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.