Business Process Outsourcing: The Finance and Accounting Process | Article

pwc acctgGlobal business organizations increasingly understand the value of outsourcing their non-core functions. Outsourcing allows companies to retain their focus on their core tasks so they can remain competitive, along with many other benefits. But the leading issue is that companies need to demonstrate to their shareholders ways in which to increase share value, and many look to outsourcing for that support says David Narrow, global leader for the finance and accounting BPO practice at PricewaterhouseCoopers.

Based on a recent market research, statistics show that 75 percent of global business leaders attached significant importance to outsourcing as a means of enhancing shareholder value. Sixty-three percent of the executives reported that they are already outsourcing one or more business processes and that outsourcing is already helping them achieve shareholder value. Of these executives, 86 percent reported satisfaction with the results. Conclusively, the odds are in outsourcing’s favor.

One of the business processes that is receiving a lot of attention is finance and accounting, Narrow says. And companies are turning their attention to outsourcers that are experts at the finance and accounting function. Besides enhanced business focus, outsourcing this process helps companies control cost structure, instill discipline into the finance and accounting process, and give organizations access to the finest finance and accounting professionals and technology in the world.

“Companies can put a number on cost savings and strategic focus because we can articulate where that value is coming from,” Narrow says. “Organizations understand that not only are they getting economic value by outsourcing, but they can also become better at their core processes as we handle their back office, or what is now our front office.”

Companies also understand that they cannot get the kinds of professionals and advanced technology that a world class finance and accounting organization like PricewaterhouseCoopers can get. But by outsourcing a company immediately gains expertise and processes.

“Companies know that they are not in a position where they are able to make the same level of investments that we have to make, as this is our core business,” he says.

As an example, PricewaterhouseCoopers is spending more than $400 million on e-business initiatives over the next year to find out how to use technology to fundamentally change these processes. No company would be willing to spend that kind of money, he says, but they can tie into that kind of investment by outsourcing.

Also, by using the vendor’s investment in radical change it mitigates any risk to the client. CFOs know that they are going to have to live with change as they look forward, but by working with an outsourcer, the risk that is inherent in radical change programs, is handed to the vendor.

“When companies talk about becoming a global organization, they need a global response to do that, so they are looking for us to help them and minimize that risk,” he says. “When CFOs talk about what they are doing with their CEOs, the issue is managing the risk. We have invested a lot in making sure that we understand the risk and we know what we are going to do about it.”

Standardizing the Finance and Accounting Process

Standardization has been central to PricewaterhouseCoopers’ global delivery approach of finance and accounting solutions. By leveraging process commonality across companies and geographies, PricewaterhouseCoopers can significantly improve the finance and accounting function. Companies on their own do not have this ability either because of a lack of specialized resources, scale or simply because this is not their prime area of focus. This is why it makes sense to outsource it. And as the back office becomes more standardized, in particular the accounting functions, even bigger cost savings will be seen.

For Narrow, having a large organization is key to standardizing the process. PricewaterhouseCoopers has more than 100,000 professionals globally devoted to finance and accounting. And as a general rule there is a benefit that derives from scale – “bigger is better,” he adds. There is much more flexibility in organizations that have a large operation; it allows more creative ways to do things and brings everyone a little closer to standardization.

“Two or three years ago we looked down the road and saw that we would have to take a global perspective on how we would handle finance and accounting outsourcing,” he continues. “By having a global response it has allowed us to be very nimble in how we respond to building our service delivery models. The Centres of Excellence (global service centers) that we have set up around the world underscore that.”

Taking a global perspective allows vendors like PricewaterhouseCoopers to do some of the creative things that it is beginning to do like moving elements of processing cross border, with a particular focus on India. Had PwC not gone down that road and forced the standardization of the model it couldn’t have done that, Narrow says.

“The efforts and the results that we have come up with have really provided the platform for more dramatic changes as we go forward,” he says

As an example, one of PricewaterhouseCoopers’ clients, a major oil company, reduced their finance and accounting costs close to 50 percent in the first full year after the transition to PwC outsourcing. In the second year it further reduced costs 20 percent. Narrow says they are now looking at another 20 to 30 percent in upcoming years. “These are tremendous savings,” he says. “The reason that we can even look at cuts like this is due to us moving further down the road towards standardization. And that will give us the platform to really start changing things.”

Moving Forward

Narrow envisions a new century of innovation that will look completely different than it does now. Technology will shape the way that the finance and accounting model is delivered, so much so that the process won’t even be recognizable. But what it actually looks like will be less of an issue than the vision that vendors will offer customers seeking services, he says. Clients will value more, a vendor’s strategic positioning, both in terms of the relationship and the delivery of the benefits.

In a recent case, PricewaterhouseCoopers implemented a different governance model to add value to one of its outsourcing relationships. PwC told its client that it didn’t want to have accountants talking to accountants. It needed to have the business leaders sitting on its review board to discuss where they were heading with their business. This would allow PwC to understand how to help them get there, how it could provide more flexibility, and how it could add value through the whole end-to-end process.

“Part of that value goes straight to the business and part of that comes from the scope that was outsourced,” he says. “With this client that we are expanding our relationship with, we have already had this discussion and have made it a precondition to the deal. We are that committed and it is things like this that will drive a next generation of savings.”

Lessons From the Outsourcing Primer:

  • A company should choose a vendor that can deliver. A company should thoroughly research the vendors involved and get past performance records of each.
  • Choose a vendor that is willing to be in an ongoing relationship and is committed to continuos improvement.
  • The vendor that is chosen should be able to commit substantial time and resources to its clients.

  • The two sides, the vendor and the supplier, should have a clear vision of how the process will work, and each one should know its responsibilities.

Post a Comment

Your email address will not be published.

( required )

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>