure you fully understand what makes for a successful outsourcing partnership.
