Over the last several years, organizations across the country have relied heavily on outsourcing their finance and accounting (F&A) tasks to handle mission-critical fiscal processes. But now, as is often the case, the outsourcing pendulum has swung back in the opposite direction.
Roughly 60% of companies were not outsourcing finance and accounting functions in 2023. In 2024, that figure climbed to 73%, according to the Controllers Council 2024 Corporate Finance & Accounting Talent Study. Some in the “not outsourcing” camp actually rely on insourcing, which involves establishing off-shore F&A departments in regions like India and the Philippines.
The same study shows that 16% of companies plan to increase outsourcing in the next 12 months. If your company is among them, this list of best practices will help facilitate a successful outsourcing journey.
Identifying the Right Tasks to Outsource
The most important aspect of any outsourcing strategy involves identifying which tasks to delegate to outside entities. Outsourcing works best when your business delegates time-consuming, routine tasks that don’t require deep knowledge of internal processes. F&A functions that are frequently outsourced include:
- Payroll processing
- Accounts payable
- Tax compliance
According to the Controllers Council 2024 talent study, tax roles are the most commonly outsourced, with 58% of respondents indicating they outsource this function. Outsourcing tax compliance can be especially valuable if your organization operates in multiple countries or regions due to the disparity in regulations between different jurisdictions.
On the other hand, tasks requiring close collaboration or specific knowledge of the organization, such as financial forecasting for strategic planning, are better kept in-house. Consider the company’s long-term goals when making outsourcing decisions and ensure that critical tasks remain under the control of internal teams.
Building and Managing Vendor Relationships
Outsourcing can be taxing on both your internal team and your vendor partners. It’s vital to build and maintain strong relationships with your vendors prior to integrating outsourcing into the equation. Make sure that your existing network of partners is on board, and set clear expectations regarding how the outsourcing process will affect day-to-day communication and dispute resolution.
After you’ve addressed the needs of your current vendors, shift your attention to the company you intend to use for F&A outsourcing. Conduct thorough due diligence by assessing factors like experience, reputation, and expertise in handling the specific F&A functions you want to delegate. Contracts must clearly define expectations and performance standards to ensure the vendor meets your company’s needs.
Regular communication is also essential for maintaining alignment and addressing potential issues. Schedule meetings and periodic performance reviews so you can monitor the impact of the partnership. Be willing to make adjustments as necessary so you can get the most out of your outsourcing efforts.
Ensuring Quality Control and Compliance
Quality control is one of the most critical components of F&A outsourcing. Errors in areas like payroll or tax compliance can have serious consequences. Your finance leadership team should establish internal controls to verify the accuracy and quality of the vendor’s work. These might include routine audits or sample testing of outsourced tasks.
Additionally, many companies implement key performance indicators (KPIs) to measure the effectiveness of the vendor. Some KPIs you could track include accuracy rates, turnaround times, and compliance adherence.
In addition to quality control, compliance with relevant regulations is essential. You should verify that your vendors are up to date with local, national, and international standards, especially in sensitive areas like tax and payroll.
For larger organizations with off-shore insourcing departments, maintaining consistent compliance with country-specific laws is a crucial area of concern.
Is F&A Outsourcing Right for Your Business?
You should tackle the outsourcing issue in two phases. First, decide whether it is a good move for your organization to outsource its finance and accounting tasks.
To do that, you should consider whether your business faces a high volume of routine tasks like payroll processing and accounts payable. If your company requires close control over financial processes or needs highly customized financial strategies, it may be more pragmatic to keep these functions in-house.
If you decide that there are enough routine tasks to justify outsourcing, then you should determine how much of your F&A workflow to delegate to a third party. Focus on routine work that’s easy to monitor and perform quality assurance on. You should also consider outsourcing if your company is experiencing rapid growth and wants to avoid scaling up your internal F&A department.
Strategic Outsourcing for Lasting Benefits
By identifying the right functions to outsource and applying these best practices, you can make your F&A department more nimble and efficient. In turn, your F&A team will be better equipped to adapt to the changing financial needs of the organization.
