August 19, 2021

How CFO’s can drive maximum value in business with outsourcing?

A recent CFO World article points out that in today’s uncertain and changing economy, the only constant seems to be a CFO’s continuously expanding to-do list. While conventionally the role of a CFO encompassed core responsibilities such as i) Creating systems and practices to be able to exercise control over resources, ii) Ensuring financial security, iii) Ensuring adherence to all the latest statutory tax and government requirements, iv) Providing financial expertise to ensure prudent decision making by other business functions, globalization and technology improvements have transformed the business environment such that now CFOs are facing additional challenges. Some of the major ones are enlisted here:

  • It’s imperative to now manage investments in finance and accounting technology after due consideration.
  • The digital age having made such a huge entry, it’s unavoidable to have the team up and ready jump on the wagon right away.
  • The CFO has to be able to foresee what kind of infrastructure required for the specific organization so as to ensure MIS and reporting systems that match its needs.
  • Unavailability of data now being an outdated excuse, one has to be ready to be able harness the power of digital analytics.
  • The factors that have kept the financial function separated perennially from the operational function have to now be eliminated using appropriate measures, so as to add more value to the business.

To stand up to these challenges, CFOs have started to consider outsourcing of finance and accounting as a vehicle to save cost and also to enhance the effectiveness of their finance organization, mainly because of ‘better talent and analytical capabilities’. It’s evident that the F&A BPO market has matured so as to be able to outsource more complex functions like financial planning and analysis, financial closure and management reporting too. The main benefits available to CFOs by this practice are:

1. Achieving operational excellence

When a separate team specialized in the outsourced functions is given the responsibility of those tasks higher accuracy, punctuality and coherence is a natural outcome. The processes become much more efficient in such a scenario with the inherent flexibility to manage fluctuating workloads. As these non-core tasks are taken away from their hands, the in-house F&A team is able to function with higher agility in their core tasks, adding more value to business.

2. Achieving better reporting infrastructure and capabilities

Especially in multi-national or geographically expanded businesses, outsourcing to a single geographical source helps streamline operational and financial data in ways that multiple sources can never achieve. As the service provider is bound to have the latest technologies available at hand, outsourcing helps build capabilities to use this technology to provide self serving reporting mechanisms. This in turn helps develop a culture of decision making driven by actionable intelligence throughout the CFOs organization. The team taking up audit functions no more being an ‘insider’ nor being loaded with other tasks, the auditing capabilities are much better in such a set up.

3. Achieving immediate digital transformation by quick technology adoption

Organizations which have adopted outsourcing of F&A have reported saving anywhere between 25 – 35% in working capital, a significant benefit for any CFOs budget. This saving can in turn be routed to make good investments for ERPs that can optimize automation capabilities & data analytics capabilities of the organization sooner than later.

4. Achieving higher strategic alignment and focus

The saved time and human resources can give the CFO and his team to focus their time to provide strategic inputs and support to the CEO. They can use the information passed on by the MIS of the service provider to help in improved performance management to the business leadership team. The various information and data can also be studied by them and used to build better and robust governance structures, which in turn will bring increased value to the organization in future. Hence overall financial management capabilities can be achieved due to availability of greater bandwidth of information from the service provider.