Many growing middle market companies experience fast growth and turn to outsourcing to help enhance performance, reduce costs and optimize operations. During this podcast, Jim Cashin will discuss how finance and accounting outsourcing can allow your company to streamline processes and manage your back-office effectively and efficiently.
What are the trends driving middle market firms to outsource their finance and accounting functions?
Cashin: Years ago, outsourcing was driven through much larger organizations, and it was not readily available at a cost-effective price point for middle market companies. I think with the changes in technology and the struggles we’re seeing within middle market companies, oftentimes having the right skill sets—and the ability to hire and maintain those employees based on a growth path they’re experiencing—is a challenge. So as we do a lot of work with companies to assess whether outsourcing is right for them, we’re starting to see a very large trend of both small and middle market companies looking to outsource certain components, if not all, of their finance and accounting operation.
What does that market look like right now when it comes to finance and accounting professionals if a firm did, in fact, want to bring someone in-house?
Cashin: It’s kind of a “Catch 22.” What we’re seeing is that it’s a very robust market for finance and accounting professionals, but because of that, the supply is not necessarily meeting the demand. Oftentimes, we get called in when clients either lose someone or are thinking about this based on the cost of their overall operation. And, when we start to examine it, they don’t necessarily have all the requisite skills that it takes to perform an accounting and finance function at its highest levels.
With internal resources, as the business grows, it’s not as easy to dial up or dial down the number of staff you have dedicated to these functions. But you can do that when you have an outsourced team.
Cashin: I think that’s accurate. The other component to that is that a firm like ours has the ability to draw in industry, technical accounting and tax knowledge. If their aspiration is to grow internationally, or they want to expand in other areas of the country, what does that mean from a tax perspective? Or how now are we going to have to comply with regulatory issues in those various states or countries?
What are some specific examples of the benefits of outsourcing these functions?
Cashin: We have a whole level of industries that we focus on and deliver services to, but a couple I can speak to easily. We have products that deliver outsourcing services to multiunit restaurants, so we have one client—they have about 13 restaurants—where they have operational managers at each location. One owner is responsible for all of the activity and wasn’t receiving the information on a real-time basis to understand their inventory levels and their drivers of costs and revenues.
So through our automation platform plus outsourcing the accounting efforts, we’ve been able to put in a systematized approach for how the managers of the locations operate. Then, we deliver that back in a dashboard setting where the owner now has the flexibility to have real-time data on his phone or iPad, and as he’s working in different locations.
We work a lot with private equity groups as well and; in a lot of cases, it’s a carve-out scenario or doesn’t require a full staff right away. The model that we employ with a couple of these clients is that it’s kind of a pay-as-you-grow model. We can set up a platform that is scalable—but very cost-effective for them to have in place—and start to process transactions. As they mature and as they grow and become revenue-generating entities, we’re able to apply different skill sets to manage their business operation from an accounting standpoint very easily.
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