Finance & Accounting Outsourcing: Building for Long-Term Success

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Do you need to find ways to build the long-term success of your company without sacrificing all your time to tactical issues?

Read this whitepaper now to learn how Finance & Accounting Outsourcing can solve your problems!

Who should read this–CEOs, CFOs and Finance & Accounting executives and managers considering improving the overall performance of their organizaitons

Top 4 things you’ll learn:
1. Look at the potential needs of YOU, the customer
2. What and where you could start in your outsourcing journey
3. How to address some of the risks
4. Look at some of the potential benefits

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Finance & Accounting Outsourcing: Building for Long-Term Success

  1. 1.    Finance  and  Accounting  Services     Finance  &  Accounting  Outsourcing:   Building  for  Long  Term  Success     Table  of  Contents     Introduction             2   Fears  and  Concerns  about  F&A  Outsourcing     3   The  Cost  and  Quality  Benefits  of  F&A  Outsourcing   4   Creating  The  Environment  for  Success     5   Success  Factors           7   About  Sutherland  Global  Services       8   Contact  Information           8   Resources             9                           Author:   Simon  Speirs,  Lead  Solution  and  F&A  Architect   Europe/Middle  East/Africa         Finance  &  Accounting  Outsourcing:  Building  for  Long  Term  Success            ©  2012  Sutherland  Global  Services.   Page  1  
  2. 2. Introduction  Many  finance  departments  in  mid-­‐market  companies  are  in  a  quandary.  They  strive  to  provide  true  value  to  their  organisations  by  using  their  skills  and  expertise  for  strategic  insights.  But,  too  often,  finance  departments  are  simply  caught  on  a  hamster  wheel  of  transactional  functions  to  offer  their  full  potential.  In  fact,  the  American  Productivity  &  Quality  Center  (APQC)  surveyed  finance  professionals  at  119  organisations  to  discover  that  “only  5  percent  of  survey  respondents  believe  that  finance  is  currently  delivering  game-­‐changing  value  to  their  enterprises.”  Adding  to  the  dilemma,  a  survey  of  200  CFOs  and  finance  directors  in  the  UK  by  Director  of  Finance  Online  found  that  66%  of  respondents  “were  very  or  somewhat  concerned  about  losing  top  performers  to  other  job  opportunities  in  the  next  year.”  One  solution  that  addresses  both  the  need  to  provide  vital  analysis,  while  also  creating  an  environment  where  top  talent  thrives  and  is  challenged  is  Finance  &  Accounting  (F&A)  outsourcing.  Traditionally  the  main  barrier  to  Business  Process  Outsourcing  (BPO)  for  firms  in  the  mid-­‐market  has  been  cost.  However,  advances  in  technology  and  access  to  a  global  workforce  have  lowered  those  concerns.    Instead  the  main  driver  toward  adopting  outsourcing  is  the  need  for  more  effective  operations  at  a  global  level  and  access  to  new  technical  skills.  However,  there  is  a  hesitation  to  adopt  F&A  outsourcing  as  a  viable  option  amongst  finance  professionals  in  the  mid-­‐market  due  to  fears,  real  and  imagined,  and  an  outmoded  concept  of  what  the  process  entails.  This  paper  aims  to  dispel  concerns  and  help  finance  directors  be  successful  in  implementing  an  F&A  outsourcing  programme  in  their  organisation.            Finance  &  Accounting  Outsourcing:  Building  for  Long  Term  Success            ©  2012  Sutherland  Global  Services.   Page  2  
