Articles | Changing Trends in Outsourcing F & A

In the era of globalization many companies have undertaken outsourcing as a part of their business strategies. As more and more companies are joining the bandwagon of outsourcing, this phenomenon is gaining a lot of corporate and media attention. Recent market surveys indicate that almost 80 percent of companies expect to increase their investment in outsourcing. More recently, however, outsourcing of finance & accounting functions has been growing rapidly.

Very simply Outsourcing Accounting can be defined as a process in which a company delegates some of its in-house accounting/operations to a third party. Thus outsourcing is a contracting transaction through which one company hires services in accounting from another while keeping ownership and ultimate responsibility for the underlying processes.

In the finance and Accounting Outsource, many companies are either outsourcing entire finance and accounting functions or sourcing single functions that are: A/P, A\R, Cash disbursements, Credit and collection, Cash application Billings, Bank & other reconciliation, T&E report processing, Tax Consulting, Statutory reporting and Financial Statement analysis.

Recent trends in Outsourcing F & A

  • Cost pressures continue to drive companies to take advantage of cheap labor in developing country like India.
  • As outsourcers groom their capabilities and processes, companies want to take advantage of the expertise and quality improvements outsourcers can offer.
  • Outsourcing of accounting used to consist primarily of invoicing, AP/AR processing and bank and credit card reconciliations. Now, organizations are outsourcing their entire financial transaction processing, recognizing that their own capabilities are in the use of financial information, not its creation.
  • Transaction management services are the largest opportunity within the FA BPO space while accounts payable will remains the most widely outsourced FA function.
  • Increased government regulations in US and European market are prompting companies to outsource F&A to external providers.
  • F&A Outsourcing is not just restricted to transaction accounting. It is increasingly covering complex and high end F&A activities like year-end finalization and statutory compliance.
  • Small to mid-sized business offer fantastic opportunities for outsourcing F&A.
  • Diverse industries are implementing outsourcing from construction to retail.
  • Major accounting firms are depending on offshore outsourcing providers for tax returns and other services.
  • A recent survey revealed that companies today are largely adopting finance and Accounting Outsourcing not only for cost savings, but also to transform the F&A function from a resource and cost intensive support process to an integrated flexible function able to quickly respond to changing business needs.

- Finance and Accounting is one of the fastest growing BPO segment in the outsourcing industry. It accounts for about 40% of the BPO market. The worldwide finance and accounting (FA) outsourcing market is expected to reach 47.6 US$ bn in 2008.

- According to a survey done by Accenture, majority of manufacturing and consumer industries were pleased with the outcome of their F&A outsourcing arrangements. More than 60% of the respondents describe their outsourcing experience as either “extremely successful” or “successful”.

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