Every business, no matter the industry, needs proper financial management to succeed. This means specific planning and managing of its financial resources to achieve its business objectives and to return maximum profits. As a business grows, it’s natural to hire more staff to take care of the financial management of a company. The challenge of this, though, is that good people who can provide financial management skills can be difficult to find or their asking price can be a bit steep.
In addition, salary isn’t just the main consideration. There’s also the need to provide office space for the potential financial management professionals you are going to hire full-time, and to furnish that office space, not to mention the benefits that you need to throw into the mix to sweeten the pot—not every professional will be scrambling to work for your company if you don’t offer a good employment package.
Not everything is lost, however; in this day and age, you can turn to outsourcing part of your financial management operations. And take heart: outsourcing financial management isn’t for large organizations only. In fact, a lot of smaller businesses nowadays have outsourced their financial management and saved themselves a lot of stress—and time and money—while channeling their energy into growing the business itself.
In this article we will talk about the advantages and disadvantages of financial management outsourcing, so you can decide for yourself and see if it’s right for your business.
Outsourcing vs. Offshoring
When a company outsources employees, it is hiring outside staff to handle jobs instead of hiring in-house. Various tasks can be outsourced including IT support, sales support, customer service, manufacturing, and yes—financial management.
Oftentimes the words outsourcing and offshoring are used interchangeably, but they are actually very different from each other. As we’ve already discussed briefly, outsourcing involves contracting outside providers for functions that are typically handled by in-house staff, while offshoring involves moving different internal operations to other countries, so they can be performed at reduced costs.
Financial outsourcing doesn’t fit every company, but many businesses can potentially benefit from outsourcing. There are many activities that are not part of a company’s core business, which don’t necessarily have to be carried out in your company.
Why Consider Financial Outsourcing?
The following are some of the most important reasons for outsourcing your financial management team.
Scale Up Rapidly
Do you want to expand your business, but it’s too costly to pay for additional staff and resources? New employees will also mean new offices, additional salaries, new machines such as desktops or laptops and even office cellphones, as well as benefits.
When you decide to outsource your financial management team, however, you won’t need to shell out much money before you scale up your operations. Why? The outsourcing provider will usually cover most of the overhead costs, while, at the same time, offering a much lower rate.
Reduce Operational Costs
It’s hard to keep up with operational costs while running an organization, that’s a given. But with outsourcing, you will be able to save a lot of money, money better used to expand your business in other ways.
Get Access to Skilled Experts Without Breaking the Bank
Every company wants only the best people, those with the skills and experience to match, but you find yourself unable to match their asking price. In some outsourcing locations, professionals with those skills that you are looking for don’t command as much in terms of salary. So why not outsource these operations to gain access to the professional skills you would not be able to afford otherwise?
The Pros of Financial Outsourcing
You can properly monitor and implement accounting rules in your company—even on a daily basis
It is important to keep track of constant changes in accounting, especially in your business. The thing is, this is easier said than done. The solution? Outsourcing your financial management to a firm that specializes in financial processes; that way, you get a team that can keep track of all the accounting changes and implement them as and when required—or even on a daily basis.
You can reassign other tasks to your in-house staff, especially the more pressing ones
Hiring an experienced in-house accountant or financial manager can be quite the investment, but you can do so provided that other tasks pertaining to financial management, accounting, and bookkeeping are outsourced. You can also take advantage of payroll outsourcing. You can then decide to even promote your in-house accountant or financial manager to CFO to oversee everything financial related in your business.
You can get the best accounting pros as well as benefit from advanced tech know-how
If the country where you are tapping your accountants is known to produce some of the best financial minds in the world, then you know that you’ve made a good decision. Not only that, outsourcing your financial management gives you access to the best financial software that’s oftentimes included in the package, so you don’t need to invest, thereby saving your company more money.