  3. 3. Fears  and  Concerns  about  F&A  Outsourcing  Leaders  in  finance  are  charged  with  managing  people,  overseeing  process,  and  harnessing  technology  to  its  best  application.  They  must  constantly  balance  the  demands  of  insight,  controls,  team  performance  and  cost.    It’s  no  wonder  then  that  the  three  main  areas  of  concern  about  outsourcing  are:   • Uncertainty  and  loss  of  control   • Employee  dissatisfaction  and  loss  of  expertise   • Decision  reversal  and  programme  failure  Uncertainty  and  Loss  of  Control  Major  organisational  change  brings  about  uneasiness  and  uncertainty  of  the  unknown.  If  you  are  wading  into  outsourcing  for  the  first  time,  lack  of  knowledge  and  experience  in  managing  the  process  can  be  daunting.  There  is  often  a  feeling  that  moving  certain  functions  outside  of  your  company  will  lead  to  loss  of  control.      No  longer  able  to  physically  see  the  people  performing  the  work,  there  is  a  common  perception  that  the  functions  are  no  longer  within  your  direct  and  immediate  control.  In  fact,  this  lack  of  physical  contact  takes  managers  outside  of  their  comfort  zone  and  often  gets  confused  with  the  fear  of  forfeiting  decision-­‐making  capacity.      Employee  Dissatisfaction  and  Loss  of  Expertise  At  times  of  change,  the  risk  of  employee  dissatisfaction  is  real,  though  experiences  of  malicious  intent  are  few  and  far  between.  The  uncertainty  that  finance  leaders  may  feel  is  exacerbated  in  staff  who  have  the  least  control  over  the  conditions  that  govern  their  day-­‐to-­‐day  work  lives.  Unclear  communication  from  management  about  how  their  roles  are  changing,  the  expectations  upon  them,  and  an  understanding  of  how  they  are  to  navigate  their  new  reality  can  lead  to  a  decline  in  productivity  as  employees  transition  from  one  operating  model  to  another.      If  not  managed  effectively,  employee  dissatisfaction  may  lead  to  a  loss  of  expertise  in  the  roles  that  you  are  looking  to  retain.  A  survey  of  200  CFOs  and  finance  directors  in  the  UK  conducted  by  Director  of  Finance  Online,  revealed  that  66%  of  respondents  were  “very  or  somewhat  concerned”  about  losing  their  top  performing  employees  to  other  opportunities.    Although  heightened  in  moments  of  change,  the  fear  of  losing  good  talent  is  present  in  the  minds  of  finance  professionals  at  any  time.  However,  releasing  key  individuals  to  focus  more  on  strategic,  rather  than  day-­‐to-­‐day,  issues  will  keep  some  very  happy.  With  reduced  roles  within  the  organisation,  companies  will  need  to  consider  where  to  source,  nurture  and  develop  that  talent.          Finance  &  Accounting  Outsourcing:  Building  for  Long  Term  Success            ©  2012  Sutherland  Global  Services.   Page  3  
  4. 4. Decision  Reversal  and  Programme  Failure  Senior  management  must  feel  that  they  have  the  ability  to  change  direction  and  reverse  their  decision  should  the  needs  of  the  organisation  compel  them.  The  fear  of  being  locked  into  an  unfavourable  service  agreement  that  is  onerous  and  costly  to  exit  can  weigh  heavily  on  executives.      Decision-­‐makers  are  ultimately  responsible  if  a  new  program  fails,  and  naturally,  there  is  a  healthy  fear  around  trying  something  new  and  having  it  come  to  nothing.  Concerns  can  be  particularly  acute  if  the  service  is  unsatisfactory  and  the  relationship  with  outsourcing  partner  degenerates.    In  a  recent  CIMA  roundtable  it  was  identified  that  any  organisation  –  whether  internal  or  external  –  will  be  “blamed  for  the  issue.”    Strong  analysis  needs  to  be  undertaken  to  understand  what  the  real  issues  are:    is  it  the  visibility  of  underlying  issues  that  have  always  existed,  a  blame  game  or  a  real  issue  of  underperformance  to  promises.  