Growth in Finance & Accounting Outsourcing.

The Finance & Accounting Outsourcing (FAO) industry is undergoing tremendous change driven primarily by customer demand from the CFO / Controller for permanent general and administrative cost reduction. Whether a business is in early stages of startup or has advanced to later stages of maturity, achieving and sustaining success depends on its ability to focus on right priorities. Reducing enterprise costs is the key focus of CFO / Controllers as they have the ultimate responsibility of managing the assets of the company. The need for CFOs to grow revenues while entering new markets and reducing revenue losses, as well as a general maturing of the finance & accounting outsourcing FAO marketplace, are driving a boom in the outsourcing of finance and accounting business processes.

As per Gartner Group’s study on 2012 CIO Agenda, the top three business strategies selected by the CIOs are:

• Increase Enterprise Growth
• Attracting and Retaining New Customers
• Reducing Enterprise Costs

A recent BPO Outcomes poll measuring the state of Finance & Accounting Outsourcing(FAO) among outsourcing customers shows that FAO has substantial room for growth. According to poll results, slightly more than 1/3rd of respondents (35%) said they do not have an FAO program. The next most popular response, representing 29% of the total vote was "We outsource transactional processes like Accounts Payable and Accounts Receivable. Another 18% of respondents said they outsource both transactional processes and higher-level processes like general ledger and analytics, and 18% said they only outsource higher-level processes like general ledger and analytics. 

The FAO model which has been traditionally & successfully offered by several providers across the globe gears around the historical approach where F&A transactional processes such as Accounts Payable and Accounts Receivable functions are shifted to a lower cost location for delivery. In most instances, India leads this model because of availability of its skilled low cost labor. Large BPO providers have invested millions of dollars in the creation of off-shore delivery centers. These centers are located in major cities of India such as Mumbai, Delhi, Bangalore, Chennai, Hyderabad, etc.  While other countries have come up to offer these services, India still leads because of its availability of English speaking, educated pool of people.

Let’s look at the top reasons to outsource:

• It allows you to focus on your core top business strategies and supporting functions.
• It brings in cost reductions.
• It helps you leverage the service providers’ expertise, technology and best practices in F&A.  
• It helps you adjust internal resources from non-core activities to support core business functions.

In summary, business enterprises must focus their investments and efforts on core business strategies such as growth, customers, reducing costs, offering new products and / or services, and show results. CFOs / Controllers managing the F&A function would have to continue driving towards permanent cost reduction in the major processes of F&A.

Aria provides finance and accounting outsourcing services to help clients reduce their operational costs and to achieve a faster turn-around time. In our offshore facility, we have qualified accounting and commerce professionals who work on clients’ projects and present them with reports on regular basis. We sign a confidentiality and non-disclosure (NDA) agreement to ensure client data confidentiality. We also take internal and external security measures to protect client data.

For more information please call Sameer Sheth at 510-579-8565 or email at Sameer.Sheth@AriaBPO.com.

Trends in F&A BPO Pricing

Is transaction based pricing becoming more popular over FTE based pricing in F&A BPO deals ? This is a multi-million dollar question which does not have a clear answer. While F&A BPO providers prefer to have their customer contracts on FTE based pricing, the customers would like to have transaction based pricing for obvious reason. Let us see which model would become more popular as F&A BPO deals pick up. 

FTE Based Pricing

F&A BPO providers like to get their customers commit to certain number of full time employees being exclusively assigned to the contract for a fixed period. This guarantees a fixed income for the provider for the duration of the contract. The advantages of this model to both the sides are:

1. The provider can better plan the allocation of resources. 

2. The buyer need not worry about training and re-training as the provider would ensure that they always have the required pool of trained resources available. Hence avoiding any downtime. 

3. This model helps the buyer plan out their expense as the amount per month / per year is known. 

However, the buyers feel there are certain disadvantages for them. 

1. Buyer is required to pay a fixed amount per month irrespective of the volumes. So if the volumes go down during the contract period, the buyer is still liable to pay the amount agreed upon.

