A recent BPO Outcomes poll measuring the state of finance and accounting outsourcing (FAO) among outsourcing customers shows that FAO has substantial room for growth. According to poll results, slightly more than one-third of respondents (35%) said they do not have an FAO program. The next-most-popular response, representing 29% of the total vote, was “We only outsource transactional processes like accounts payable (AP) and accounts receivable (AR).”
Another 18% of respondents said they outsource both transactional processes and higher-level processes like general ledger and analytics, and 18% said they only outsource higher-level processes like general ledger and analytics. The poll asked respondents to select one of these four responses.
FAO – Reasons for Optimism
Some observers may take a pessimistic view about the potential for FAO to evolve into a means of more efficiently performing higher-level, value-adding processes. However, a closer look at developing trends in FAO suggest that “room for growth” is the proper, more optimistic view, as FAO simply offers too much opportunity for organizations to reduce costs and increase the accuracy and efficiency of their transactional and higher-level finance and accounting processes, leading to a significant ROI. Let’s review a few developments in the realm of FAO that BPO Outcomes has reported in the past several months:
Automation Alters FAO Marketplace
According to Ron Walker, partner at KPMG, and Stan Lepeak, director of global research, management consulting at KPMG, the growing trend toward F&A automation can be seen as shrinking the size of the FAO market in some ways but as expanding it in other ways. Automation is leading to smaller-scale FAO deals, but opening FAO to small- and medium-sized businesses and helping fuel single-digital annual global growth. Automation of F&A processes can also provide an end user organization with several significant benefits, including enabling the outsourcing of much more strategic work and vertical-specific processes, increased speed and accuracy, and mitigation of the impact of high turnover in the F&A industry.
FAO Eases M&A Headaches
Most industries have seen an uptick in mergers and acquisitions (M&A) in recent years. While M&A activity can produce more profitable companies that leverage economies of scale, it can also produce a nightmare of integrating disparate financial systems and processes. At the 16th annual North American Shared Services & Outsourcing Week hosted by SSON in Orlando earlier this year, Jake Farkas, project director of multi-industry conglomerate Trinity Industries, said FAO allows Trinity, which heavily relies on M&A for growth, to expedite the M&A process and do a much better job (of assimilating financial systems and processes. In addition, Farkas said FAO has helped Trinity reduce the seven-day cycle it took the company to close books, as well as to better share and deploy financial best practices and benchmark and baseline financial processes to meet regulatory requirements. Trinity has also used FAO as a transformational agent to centralize its back office process.
Resolving Delayed Cash Flow
Earlier this year Rob Sherman, Principal, BPO Delivery Director, Capgemini, explained in an interview with BPO Outcomes how outsourcing cash collections can result in acquiring proven expertise to be able to increase receivables amounts and improve days sales outstanding (DSO), identifying front-end issues that cause disputes and re-work, providing effective customer segmentation and prioritization, and improving control, transparency and reporting on collections performance and results.