Recipes for Bundled Finance and Accounting Outsourcing

Outsourcing
Recipes for Bundled Finance
and Accounting Outsourcing
At a high level, bundled outsourcing is a strategy for building
scale, creating synergies and shedding costs by outsourcing
several business functions to a single services provider. It isn’t
about offloading poorly managed processes or simply
consolidating vendors and sub-processes.

After all, when business functions
are outsourced to multiple providers,
scale opportunities are sacrificed and
extra “failure points” (complete with
blurred lines of accountability and
governance) are added. Take one of
the world’s largest consumer goods
manufacturers, which outsources
human resources and learning/
training to a single services provider.
This combination has resulted in
less turnover, better recruiting, and
employees who leverage more-relevant
skills in fewer work hours. There’s also
a top electronics retailer that lowered
its IT costs, reduced technology
complexity and governance, and freed
up capital by concurrently outsourcing
key business applications and IT
infrastructure. And a Big Pharma
company outsourced procurement and
HR, thus improving its ability to more
cost-effectively acquire recruiting,
temporary staffing, training and
benefits services.
Less clear, however, may be all the ways that
outsourcing to a single services provider unlocks
business value.
So what about the finance and
accounting function? Are the
opportunities to bundle finance
and accounting function with other
business processes just as great?
Absolutely! Here are three examples:
Finance and Accounting and
Procurement
Outsourcing finance and accounting
and Procurement can increase
visibility into both purchasing and
accounts payable processes, while
making it easier to track compliance
with strategically sourced contracts.
One reason is that procurement and
finance and accounting naturally
overlap: Purchase orders are typically
issued via finance systems, while
payments made in finance systems
match back to purchase orders
and receipts made in procurement.
Moreover, supplier master data is
often maintained in finance systems
but managed by procurement.
Microsoft Corporation recently
signed a seven-year agreement to
outsource requisition-to-purchaseorder
processing, along with accounts
payable, travel & expense, and
record-to-report functions (fixed
assets, general ledger, treasury and
statutory reporting). Spanning 9
countries, these combined services
will be managed from five delivery
centers on five continents. Microsoft’s
CFO has observed that the initiative
“streamlines Microsoft’s global finance
operations, reduces costs, standardizes
processes and reduces the time needed
for transactional tasks.”

Finance and Accounting and
Human Resources
Outsourcing finance and accounting
and human resources (HR) consolidates
HR administration with back office
processes, such as payroll and expense
reporting. In addition to raising
personnel performance, it frequently
improves cash flow and compliance
with payroll expense policies. The
reason is that HR and finance and
accounting, too, have extensive
technology and administrative
overlaps: Organizational data/
hierarchy and approval structures,
such as travel & expense or purchases,
often involve HR and finance
and accounting.
Two years ago, British Telecom (BT)
signed a ten-year outsourcing contract
for human resource administration
services. Services provided include
customer contact/call center,
recruitment, pension administration,
payroll and benefits administration,
performance management
administration, health and safety,
and HR advisory and information
services. This year, BT opted to
pursue additional synergies via global
finance and accounting outsourcing
agreements with the same services
provider. These cover a range of highvalue
finance processes, including
management reporting, financial
planning and analysis, month-end
close activities and budgeting/
forecasting operations.
BT acknowledges that the two
contracts are highly complementary.
For example, HR payroll issues that
involve the finance organization
can be addressed as a single, endto-end
process. And according to
BT’s director of reporting, planning
and analysis, “Outsourcing higherend
finance functions allows us to
provide enhanced business support
internally, so that BT can better focus
on bringing real value and innovation
to customers.”
Finance and Accounting and IT
Outsourcing finance and accounting
and IT can release myriad synergies:
Bundling the two functions generally
implies an IT infrastructure based on
optimal finance processes, as opposed
to cumbersome ”workarounds” and
processes whose designs are driven
by whatever technology was chosen.
Streamlined governance (functional
management under one umbrella)
is another advantage, with lower
costs often resulting from improved
business performance, less complexity
and reduced duplication of effort.
Workflow solutions, accounts payable
approvals and management reporting
can all be more effectively executed
if finance and accounting and IT are
addressed as a holistic outsourcing
solution.
For several years, Thomas Cook UK has
outsourced finance and accounting/
payroll and applications management
via a shared services center. The
arrangement is a true partnership,
with Thomas Cook retaining control
over strategy, policy and investment,
and its services provider focusing on
operational management of service
delivery and overall performance
of IT and finance and accounting
operations. The arrangement has
enabled Thomas Cook to achieve new
efficiencies and cost savings, increase
the range and effectiveness of its
numerous travel services, and sharpen
its focus on strategic initiatives.
According to the company’s chief
executive, the arrangement simply
“provides finance and IT services in a
more efficient and cost-effective way.”
The whole exceeds the sum of
the parts
Few companies dispute the value of
outsourcing. In fact, there are very few
organizations that receive no outside
assistance or that outsource only a
single function. Not many, however,
develop third party relationships with
the expectation that multi-process
outsourcing synergies will result. But
that’s what can happen: Bundling
outsourced finance and accounting
with other processes can mean new
opportunities to streamline backoffice
operations, simplify governance,
reduce costs, improve compliance,
optimize process performance,
leverage scale, raise accountability,
limit capital outlays, minimize risk and
ensure continuous improvement.
This article was published in the
October/November issue of FAO Today.

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