You can focus on your core business and reduce your operational costs
It gets more challenging when you have too many staff to manage; as a result, you may lose sight of your core organizational skills. Outsourcing allows you to focus more on the relevant issues, freeing you up to channel your energies into growing the business. Allow the outsourcing company to handle the rest for you, in this case your financial management needs. Also, when you outsource, you slash the cost of hiring staff and spending money on their infrastructure and payroll, etc. Some service providers can also provide you with fixed costs that will help your business save even more money.
The Cons of Financial Outsourcing
Cultural differences can be a challenge
When you outsource, you are going to work with people from other countries—there’s just no getting around that. As a result, they will probably have a workplace culture and ideals that are different from yours. This could lead to some conflicts or misunderstandings, so it’s always good to acclimatize them with your organizational culture at the outset to make sure there won’t be any issues.
There’s reduced day-to-day control
When you outsource, the professionals you outsource are usually not under your direct control. As a result, you don’t have as much influence over them as you would if they were working in your office. To avoid this, ensure that you are working with an experienced outsourcing provider that you can trust.
You might be locked in to a contract
Some outsourcing companies require clients to sign long-term contracts with them. Others require clients to spend a fixed amount of money to use their services. Make no mistake: these outsourcing companies are aware that they are saving you a ton of money in the long run. So before committing to anyone or any company, ensure that you choose an outsourcing services firm that won’t tie you to a disadvantageous long-term contract.
You can cause your local employees to become disgruntled
When you outsource, your local employees may feel threatened—and this is natural. They might think that their job security will be in danger and think that their jobs might eventually be outsourced too. This could affect employee morale and overall performance. Choose a service provider that will help you handle the outsourcing process in a way that your employees’ morale won’t be affected.
The Best Countries for Financial Outsourcing
In many cases, countries that have a low cost of living are the top financial outsourcing destinations, to take advantage of the reduced cost of workers. There are a range of countries in Eastern Europe and Asia that offer highly talented and motivated financial specialists for outsourcing. In Eastern Europe, for instance, economies offer lower upfront costs than in more developed economies, as well as plenty of today’s in-demand skills, a heritage of the education priorities from old communist times.
In Asia, on the other hand, there are a lot of technical-proficient experts that are waiting to be tapped for outsourced work. There are a lot of good schools and universities in Asia that produce countless of industry-ready graduates every year. In fact, Asia is producing some of the top mathematical, accounting, and engineering minds in the world.
The following are the three most popular countries for financial outsourcing.
The Philippines is one of the best countries for financial outsourcing. The outsourcing sector makes up about 8% of the GDP of the Philippines. It really comes as no surprise that more and more companies are choosing to outsource to the Philippines.
Filipinos adhere to an excellent work culture, which can be traced back to their history. Majority of Filipinos are Catholics, and they are raised to believe in hard work, integrity, and honesty.
Accounting jobs in the Philippines are, like in many countries, considered prestigious, often at par with doctors and lawyers—in fact many students aspire to become certified public accountants—which is why there are a lot of universities across the country that strive to produce some of the best and world-class accounting graduates.
India is currently the most popular country for outsourcing and has one of the fastest-developing infrastructures, with a yearly growth rate of 25 to 30%. The country also has one of the fastest Internet connections in the world, which means that you won’t experience delays in communication or hitches. The Indian government has also invested a lot in technology and infrastructure, making things better for those who are willing to handle outsourced jobs.
India has a substantial pool of experienced accountants that can provide a wide array of financial and accounting services, like bookkeeping, accounting, payroll processing, and tax processing to name a few.
Malaysia not only produces skilled IT professionals but also produces world-class accountants and bookkeepers, mostly from the nation’s capital Kuala Lumpur, as well as Selangor and Johor.
The Most Commonly Outsourced Finance Roles
Financial management is one of the biggest sectors for outsourcing globally. In fact, only two years ago, in 2016, the global FAO market witnessed strong growth of 8 to 10% to reach 6.4 billion US dollars in annual size.
The most popular financial functions that are outsourced include payroll processing, tax auditing, claims processing, financial data management, financial analysis, financial report preparation, regulatory and reporting compliance, risk assessment and risk management, and budgeting, among many others.