Certainly,  the  many  news  stories  in  the  public  domain  that  highlight  the  perils  of  failed  outsourcing  efforts  do  nothing  to  allay  the  fears  of  finance  executives  –  but  there  are  many  success  stories  that  remain  private.  The  Cost  and  Quality  Benefits  of  F&A  Outsourcing  Although  some  of  the  concerns  about  outsourcing  can  be  valid,  the  appeal  of  the  cost  and  quality  advantages  for  your  company  are  enough  to  motivate  most  fear-­‐struck  finance  professionals  to  give  this  option  a  serious  second-­‐take.  Human  Resources  Outsourcing  reduces  or  eliminates  costs  of  wages  and  benefits,  as  well  as  the  costs  associated  with  staff  including  buildings,  infrastructure,  IT  hardware  and  software  costs,  to  name  a  few.  Turning  fixed  assets  into  variable  costs  helps  your  company  be  more  flexible  in  times  of  business  expansion  or  contraction.    When  employees  are  released  from  performing  routine  transactional  functions,  they  are  elevated  to  conduct  higher-­‐level  and  quality  work,  giving  them  the  focus  to  drive  business  benefits  that  can  add  real  value  to  your  organisation.  Processes  and  Controls  Outsourcing  provides  an  opportunity  to  design  stricter  process  management,  governance  and  obtain  performance  guarantees  through  Service  Level  Agreements  (SLAs).  Service  improvements  from  outsourcing  may  find  tangible  benefits  that  come  from  reduced  business  process  cycles,  resulting  in  significant  performance  improvements,  while  ensuring  a  clear  audit  trail  and  rigourous  quality  assurance.    These  guarantees  result  in  more  assured  delivery  and  uniformly  applied  policies  across  critical  areas,  like  credit  management.  Accounts  Receivable  outsourcing,  with  more  stringent  controls  over  procedures,  may  result  in  the  reduction  in  Day’s  Sales  Outstanding  (DSO)  and  bad  debt  write-­‐offs,  culminating  in  improvements  to  working  capital.          Finance  &  Accounting  Outsourcing:  Building  for  Long  Term  Success            ©  2012  Sutherland  Global  Services.   Page  4  
  5. 5. Technology  Improvements  Workflow  automation,  CRM,  or  payment  gateways  are  just  some  of  the  improvements  that  can  come  when  there  is  an  upgrade  in  technology  from  outsourcing.  Although  entirely  possible  to  implement  these  improvements  in-­‐house,  the  reality  is  that  Finance  IT  projects  are  often  low  in  the  priority  list  of  technology  needs  across  the  company.  Outsourcing  offers  the  ability  to  increase  productivity  through  technology  at  a  lower  investment  cost.    Improvements  to  online  reporting  technology  allow  stakeholders  from  across  the  company  to  view  metrics  and  key  performance  indicators  (KPIs),  leading  to  improved  relevancy  and  decision-­‐making  abilities  for  a  more  nimble  organisation.  Cloud-­‐based  services  may  also  provide  increased  business  continuity  planning  (BCP)  and  disaster  recovery  (DR)  solutions.  Creating  The  Environment  for  Success  Being  successful  in  outsourcing  F&A  functions  lies  in  planning,  change  management,  and  setting  clear  expectations  in  governance  process  and  results.  The  key  is  choosing  the  right  partner  and  having  a  continuous  commitment  to  sustaining  the  change  over  the  long-­‐term.  Choosing  Your  F&A  Partner  Your  F&A  service  provider  is  your  best  asset  in  building  long-­‐term  success  for  your  outsourcing  programme.  Choosing  a  provider  who  supports  your  objectives  and  has  a  wealth  of  previous  experience  to  draw  upon  and  share  with  you  makes  the  transition  much  more  likely  to  be  successful.    