Offsetting labor challenges with finance and accounting outsourcing
INSIGHT ARTICLE |
Several economic factors are significantly impacting the hiring and retention practices for key finance and accounting personnel in every industry. However, many successful middle market companies are counteracting these challenges by leveraging outsourcing strategies to gain efficiency, overcome staffing difficulties and better manage costs.
A significant shift is currently occurring with some economic indicators, as demonstrated in the recent RSM US Middle Market Business Index. Salaries are expected to rise in 2017, with hiring increasing and unemployment subsequently falling. With these challenges in mind, competition for talent is rising, and middle market organizations will face numerous risks when looking to attract and retain skilled finance and accounting personnel.
Middle market organizations require several unique characteristics and skill sets to effectively manage the finance and accounting function. These include:
- The right systems and technology environment, as well as the clerical ability to turn data into actionable information
- Effective management to understand industry regulations to accurately record and report information
- Resources to make strategic decisions for budgeting, forecasting and spending
- Tax strategy and technical accounting compliance knowledge to organize financial and management reporting within the organization
Unfortunately, these skills are all different, and finding a single individual with experience in each of these areas is often a challenge. Therefore, to fill each of these roles with qualified resources, middle market organizations are increasingly implementing outsourcing strategies to take advantage of fractional resources with a myriad of diverse skill sets.
Attempting to hire one person with all the needed capabilities and a high salary is a risky proposition. The wrong hire can require additional resources, and higher costs to augment their skills with more outside assistance. However, hiring an outsourcing firm with finance and accounting capabilities allows businesses to focus on their core management decisions.
Hiring internal resources also comes with hidden costs, including benefits and training. In addition, with a competitive personnel environment, a productive employee may choose to leave, resulting in potential opportunity costs. However, an external firm that provides finance and accounting outsourcing provides a redundant system to leverage additional capabilities if someone goes on leave, a critical situation befalls someone, or if someone leaves for another opportunity.
Outsourcing can help combat hiring challenges with flexibility and coverage by leveraging standardized processes and technology solutions that help deliver necessary finance and accounting services. It provides a diverse skill set base with technical accounting skills, financial reporting and analysis, and an understanding of the business and key performance indicators that is difficult to replicate internally without a significant cost.
In many cases, firms with outsourcing capabilities can attract and retain a strong talent base by incenting employees with diverse opportunities. A situation where personnel experiences many different circumstances, environments and industries are often more attractive to qualified professionals than working in one singular location. Firms with outsourcing capabilities have a unique opportunity to attract scarce talent, by challenging employees with constant opportunities for growth.
Competition for talent is only expected to increase, as CPAs may become scarcer in the coming years. Demand for accounting resources has increased significantly, and the number of individuals becoming CPAs has not matched that need. In a recent survey, the American Institute of Certified Public Accountants found that enrollment in accounting programs reached an all-time high in the 2013- 14 academic year, but with hiring also at record levels, the supply has yet to meet the demand in the marketplace.
A smaller amount of talent will inherently add to the risks involved in hiring and retaining accounting and finance personnel. Without a proper framework for continuous training and personnel development, the performance of the finance function can suffer. While many middle market companies do not have the resources to support this structure, firms with outsourcing capabilities can provide resources on demand with the necessary experience and skill sets. With the opportunities they present to personnel, outsourcing firms typically have a growing group of talent both in accounting and technology platforms that they continue to develop.
By working with multiple companies and industries, employees better understand a variety of business aspects and challenges. Firms can replicate finance and accounting best practices to help organizations become more efficient and see real-time information as needed to help make better business decisions. In a rapidly evolving economy, rising salaries, falling unemployment, and the supply not meeting the demand for CPAs are creating difficulties for middle market businesses to hire and retain effective finance and accounting resources.