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Optimize Your Business Model with Finance and Accounting Outsourcing


As growth pressures continue to increase, many businesses struggle to develop the right organizational structure and employee skill sets in order to effectively compete in the marketplace. Implementing and maintaining a cost effective and reliable business application environment is becoming more challenging as technology continues to advance at a rapid pace. At the same time, leading-edge technologies have allowed alternative business models to take advantage of a large, talented human resource pool without hiring full-time or even part-time employees. Finance and accounting outsourcing (FAO) agreements allow companies to scale their operations and resources up or down as their business needs fluctuate.

By combining the functionality of business applications delivered by cloud channels such as software-as-a-service (SaaS) and by leveraging components of FAO, executive leadership can realize tremendous gains at a price point that is very compelling.

By definition, FAO is the practice of outsourcing highly transactional and traditionally low value-add processes that fall outside the core competency of a business. This practice enables the organization to concentrate on the processes and functions that grow the business. In addition to transactional processes, FAO providers are beginning to offer more strategic services – such as process improvement and analysis, budgeting, tax advice, or even interim C - level services – that not only help companies grow but also become more efficient.

Leveraging new technologies
On-demand applications and SaaS models allow companies to effectively leverage external service providers. According to the Yankee Group, SaaS applications that are most in demand for the small- to mid-sized business market are marketing, project management, time and billing, accounting/financial, CRM, inventory management, and payroll.

There are several advantages to the SaaS business model. For example, a typical SaaS agreement outlines that the vendor is responsible for managing and maintaining both the software and the hardware related to the business application. This includes regularly scheduled software upgrades, hardware upgrades, network redundancy, disaster recovery, and the overall management of the application. Employing a SaaS model to manage business applications allows an organization’s IT department to focus on more strategic items as opposed to focusing on maintenance and support. With a greater number of Enterprise Resource Planning (ERP) solutions being delivered via a SaaS model, employees can access the company’s complete financial and operational data with just an internet connection. This provides greater flexibility to access information and streamlines the decision making process.

Focusing on core competencies
FAO agreements provide companies that are in need of cost-effective, scalable solutions with access to people, standard processes and leading-edge technologies. Generally, the goal of entering into a FAO agreement is to relieve a company of its non-core business processes while improving support for decision makers by providing better and more relevant information. These agreements allow companies to focus their attention on the core business and on achieving strategic growth goals.

Traditionally, the goal of a FAO agreement is to lower a company’s bottom-line expenses via labor arbitrage. Today, however, FAO has evolved due to the advances in technology platforms that allow greater access to resources like subject matter experts (SMEs) and specialized providers that who not only reduce costs but also improve an organization’s overall operations. In order to effectively deliver these specialized outsourced services, providers are focused on developing and enhancing their client’s operating model that will essentially support the organization. Business models that incorporate elements of FAO agreements allow companies to avoid hiring, training and retaining employees for back-office processes.

Another benefit of the FAO model is the ability for service providers to bundle pricing for certain technologies and services that roll up as one monthly fee. This month-to-month pricing model can ultimately be significantly lower than individually procuring software and services separately, and especially lower than managing everything internally.

Companies need to leverage leading technologies in conjunction with the provider’s expertise in order to fully realize the maximum benefits of FAO. Cloud computing solutions provide business leaders with access to real time information regarding operational performance, detailed metrics and financial performance analytics. FAO providers who are utilizing these technologies are able to effectively manage their client’s operations by leveraging process automation and standardization without being required to have a full-time on-site presence at the company, thus reducing overhead costs.

Some of the functions that FAO providers are able to provide include:

  • Financial planning and analysis
  • Budgeting and forecasting
  • Performance management
  • Internal reporting
  • Payroll
  • Tax preparation
  • General bookkeeping
  • General ledger
  • Accounts payable
  • Accounts receivable
  • Travel and entertainment
  • Fixed assets

An organization can focus on their core business, achieve superior business results and enhance organizational performance by employing an outsourcing model that leverages technology, provides highly efficient processes, and delivers a higher level of customer service. FAO will continue to grow in popularity as more businesses realize the potential for growth that it allows.