Having  a  trusting  and  collaborative  relationship  will  see  you  through  initial  conception  through  to  implementation,  performance  and  success  measurement.  Strengthening  the  relationship  beyond  the  transactional  to  include  leveraging  talent,  will  ramp  up  your  strategic  success  factor.  When  choosing  your  partner,  start  by  assessing  which  transactional  functions  can  be  outsourced.  Determine  if  there  are  other  more  strategic  analytical  activities  where  a  portion  of  the  work  could  be  outsourced  for  less  heavy  lifting  within  your  organisation.  Specialised  F&A  expertise  can  add  value  to  your  internal  strategic  functions.  Discover  if  your  provider  can  offer  a  range  of  senior-­‐level  skills  to  augment  your  business  needs,  particularly  at  times  of  cyclical  activity,  expansion  or  contraction.  A  provider  with  access  to  a  wide  range  of  skill  sets  has  the  ability  to  improve  your  company’s  performance  by  providing  greater  insights,  accuracy  and  productivity.  Planning  The  start  of  the  program  will  see  a  considerable  time  investment  in  risk  management,  creating  a  transition  plan  and  establishing  long-­‐term  governance  with  clear  expectations.  These  factors  will  mitigate  issues  around  deliverability,  human  resources,  and  service  expectations.    Methodical  planning  will  involve  stakeholders  from  multiple  departments  from  within  your  organisation,  as  well  as  your  F&A  partner.  Maintaining  a  continuity  of  personnel  in  this  planning  group  is  helpful  to  provide  consistency  in  the  process  and  traceability  for  decision-­‐making.          Finance  &  Accounting  Outsourcing:  Building  for  Long  Term  Success            ©  2012  Sutherland  Global  Services.   Page  5  
  6. 6. The  planning  process  should  include  a  review  of  current  functions  to  provide  a  point  of  reference  and  a  baseline  against  which  to  measure  the  programme.  Detailed  discussions  of  processes  and  practices  will  guide  governance  policy  and  performance  criteria.  A  contract  and  agreement  review  will  ensure  that  the  terms  of  your  service  will  be  met,  needs  are  identified  and  the  criteria  for  success  is  established.  During  and  near  the  conclusion  of  the  knowledge  transfer  phase,  be  sure  to  conduct  a  readiness  review  on  pre-­‐agreed  success  criteria  for  all  parties  to  ensure  that  systems,  facilities,  people  and  training  are  ready  prior  to  the  programme  going  live.  Change  Management  No  amount  of  planning  will  overcome  a  lack  of  support  by  senior-­‐level  management  to  facilitate  organisational  change.  Resistance  to  the  programme  may  see  some  departments  opting  out  of  receiving  services  and  undermining  the  entire  process.  Having  top-­‐down  support  is  essential  for  the  success  of  F&A  outsourcing  and  will  help  to  prevent  areas  of  the  organisation  from  reverting  to  old  habits.    After  identifying  key  processes  and  roles,  create  an  employee  retention  plan  to  ease  the  transition.  This  may  include  how  specific  personnel  can  be  re-­‐focused  on  functions  with  more  analytical  value,  rather  than  transactional  functions.    Communicate  regularly  and  clearly  with  staff  about  changes  as  they  are  happening.  For  your  employees,  understanding  the  process,  what  the  transition  plan  will  be,  and  where  they  fit  into  it  will  help  to  minimise  a  decline  in  productivity  and  remove  focus  from  the  rumour  mill.    Long-­‐Term  Success  Good  governance  and  the  application  of  clearly  defined  success  criteria  to  performance  reporting  are  critical  to  the  programme.  Plans  may  evolve  and  measurements  may  adapt  over  time.  