The Opportunities of Finance and Accounting Outsourcing

by James J. Caruso, CPA, CGMA | Mar 01, 2016

Pennsylvania CPA Journal

As financial professionals in business, CPAs have no shortage of problems to solve in our fast-paced and complex world. Optimizing, if not transforming, the finance and accounting function is top-of-mind for many financial executives as they endeavor to overcome the following challenges:

Strategy and operations – Routine reporting and compliance matters take time and resources away from value-added analysis and decision support. Being buried in day-to-day details, unable to find strategic and tactical “think time,” hurts both the organization and personal professional development.

Budgetary constraints on staffing – Too often there is a trade-off between headcount budgets and skills/specialization, such as using a budgeted position for a function that is not necessarily a full-time job, or consolidating two or more incompatible roles into one position.

Processes and controls – Inefficient processes that have not scaled with the business take resources away from more value-added activities. Delayed month-end closing and reporting hinders timely, actionable business intelligence.

Technology – Disparate, aging systems that are not integrated result in high maintenance and support costs. Information must be seen as a strategic asset, with proper governance and integrity.

Talent acquisition and management – There is often an inability to hire the best talent, particularly in small and midsize enterprises. The management and the development of staff should be a priority, understanding that growth in the size or complexity of the business may outpace the skill levels of earlier hires.

A solution to many of these impediments is finance and accounting outsourcing (FAO). Now enabled by cloud-based technologies that support continuing trends toward virtual business models, FAO solutions are gaining wider acceptance as they move up the value chain, from routine transactional procedures to more value-added financial planning and analysis activities. The potential problems outlined above are interrelated, and a comprehensive, integrated FAO solution could be positioned to solve them.

Determining whether to outsource all or part of the finance and accounting function is a “make vs. buy” decision, in which cost is only one part of the value equation. Cost must be evaluated using an appropriate apples-to-apples comparison. For example, if budget constraints force an organization to have one person fulfill two roles that would more appropriately be filled by two different people having the right skills for each, the cost of FAO should be compared to the cost of those two positions. FAO will provide the right skills for each set of activities, producing far better results than hiring a “jack of all trades” that does not fit either role particularly well. Further, the financial comparison is not as simple as comparing the fees paid to an FAO provider to the gross payroll of employees. The cost of an in-house team also includes payroll taxes; health care and other benefits; bonuses and equity-based compensation; computer equipment, software licenses, smartphones, tablets, and related information technology; office space and furniture; human resource compliance costs; continuing professional education; management time for training, supervision, and oversight; recruiting fees; and the cost of lost productivity and morale impacts from voluntary turnover or bad hiring decisions.

Considering all of the above, the economics alone may justify outsourcing. But the value proposition is much greater when an FAO solution is viewed as a bundled solution of flexible, scalable, and innovative processes and systems that encompass risk mitigation through improved segregation of duties, access to the breadth of expertise of a service provider, elimination of concern over absences or turnover, and the ability to shift from subjectively evaluating employees to monitoring objective contract performance.

Using this broader value proposition, FAO will likely become the predominant mode of execution for accounting and finance processes, much as in the case of the payroll function.

What does this mean for CPAs? It should not be viewed as a problem, but rather as an opportunity for a compelling career path. FAO provides opportunities to do fulfilling management accounting and operational finance work for a variety of companies at different stages and in different industries while working in a professional services environment surrounded by a motivated and ambitious peer group. In most middle-market companies, advancement opportunities are dependent upon the person above you moving up or out; there is only going to be one controller position no matter how much the company grows. Job security is predicated upon the fortunes of the company, and even success can be career-limiting if it leads to a sale of the company.

At an FAO provider, you are a profit center, not a cost center. In a firm that is growing, there will be no shortage of promotional opportunities. A career at an FAO provider is likely to provide an environment more conducive to professional growth through lifelong learning, the ability to leverage the firm’s intellectual property, and the market-driven imperative to continuously reinvent your skills to stay relevant.

In contrast, within a middle-market company your exposure to new processes and technologies may be limited by the company’s trajectory, budgets, and other forces out of your control. If you are so inclined, at an FAO provider you may also have the opportunity to move beyond the performance of accounting and finance activities to practice management, business development, and other market-facing pursuits.

We are fortunate to be CPAs today. We can experience the expanding array of possibilities that FAO represents for both problem solvers and solution providers.


James J. Caruso, CPA, CGMA, is partner, finance and accounting outsourcing, with RSM US LLP in Blue Bell, and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at jim.caruso@rsmus.com or on Twitter @jamesjcaruso.
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