August 19, 2021

Transition accounting to outsourcing model with ease

Transition of an important function as the accounting function to an outsourcing model is a challenge which many outsourcing organizations fail to meet efficiently, hence losing out on achieving optimal addition in business value. Some of the important steps that need to be taken to achieve this kind of value addition with comparative ease are briefed below after studying various organizations and consequences of outsourcing:

1. Create milestones, checkpoints and tasks

Like any other major activity/ process in the organization, transition of accounting should have gone through enough planning phase. This should involve timeline and objectives to be achieved, allocation of resources and allocation of tasks. Such clear-cut planning helps all stakeholders to experience the expected level of ownership and also a clear vision of what efforts will help achieve the desired milestones.

2. Stakeholder buy-in

Unlike many other services, outsourcing of accounting functions cannot be executed well without the correct HR approach ensuring stakeholder buy-in. Right from the senior leaders of different functions to the operational staff who will need to follow the systems being set up by the service provider, everyone needs to be ready to for the incoming changes. For this, overt communication regarding the benefits of the new strategy needs to take place well before the actual execution takes place. Like any other kind of major transition, accounting transition too needs to be seen as the ‘win-win’ solution it is. And like any other transition, this one will have its own critics in the system, who need to be continuously kept updated about even the smallest success achieved during the implementation so as to not allow any kind of negativity to seep in during the challenges faced in the initial half-baked stages of transition. It is also imperative to present the service provider team as partners in achieving business value, rather than vendors who are looked upon as competitors to achieve the expected support from all stakeholders.

3. Risk assessment

To ensure limited damage, whether HR wise or efficiency wise, it’s best to apply the ‘Precaution is better than cure’ approach. For this, it is imperative to have assessed the involved risks during the transition and have taken measures to mitigate these early on. The best way to do this is to clearly specify risks involved, and overtly communicate the impacts and evaluate possibilities. And then all the potential risk responses should be addressed with equal significance and also communicated. Hence, outsourcing team and service provider team both should be ready to deal with situations accordingly to cause minimal efficiency losses during the transition.

4. Implement a governance mechanism

Implementation can be most successful if responsibility of the same is clearly defined by appointing a project manager for the transition, who would further ensure setting up of necessary governance mechanisms. The manager has to should take required measures to ensure alignment of project objectives with the stakeholders. This includes ensuring proper reporting and communication of success and failures, perceived or real dissatisfaction and taking steps required to fill those gaps. He also should track status of the transition project and changes if any and more importantly, should ensure any surprises are avoided by timely action.

5. Define successful metrics and favorable outcomes

Last but not the least, clearly defined criteria to measure the success of transition qualitatively as well as quantitatively have to be in place. While validating the quantitative & qualitative success, this should be done with context to each other and audible dissatisfaction should be accessed well i.e. even if the either qualitative or
quantitative success is seen to be achieved, if dissatisfaction is being expressed in case of other, the transition should be accessed as not completely successful. It is required that the manager chosen has the abilities to ‘hear’ and ‘feel’ the undercurrent and minute movements, which might go unnoticed to an inexperienced eye. The service provider’s
project in-charge should be consulted regularly while defining these measures as well as monitoring these results so that his experience can be taken advantage of.

If all, or at least most the above have been done carefully, organizations are bound to reap highest benefits from outsourcing of accounting function, without too much disruption due to the transition process.