Trends in Finance & Accounting Outsourcing Services

A Brief Introduction to Finance & Accounting Outsourcing Services

The current era of commercialization and globalization are witnessing the adoption of outsourcing as an integral fragment of the core business strategies. With numerous companies getting on the outsource mode, the market is exhibiting a lot of growth in this sector.

Latest market studies point out that a huge chunk of existing outsourcing industry clients plan on growing their investment pooled into outsourcing. Lately, process outsourcing for finance & accounting is steadily growing and majority of the firms are undertaking the same.

Accounting Outsourcing is basically subcontracting some/all accounting operations and processes to an external vendor. The outsourced functions include Purchase to Pay, Fixed Asset Management, Order to Cash, Employee Reimbursements, GL Accounting etc.

Current F & A Outsourcing trends

• Management of Transactional services is the largest opportunity in the F&A BPO space, whereas payables are amongst the highest outsourced function in F&A.
• Earlier companies used to only outsource certain parts of their accounting processes such as AP/AR and some reconciliation processes. In the current scenario however, companies are sub-contracting the full gamut of activities involved in their financial processes. A probable reason for the same is that companies have understood the significance of being at the centre of strategic activities rather than transactional.
• Service providers are in the process of improving skills and polishing capabilities in process execution and their clients are accordingly trying to achieve the best from that.
• Stringent federal regulations in the European &US markets are driving corporates to adopt outsourcing in order to save their time, efforts and cost.
• SMB’s offer a plethora of business opportunities for Financial Outsourcing domain.
• Some recent market statistics have also revealed that companies these days are primarily adopting finance and Accounting Outsourcing  to save their expenditure, as well as to migrate the F&A function from being a cost exhaustive support function to a dynamic core business function.

The Dominance of India as a Globally Preferred Outsourcing Destination...

        India: “The Preferred Outsourcing Destination”

India remains the most preferred Outsourcing Country and contributes to 65% of the BPO off shoring market. NASSCOM (The National Association of Software & Service Companies) has conducted several surveys in recent past in the outsourcing industry. Many positive outcomes have been reported as part of this survey, especially for the companies engaged in the outsourcing industry. Majority of American and European companies have selected India as a preferred destination to outsource their work, while nearly 50% Fortune 500 companies choose to outsource IT related processes to Indian outsourcing firms.

Despite the recent emergence of other contending lower-cost outsourcing destinations such as the Philippines, Mexico and China etc.; the Indian subcontinent has retained its leadership position as a prime provider of “Affordable yet superior quality” outsourcing services. The Indian outsourcing industry is witnessing a rapid growth rate of nearly 30% per annum. This growth is primarily attributable to a skilled and knowledgeable young workforce, rapid infrastructure growth and some beneficial economic and government policies.  

The Cost Benefit Factor

India gains heavily on the point of labor costs as compared to the developed countries where the wages for skilled personnel are relatively much higher. The low labor cost factor helps companies achieve substantial savings on their expenses. Due to this sort of flexibility available in terms of labor wages, companies are empowered with the ability to enhance their profitability.

The Best Talent Pool of the World- Both in Quantitative and Qualitative Terms…

India is a young nation, with more than 80% of the population under the age of 30 years. This young population is progressively enhancing their education levels and hence contributes to the development of the largest Global pool of Skilled Human Resources. Another fact that contributes to the dominance of the country in the International Outsourcing Market is the fact that India is the world’s Largest English speaking country. Hence, India secures and seals its leadership position with the Human Resources playing a prime role in the same.

World-Class Services- Local Prices

At the advent of the outsourcing century since the year 2000 onwards, MNC’s had chosen India to outsource their requirement, keeping in mind the resultant cost benefits.  However, later on it was noticed that companies extended their outsourcing contracts and continued with their Indian providers due to continually good service delivery levels. Quality of services offered and time-to-market drove global customers to continue with Indian Outsourcing Companies

Government Stability and Favorable Policies

Government supports the outsourcing industry in India through several helpful policies on power, telecom, taxation, special zones and industrial parks are improving both communication and infrastructure systems. The IT industry is being supported continually by the Information Technology Act IT which also leading to a growth in the outsourcing industry.

Rapid time-to-market of Indian Companies

India, being in a different time zone ahead of most Western world countries gains by this time difference and offers the most rapid time-to-market. The time difference allows early completion of work, timely fulfillment of deadlines and hence quick turnaround. The above mentioned factors lead to satisfied customers.

India boasts of the best in Infrastructure and technological capabilities

Urban India has well developed infrastructure in terms of cellular networks, telecom and Internet in all major towns and cities. Customers are offered leading edge technology, tailor made solutions for all applications and business functions including Business Process Management, Finance & Accounts, and HR Outsourcing etc. 

The Varied Needs of Modern Business ....

In today’s economy, it does make sense to have an effective and efficient finance organization. Therefore to achieve high performance in challenging global market, companies are looking for finance and accounts outsourcing to drive their business. On a global scale there should be a deep understanding on how to leverage technology and commitment to drive operational excellence.

There are outsourcing companies with internal teams which focus on core business issues. They work on standardizing the financing and accounting process which transform the finance costs and lower the costs. Most organizations across the world are keen on improving the financial transparency and managing the costs on core business areas.

Since India has a rich pool of talent and substantial cost advantage, it remains one of the most preferred outsourcing destinations. In today’s fast evolving business process, the organizations are increasing to speed up their operations and free up their resources for core business activities. Therefore they need to outsource their non core functions for fixed assets management.

Nowadays the definition of BPO is changing as it is changing their scope as companies are also going for human resource outsourcing. This has accelerated over the years and will continue to do so. Therefore companies entrust all their outsourcing solutions to a single firm so that they concentrate on their core business issues. The work of Human Resource is to develop, retain and train the best people. They are also responsible for compensation, benefits, employee and labor relations, data collection, business partners and other legal issues.

Speaking about employee expense reimbursement, it is the act of compensating someone for the expenses made. Usually a person is reimbursed for out-of-pocket expenses when the expenses are made through an employment while carrying out the duties for third party. Some common examples are firms when they compensate for individuals that buy supplies for the company or compensate the employee that go for out-of-town assignments.

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