2. Since the provider is assured of the monthly revenue, the buyer feels there is no incentive on the part of the provider to improvise in delivering more. 

Transaction Based Pricing

Under this pricing model the buyer pays the provider on a transaction basis. The transactions in a F&A deal could be:

1. Cost per journal entry or accounting entry.

2. Cost per invoice for Accounts Payable or Accounts Receivable.

3. Cost per paystub for Payroll processing. 

4. Cost per expense report.

The advantages of this model are:

1. Buyer pays for actual number of transactions processed. Ups and downs in volumes don't matter. 

2. Provider can create processes which can be repeated across multiple customers. This helps the provider to allocate resources for a different customer, if volumes go down for one. 

However, the providers feel the biggest disadvantage in this model is that they cannot offer most accurate pricing to their customers unless and until the internal processes are understood properly. Lot of times even the buyer is not clear completely of their internal processes. 

In summary, both models have their pros and cons, the key is that the buyer and provider work together closely and come up with a model which benefits both.

At Aria Global, we offer both pricing models. We work with the buyer in understanding their needs, volumes and offer what would work the best for them. Call us to discuss your needs in F&A space.

Trends in F&A Outsourcing

In the era of globalization many companies have undertaken outsourcing as a part of their business strategies. As more and more companies are joining the bandwagon of outsourcing, this phenomenon is gaining a lot of attention. Recent market surveys indicate that almost 80 percent of companies expect to increase their investment in outsourcing.

Finance and Accounting outsourcing can be defined as a process in which a company delegates some of its in-house accounting/operations to a third party.
In the F&A space, companies are either outsourcing entire finance and accounting functions or sourcing single functions such as Accounts Payable, Accounts Receivable, Credit and collection, Tax Preparation, Statutory reporting and Financial Statement analysis.

Recent trends in Outsourcing F & A

• Cost pressures continue to drive companies to take advantage of cheap labor in developing country like India.
• Outsourcing of accounting used to consist primarily of invoicing, AP/AR processing and other minor tasks. Now, organizations are outsourcing their entire financial transaction processing. 
• Transaction management services are the largest opportunity within the FA BPO space while accounts payable will remains the most widely outsourced FA function.
• Increased government regulations in US and European market are prompting companies to outsource F&A to external providers.
• F&A Outsourcing is not just restricted to transaction accounting. It is increasingly covering complex and high end F&A activities like year-end finalization and statutory compliance.
• Small to mid-sized business offer fantastic opportunities for outsourcing F&A.
• Major accounting firms are depending on offshore outsourcing providers for tax returns and other services.
• A survey revealed that companies today are largely adopting F&A Outsourcing not only for cost savings, but also to transform the F&A function from a resource and cost intensive support process to an integrated flexible function able to quickly respond to changing business needs.

- Finance and Accounting is one of the fastest growing BPO segment in the outsourcing industry.
-  According to Phil Fersht, Founder & CEO of HFS Research, the market for F&A  BPO services is poised for a new phase of growth, as businesses recover from the recession and focus on new strategies to drive more efficient operations in an increasingly global economy. For complete report on F&A BPO Market Landscape, visit www.hfsresearch.com. 

Given the opportunities in F&A space, Aria Global has taken the initiative of offering cost effective F&A outsourcing solutions and services. For more details go to www.ariabpo.com. 

Welcome To Aria Global's Blog !!!!

Welcome to Aria Global's blog. Aria Global Technologies specializes in providing companies with I.T. and Business Process Outsourcing solutions. Offshore Outsourcing has become a very feasible trend for Organizations that are expanding or just trying to reduce their overhead expenses.

At Aria, we help companies in:

• Identifying the areas which can be outsourced.
• Identifying reliable companies where work can be outsourced.
• Setting up the process for transitioning work offshore.
• Creating agreements to ensure that your data / information is safe guarded and the work product is delivered on time. 

Keep checking our blog for more updates on whats happening in the outsourcing world.