Here are the two most commonly outsourced financial roles:
Hiring a virtual bookkeeper nowadays is one of the best decisions you will ever make for your business. Bookkeepers are responsible for recording financial transactions, posting debits and credits, producing invoices, maintaining and balancing subsidiaries and ledgers, and completing payroll.
Accountants, on the other hand, prepare and adjust entries or record expenses that have already occurred but are not yet recorded in the bookkeeping process, prepare financial statements for the company, complete income-tax returns, and sometimes—in a consultancy capacity—help the business owner understand the impact of financial decisions. Outsourcing accounting functions nowadays is relatively easy with the availability of dependable outsourcing firms out there.
How to Select a Good Financial Outsourcing Partner
One of the most important aspects of outsourcing is choosing the right partner. The partner you choose can either help you grow your business or cause you to lose money and waste your time—and nobody wants that. So take your time, do your research, and think hard before selecting the right provider. Here are some tips to consider when choosing the right financial outsourcing partner.
Determine how much you are willing to pay
Pricing, as always, is a touchy factor—and this is more so when outsourcing. Finding the right price is key—not too costly for the business owner, but one that the other party will find profitable for them, which they will readily accept. Also, try to keep in mind that the companies who ask for the lowest price are not necessary the best, so try to strike a balance between cost and quality. In this case, it is best to define your initial budget at the outset, and then search for a provider that falls between that range that you set.
Look for an experienced provider
Always, always look for an experienced outsourcing partner. This cannot be stressed enough. Before contacting a partner, be sure to do some research and find out their previous work experience. You can also learn a lot during your meeting or interview with them. There are a lot of outsourcing partners out there that are experienced in finance, and you should not settle for less. Selecting an experienced finance outsourcing partner is one of the most important decisions that you will make for your company, so do it right the first time.
Explain clearly what you want
It is important that you communicate well to your outsourcing partner what your expectations are. Explain to them at the outset what you need them to do and how it should be done. Define and outline specific goals, schedules, and roles to your outsourcing partner.
Look for excellent communication
Good communication is absolutely a must if you want your financial outsourcing to be a success. A good outsourcing company must be efficient at communicating and keeping you constantly updated about progress and challenges. They must also be excellent at meeting deadlines.
How to Get Started with Finance Outsourcing
One of the best ways to start a financial outsourcing project is to look at your current staff and try to determine what additional role(s) would deliver the greatest benefits. Make a list of skills and roles that will help your business the most, and then you can begin looking for the best providers that can source those skills for you.
Ideally, you should also:
- Set priorities for the roles you want to outsource
- Outline a detailed schedule for when and how you want to outsource these roles
- Calculate the money you save by outsourcing
- Calculate the time you save by outsourcing
- Start interviewing financial outsourcing providers to fill the roles you have selected
The top advantages that Yempo provides
Yempo—“Your Employees Offshore”—is a Western-owned outsourcing company, providing flexible and low-cost staffing solutions to organizations around the world. As such, we are confident that we can help you face the challenges of financial outsourcing by providing you with the best financial outsourcing staff for your business.
- Flexible staffing solutions. Whether you are looking for full-time or part-time staff or temporary or permanent solutions, we have your back.
- Low-cost, high-caliber staff selection. We source the most qualified staff for your company, at a fraction of the normal costs.
- Monthly billing in your currency. Our simple billing system is hassle-free, and there is no need to exchange currencies.
We take time to understand your requirements, source staff with the right skills, and present them to you for you to interview. If you decide to proceed working with us, we guarantee that your staff will work under your direction in terms of workload; the good thing is, we manage all the day-to-day care, payroll, government compliance, etc. We at Yempo will essentially host your own staff and provide them with the best possible employee experience to ensure loyalty and commitment to your business.
Our staff work in the time zone required by your business, and we bill you in your currency. We make sure to only hire staff who speak fluent English and have experience and are comfortable working with Western colleagues and clients to ensure an understanding of Western business etiquette and work practices.