Improving the Performance of your Finance and Accounts Department through Offshoring

Finance and accounting of a SME organization is mostly handled by a small in-house team or is outsourced to local accounting firm that takes care of the basic accounting and compliance functions. Common challenges faced relate to the SME’ssurvival, growth and risk management. The ability to make upfront capital investment in technology and capabilities also is often a constraint. All these challenges are related to the robustness of the finance and accounting systems and process. Small businesses find it challenging to achieve the following:

1. Manage top-line and bottom-line growth of the organization, i.e. how to increase revenue and profits.

2. Manage growth, as they lack these:

a.  Robustness of the financial processes and systems

b. Breadth of skill-set of F&A staff to handle complex financial tasks

c. Cross-department interaction – Inability to overcome silos

d. Robust and precise decision support system

3. Manage risks, as they have very  little appetite for risk and lack in:

a. Systematic statutory compliance process

b. Timely accounting cycle closures

c. Reliable, predictable and accurate financial information to drive business decisions

Finance and accounting Offshoring can help CFOs not only overcome above mentioned challenges but also enables them play an ‘advisory role’ in the growth of the business.  It frees up CFOs time from day-to-day transaction activities, allows them to focus more on improving efficiency of finance department and enables them to provide enhanced business insights.

Finance and accounting offshoring can help CFOs by providing access to:

• a wider and global pool of professionals at a lower cost.
• higher end resources without having them on the  payroll
• flexibility of increasing / decreasing the team size as per requirements
• optimize your F&A  systems and process
• Cutting edge technology without making upfront capital investment in acquisition, management and up gradation.

Most small companies do not generally consider off shoring as they feel their business model is unique, they fear loss of control and they find it risky to share financial data with an external entity several thousand miles away. Another mis-conception small businesses have is that it is for large enterprises and strategic tasks can not be outsourced.

But I feel it is a poor understanding about off shoring that leads them to think that off shoring is not for them. However today, most offshore vendors have robust processes, expertise and experience to work with the clients from remote locations.

Recommended approach to work with an offshore vendor is as follows:

• First step is to identify the process that would be offshored, thereafter
  • Identify gaps in the output of F&A department and assess their  impact on business
  • Organize internal competencies to focus on selected processes. This may involve releasing them from routine transactional work
  • Remaining areas could be outsourced selectively

• Create Governance structure; this generally have representatives from the client as well as the vendor’s side. Define roles and responsibilities of all the members.
• Identification of Single Point of Contact (SPOC) from client and vendor, who would be responsible for day-to-day activities.
• Develop Communication & reporting structure
• Define metrics to measure the success of the process.
• Identify point of escalation

See, off shoring is not very difficult, it just requires some planning and discipline from both the parties..   Please feel free to send me your questions, I will be very happy to respond to them..

Until next time…