Transformation: Open up to new ideas and innovation
A quarter of companies polled by ACCA use neither outsourcing nor shared services
With as much cost cutting as possible already achieved, the focus in finance teams has remained firmly on tightening or changing processes to continue to reduce costs. While there’s little or no more room to cut costs without damaging the business, the need to reduce outgoings hasn’t yet disappeared.
CFOs have considerable aspirations when they adopt alternative finance models such as outsourcing, shared services or a hybrid approach, but there is still some way to go in terms of realising these aspirations to the full.
Plenty of scope remains for transforming the finance function, but CFOs rightly remain cautious about how best to approach any change. New research is shedding some light on how businesses are transforming their finance functions.
A new study by the Association of Chartered Certified Accountants (ACCA) shows that most transactional processes such as accounts receivable, accounts payable and travel and expenses, are still delivered by a traditional in-house team. When companies do implement an alternative model, they typically choose shared services, with payroll the exception, because it’s typically outsourced.
Activities seen as higher value such as forecasting, business partnering, financial planning and analysis, among others, are even more likely to be retained in-house. The ACCA report, published at the end of May, Finance leaders on sourcing success, finds that over 60 percent of respondents (almost 500 senior finance professionals) kept higher value activities in-house.
The findings show that even once a board has decided on one course of action, that course often evolves. Companies that first set up shared services may subsequently also outsource. This was the case at US internet giant AOL, which initially used shared services before introducing outsourcing as part of a hybrid solution.
“Our initial objective for setting up shared services was to improve our control environment,” Cynthia Gallagher, vice president and deputy controller at AOL, says in the report.
“The second was process improvement, driving to harness technology wherever we can. Third, we wanted to improve our communication with our customers.
“I think we did it right in terms of going captive [shared services] and then going BPO [business process outsourcing] as part of a hybrid solution. That model continues to work for us.”
CFOs who choose the outsourcing route anticipate benefits that their own organisation might not be able to achieve alone. “The benefit outsourcers will bring is that they have the level of expertise that we will not have in many core finance processes,” says Dermot Igoe, finance director for Microsoft’s Europe, Middle East and Africa Operations Centre based in Dublin. “So we looked to them to manage our transactional activities.”
Outsourcers’ expertise should have an impact on more than costs, he adds. “The benefits need to go beyond cost. We find if it’s cost alone that we get a certain type of model and a certain type of service delivery. Instead we looked for a partner that could transform processes on a global scale.”
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