- Office 215, Block B, The Junction Business Hub, Calebasses, Mauritius
- +230 245 9773
Outsourcing your finance activities – Is it worth it?
Put it simply, outsourcing means making use of external resources to perform activities previously handled by internal staff and resources.
A brief history
Outsourcing is not a new concept and has emerged in the 1950s when massive room-sized computers were made available to large corporates by the likes of IBM on a “time-sharing” basis for simple data processing. Such outsourcing was mostly intra-country. Outsourcing gathered pace in the 1980s and 1990s with India specialising in IT consultancy and low to high end programming in India-based data centres and China becoming the world’s outsourced factories for the manufacturing of all sorts of products. It was the start of a new outsourcing concept known as offshoring, i.e. outsourcing operations to overseas locations. The early 2000s also saw the emergence of finance and accounting outsourcing to offshore locations, made possible with faster internet and advances in computing power which enabled information to be shared superfast. This was driven by the pressure exerted by the shareholders of large corporates in the developed world to maximise the bottom line by moving expensive back-office costs to low cost locations.
Outsourcing your finance functions – what are the benefits and is it worth it?
Outsourcing the finance functions include anything from bookkeeping, managing accounts receivables & payables, completing tax returns, payroll, management accounts and financial reporting to more sophisticated and complex services such as financial modelling & analysis, treasury and budget analysis. There is no doubt, that if done correctly, finance outsourcing can be of tremendous benefit to companies – small or large. A few often cited benefits of outsourcing are:
- Focus on core business activities
Keeping focus on core business activities means being stubborn about the purpose or goal of the business. Entrepreneurs do not set up businesses to worry about the ancillary activities that come with managing a business such as preparing accounts or sorting their tax returns. All efforts, especially for new businesses, should be devoted to being single-mindedly at the service of the business idea and nothing else. This is where outsourcing the finance activities can help keep the focus.
- Reduce or contain operational costs
The cost factor is an important reason to outsourcing finance functions, especially for smaller or new businesses. Investing in software and people to manage finance functions is not only expensive, but very time-consuming.
- Leverage expertise of the outsource provider
Finance outsourcing companies usually have a deep pool of qualified personnel to cater for the needs of even the most demanding companies. Making use of an outsourcing partner will save the need to start a finance set up from scratch, especially the need to recruit qualified and experienced personnel.
Should you consider outsourcing your finance functions?
Finance outsourcing is a critical element of any business today. However, case-studies on outsourcing of finance functions are littered with stories of things that have gone wrong in outsourcing relationships. Despite all the benefits in finance outsourcing, before engaging into an outsourcing relationship, any company should understand their outsourcing partner well to minimise the risk of failure.
All businesses are different. This means any outsourcing partner needs to invest sufficient time and effort to fully understand their clients, culture and internal & external factors that impact their business. Does the outsourcing partner have a good track record of success in your industry, and do they understand the complexity involved in your business? Can they add value by leveraging on their expertise and knowledge of the industry? These are a few questions that need to be assessed during the selection process. A thorough selection process should lead to the right outsourcing partner.
People become used to passing on a cat when they receive a cat so much so after repetitively performing this task, when a rabbit is introduced, no-one notices the rabbit – a great leader I know once said when talking about the hazard of working mechanically. At Fortree we can differentiate the rabbit from the cat and tailor solutions specifically for the needs of your business.
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- Office 215, Block B, The Junction Business Hub, Calebasses, Mauritius
- (230) 245-9773