In  order  to  support  the  key  areas  of  Operations,  Financial  Reporting,  and  Compliance,  critical  ongoing  attention  must  be  given  to:   • Monitoring   • Information  &  Communication   • Control  Activities   • Risk  Management   • Control  Environment  Your  organisation  will  see  the  strategic  and  financial  benefits  that  come  from  outsourcing  when  your  plans  are  well  executed.  And  there’s  no  better  way  to  follow  through  with  ensuring  your  F&A  outsourcing  is  a  success  than  with  an  experienced  finance  and  accounting  service  provider  by  your  side.          Finance  &  Accounting  Outsourcing:  Building  for  Long  Term  Success            ©  2012  Sutherland  Global  Services.   Page  6  
  7. 7. Success  Factors  Building  your  F&A  outsourcing  programme  for  long-­‐term  success  lies  in  careful  risk  management,  adaptive  change  management  and  solid  planning.  Having  an  experienced  service  provider  has  helped  many  other  companies  navigate  the  transition  from  in-­‐house  to  outsourced  F&A  will  greatly  ease  the  process.      When  determining  how  best  to  use  an  F&A  outsourcing  provider  to  benefit  your  business:   • Determine  your  core  functions  and  how  your  organisation  would  benefit  from  outsourcing   transactional  activities   • Assess  overall  staffing  needs  and  whether  cyclical  spikes  in  business  place  a  strain  on  human   resources   • Explore  how  an  F&A  provider  could  share  selected  activities  by  performing  the  heavy  lifting   for  you   • Understand  how  an  experienced  F&A  partner  can  augment  your  internal  strategic  functions   by  providing  specialised  expertise,  beyond  transactional  services   • Leverage  the  wide  range  of  F&A  skill  sets  available  from  your  outsourcing  partner  to  gain   greater  insight,  accuracy  and  productivity.    Choosing  a  service  provider  with  access  to  a  vast  talent  pool,  from  clerks  to  finance  management,  will  give  your  company  options  to  leverage  for  maximum  impact  when  the  need  arises.  This  is  particularly  true  in  times  of  growth  or  reduction  when  the  burden  of  staffing  the  expertise  level  you  require  can  be  carried  by  your  F&A  provider,  allowing  your  company  to  adapt  to  changing  demands  more  easily.    Because  starting  a  finance  and  accounting  outsourcing  programme  can  be  fraught  with  fears  and  resistance,  organisational  change  requires  support  from  management  and  clear  transitional  planning  and  communication  to  employees.  However,  the  benefits  in  cost-­‐savings,  increased  productivity,  and  greater  strategic  insights  realised  through  F&A  outsourcing  far  outweigh  the  perceived  drawbacks,  and  will  position  your  company  for  future  growth  and  success.          Finance  &  Accounting  Outsourcing:  Building  for  Long  Term  Success            ©  2012  Sutherland  Global  Services.   Page  7  
  8. 8. About  Sutherland  Global  Services  Sutherland  Global  Services  is  a  multi-­‐national  technology-­‐enabled  business  process  outsourcing  (BPO)  services  company  providing  a  unique  combination  of  vast  BPO  resources  as  well  as  extensive  expertise  and  industry  knowledge  in  Finance  and  Accounting.  We  help  you  build  a  high-­‐performance  finance  organisation  by  combining  accounting  best  practices  with  proven  BPO  processes.  Our  global  service  delivery  infrastructure  and  full  range  of  outsourcing  solutions  –  from  specific  transactional  processes  to  controller  and  compliance  functions  –help  you  reduce  costs  while  gaining  better  visibility  and  control  of  financial  processes  and  data.    We  are  agnostic  to  delivery  location  and  can  provide  solutions  to  meet  your  needs  –  whether  locally  based  or  more  distant  locations.    