More than a back office: Finance and accounting outsourcing

In these uncertain times, many companies are rethinking their business strategies and looking at solutions through a completely different lens. Those that perhaps haven’t considered outsourcing their back office previously, may have now recognized that they survived a sudden shift to managing a remote environment and that a transition to an outsourcing partner could now be exactly what their business needs.

Outsourcing the accounting function provides companies with increased efficiency, skilled resources, best-in-class systems, process consistency and sometimes even lower costs. However, many organizations underestimate the magnitude of benefits that outsourcing can provide to their finance and accounting function. Having the right outsourced partner can elevate the back office to another level, creating significant and often unexpected value.

Some common challenges that companies are currently facing are highlighted in this article, as well as how having the right outsourced partner providing support in these areas can help them reset for success.

Third-party reporting requirements

Reporting is a significant, ongoing challenge for many middle market companies. We consistently see the use of systems that don’t provide satisfactory reporting, or accounting teams that cannot be relied up on to produce timely and accurate financial information. Regardless of whether a company is in the startup phase, or is well established with private equity or other investor ownership, third parties are pushing for timely and accurate financials. Often, current systems in place are not robust enough to support the many elements of reporting that an organization may need in its life cycle.

A finance and accounting outsourcing (FAO) platform can significantly streamline the reporting process. A dynamic and cloud-based financial reporting solution has the ability to run financial reports in different ways, as well as allow management and other interested parties to view the real-time performance of their business through financial dashboards. This functionality allows organizations to eliminate Excel-based reporting, reduce time preparing financial information for banks and investors, and provide complete transparency to stakeholders.

Budgeting and forecasting

Many middle market companies are operating without a well-defined budget, let alone reforecasting their budget based on actual results throughout the year. The forecasting process is only effective with accurate financial information throughout the year and effective insights into future potential impacts to the budget. The impact of the COVID-19 pandemic has required organizations to develop new strategies for revenue modeling and scenario planning to determine how their business will thrive in difficult economic conditions.

An effective FAO solution will provide support in the areas of budget development and forecasting, including assistance with long-term revenue modeling and the tools for the organization to get accurate budget-versus-actual reporting. Additionally, organizations can actively reforecast their financial budget directly within financial management software solutions each month or quarter, and utilize this information to determine the effect of operational trends on their overall business performance.

Audit and tax compliance

Many organizations require an annual independent audit as well as tax compliance under federal, state and local jurisdictions. The data gathering process for these requirements can be overwhelming with an understaffed or unskilled accounting department. Moreover, the constantly evolving technical accounting and audit pronouncements paired with updates to tax laws can make it extremely difficult to keep up with all the changes.

An FAO solution provides more efficient implementation of new accounting pronouncements, and results in a more proactive approach to incorporating these changes into financial statements. In addition, access to the information needed is another important aspect to a smooth audit and tax process. Automated cloud-based applications within FAO solutions can make the audit process much smoother for organizations by creating an integrated environment where the entire audit and tax process can be performed remotely, creating a more streamlined and efficient approach.

Internal controls

FAO inherently includes documentation of policies, procedures and internal controls. A properly established outsourced accounting platform has integrated journal entry approval, account reconciliation preparation and review workflow, and other segregation of duties that lead to a strong set of internal controls.

Through effective segregation of duties and documentation of internal controls using proven best practices, an organization’s back-office can be elevated to provide more insight and value. Companies that might be anticipating a transaction in the future can rest easy with an FAO solution, providing audit-ready reconciliations and a strong reliable system of controls. Furthermore, with a strengthened control structure and an unbiased external perspective, FAO can lower the likelihood of misappropriation of assets or fraud.

Enhanced people management

In the current employment market, many companies simply cannot afford to hire for each of the levels of a true accounting department with the right skill sets in accounting, let alone those who will keep up with the latest developments in technology and automation. Instead, they often bring in people they can afford instead of people who can enhance key processes and help the company succeed and grow.

However, FAO solutions can provide more experienced resources with insights gathered from other similar organizations. In addition, the right outsourcing provider will deliver this experience not only through the core accounting team, but also with extensions of that team via technical accounting, tax and industry expertise to provide support when needed. With outsourcing, you no longer have to worry about ongoing turnover and recruiting troubles, as reliability and consistency are increased within the finance and accounting function, and transition within the team is a smooth process supported by strong documentation of processes.

Technology

Last but not least important in the benefits of outsourcing is the technology platform. The solutions that can be leveraged through an outsourced relationship allow for access to a technology stack without having to bear the burden of multiple licensing fee arrangements, user training and support of the systems. Having these elements wrapped into the larger outsourcing engagement allows businesses to focus on more strategic areas.

Plus, the implementation of this technology stack is done by advisors who have experience working with these solutions, and can streamline the setup process to have a company fully functional on the new platform as quickly as 60-90 days. Many companies trying to tackle this effort on their own will spend 2-3 times what they should on the implementation process because they don’t have as much experience setting up accounting systems.

Choosing the right provider

While FAO can enhance critical areas for organizations—even beyond the areas listed above—all providers are not created equal. The provider selection process is the key element to getting the most value and gaining the most efficiency and insight from an outsourcing relationship. With a growing number of outsourcing options, companies must be careful to choose a provider with the right mix of skill sets, industry experience and capabilities.

The right outsourcing partner should be a trusted advisor—it will be an extension of the organization, so it should exhibit consistent values. The wrong fit can be counterproductive and costly, so organizations must perform a thoughtful due diligence process before selecting a partner.

Conclusion

FAO solutions are a key strategy for middle market companies, providing several measurable benefits as well as intangible values. The right outsourcing framework can deliver not only customized finance and accounting solutions, but can also increase stability and clarity into financial information and ultimately allow management to focus on what matters—the success of their business.

Author

Tara Leja, Director

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