Outsourcing the Finance and Accounting Functions - CIMA

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Copyright © 2007 by The Society of Management Accountants of Canada (CMA Canada), the American Institute of Certified Public Accountants, Inc. (AICPA) and The Chartered Institute of Management Accountants (CIMA). All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, without the prior written consent of the publisher or a licence from The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright Licence, visit www.accesscopyright.ca or call toll free to 1-800-893-5777. ISBN: 1-55302-204-1 NOTICE TO READERS The material contained in the Management Accounting Guideline Outsourcing the Finance and Accounting Functions is designed to provide illustrative information with respect to the subject matter covered. It does not establish standards or preferred practices.This material has not been considered or acted upon by any senior or technical committees or the board of directors of either the AICPA, CIMA or The Society of Management Accountants of Canada and does not represent an official opinion or position of either the AICPA, CIMA or The Society of Management Accountants of Canada.
OUTSOURCING THE FINANCE AND ACCOUNTING FUNCTIONS INTRODUCTION The use of finance and accounting outsourcing (FAO) continues to rise throughout the world.The FAO market, as measured by the number of contracts signed for large FAO agreements (those that include five or more processes and/or have a contract value of at least $50 million) has increased steadily since 2000, and by more than 45 percent since 2005 (Fersht). A March 2007 IDC (Interactive Data Corporation) report forecasts that the global FAO market will exceed $47.6 billion in 2008. Although the United States will remain the largest segment of the FAO market, the fastestgrowing region includes Europe, the Middle East, and Africa (EMEA) (Bingham). In the past 18 months, several large outsourcing agreements covering multiple finance and accounting processes were finalized. Earlier this year, the world’s top personal paper products manufacturer, Texas-based Kimberly-Clark Corporation, entered into a five-year contract with FAO provider Genpact. Genpact will operate Kimberly-Clark’s global accounts payable, travel and entertainment expense management, pricing administration, accounting-to-reporting, and supply-chain accounting processes. Late last year, Aktiebolaget SKF hired outsourcing provider Capgemini to manage multiple finance and accounting processes for several of the Swedish ball bearings CONTENTS EXECUTIVE SUMMARY INTRODUCTION Page 3 1. MAKING THE DECISION 7 Identify Strategic Drivers 8 Evaluate the Full Range of Options 8 Assess Internal Capabilities 9 Determine Scope and Logic 10 2. SELECTING THE PROVIDER 12 Create the Project Team Link Buyer’s Needs 13 to Provider Marketplace 13 Consider Outside Help 14 Develop the Request for Proposal (RFP) 15 Establish an RFP Evaluation Process 16 Conduct Due Diligence 17 3. MANAGING THE RELATIONSHIP Negotiate Contract and Service 18 Level Agreement (SLA) 18 Transfer Process and Knowledge 20 Monitor and Manage Performance 21 Renew, Renegotiate,Terminate 21 CONCLUSION 22 BIBLIOGRAPHY 23 SUGGESTED READING 24 APPENDICES 26 STRATEGY Throughout the world, the use of finance and accounting outsourcing (FAO) by small, medium and large enterprises is rising.The number of large FAO contracts (those that cover five or more processes and/or have a contract value of at least $50 million) increased by 45 percent from 2005 to 2007. Most CFOs and other finance and accounting managers can count on having to weigh the pros and cons of outsourcing; many will play key roles in managing outsourcing relationships with external providers.This management accounting guideline (MAG) provides guidance on managing FAO opportunities, challenges, and risks.This guidance – which targets CFOs, finance and accounting managers, and others responsible for selecting, implementing and managing FAO relationships – centers on what might be done at each stage of the FAO lifecycle to create and manage a successful FAO initiative. 3
Page 1: MANAGEMENT ACCOUNTING GUIDELINE Out
Page 5 and 6: 3. involving the “right people”
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Page 9 and 10: improvement approaches (such as Six
Page 11 and 12: This breakdown of outsourced vs. in
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Page 15 and 16: transition, and in some cases ongoi
Page 17 and 18: of candidates based on their evalua
Page 19 and 20: - Pricing schedules; - Employee tra
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Page 23 and 24: BIBLIOGRAPHY Bingham, Brian J. 2007
Page 25 and 26: What metrics does the vendor use to
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