Our  strategy  quickly  improves  your  F&A  operations  by  adapting  a  set  of  standardised  processes  and  using  technology  and  automation  to  improve  efficiency.  We  begin  by  analysing  your  existing  accounting  workflows,  then  we  design  an  outsourcing  solution  based  on  your  business  objectives  and  available  resources.  Ongoing  processes  are  transferred  to  our  organisation.  Once  this  transition  is  complete,  we  follow  through  to  ensure  flawless  service  delivery.        The  Result:  You  gain  access  to  higher  quality,  more  complete  financial  information  to  support  effective  tactical  and  strategic  decision-­‐making  across  your  business.  Our  outsourcing  solution  not  only  reduces  the  cost  of  the  finance  function;  it  provides  CFOs  the  opportunity  to  focus  the  organisation  on  what  is  strategically  important  to  the  business.  Contact  Information  To  have  a  deeper  discussion  about  the  F&A  outsourcing  process,  please  contact:    Simon  Speirs,  Lead  Solution  and  F&A  Architect,  Europe/Middle  East/Africa    PHONE:  +44  (0)  207  138  0920  EMAIL:    simon.speirs@sutherlandglobal.com  WEB:  www.sutherlandglobal.com    Simon  Speirs  is  a  member  of  the  Association  of  Chartered  Management  Accountants  (ACMA)  with  18  years  of  experience  in  improving  business  and  finance  team  performance.  He  has  worked  in  a  number  of  blue-­‐chip  companies  including  ABB,  Accenture,  PricewaterhouseCoopers  and  Hewlett  Packard.  Simon  leads  the  design  and  implementation  of  back-­‐office  solutions  across  the  European  Region  for  Sutherland.  He  has  a  proven  track  record  of  designing  and  delivering  shared  service  solutions  and  managing  complex  global  projects.  Simon’s  experience  spans  across  continuous  improvement,  finance  &  accounting,  procurement,  sourcing  and  IT  management.  The  depth  and  breadth  of  his  experience  enables  him  to  combine  People,  Process  and  Technology  to  design  optimised  and  customised  outsourcing  solutions.        Finance  &  Accounting  Outsourcing:  Building  for  Long  Term  Success            ©  2012  Sutherland  Global  Services.   Page  8  
  9. 9. Resources  "A  New  CFO  Priority:  Talent  Development  With  a  Focus  on  Soft  Skills."  APQC.org,  Press  Release.  APQC  in  Partnership  with  EPM  Channel,  13  Sept.  2012.  http://www.apqc.org/new-­‐cfo-­‐priority-­‐talent-­‐development-­‐focus-­‐soft-­‐skills      Howes,  Gary.  "Finance  Directors  Stress  over  Retaining  Best  and  the  Brightest."  Director  of  Finance  Online.  n.p.,  29  Aug.  2012.  http://www.dofonline.co.uk/content/view/6465/152/      Speirs,  Simon.  "Part  4:  Outsourcing:  Distraction  or  Solution?"  Sutherland  Global,  The  Accounting  Minute  Blog,  24  Oct.  2012.  http://info.sutherlandglobal.com/blog/accounting-­‐minute/bid/161364/Part-­‐4-­‐Outsourcing-­‐Distraction-­‐or-­‐Solution    Speirs,  Simon.  "  Part  3:  Managing  the  Perceived  Risks  of  Outsourcing”  Sutherland  Global,  The  Accounting  Minute  Blog,  17  Oct.  2012.  http://info.sutherlandglobal.com/blog/accounting-­‐minute/bid/161003/Part-­‐3-­‐Managing-­‐the-­‐Perceived-­‐Risks-­‐of-­‐Outsourcing    Speirs,  Simon.  "Part  2:  Determining  Core  Functions”  Sutherland  Global,  The  Accounting  Minute  Blog,  10  Oct.  2012.  http://info.sutherlandglobal.com/blog/accounting-­‐minute/bid/160457/Part-­‐2-­‐Determining-­‐Core-­‐Finance-­‐Functions    Speirs,  Simon.  "Part  1:  What  CFOs  Tell  Us”  Sutherland  Global,  The  Accounting  Minute  Blog,  3  Oct.  2012.  http://info.sutherlandglobal.com/blog/accounting-­‐minute/bid/160553/Part-­‐1-­‐What-­‐CFOs-­‐Tell-­‐Us              Finance  &  Accounting  Outsourcing:  Building  for  Long  Term  Success            ©  2012  Sutherland  Global  Services.   Page  9  

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