5 Ways Company Leaders Are Using Finance Outsourcing to Grow Their Businesses

A version of this article first appeared in CXO Today.

As company leaders are tasked with doing more with less, moving at an increasingly rapid pace, and navigating widespread accounting and finance talent shortages, finance outsourcing remains a relevant topic for CFOs and businesses today. Finance outsourcing can have extensive impacts by enabling a Finance function to rapidly expand its capabilities, often allowing it to bypass the cost- and time-intensive process of acquiring those resources organically and support the broader organization more timely and comprehensively. Approaching finance outsourcing as an organizational initiative—with a deliberate plan—allows company leaders and CFOs to optimize performance and ensure success.

Here are five ways businesses can optimize finance outsourcing and improve performance:

(1) Drive cross-functional sponsorship and support.

Given Finance’s role in supporting the business, the impacts of finance outsourcing are typically felt across the organization.  To realize maximum benefits, it’s critical to Identify internal cross-functional champions and drive alignment early in the process. Successful outsourced finance functions deliberately engage with cross-functional teams to solicit and act on feedback regarding the scope of services provided, responsibilities of impacted parties, key operating procedures, and performance metrics.

(2) Rigorously define and measure against business requirements.

A newly minted CFO of a private-equity-backed business may need an outsourced finance capability to help deliver routine services under a more efficient cost profile, while an experienced CFO of a publicly traded organization may rely on an outsourcing provider to add additional interim capacity during times of peak activity.  Regardless of the situation, successful CFOs and their teams should define a tiered list of business requirements that an outsourced capability must support, and then continuously measure against those requirements to ensure needs are being met. As the financing outsourcing capability continues to mature, those original requirements can be reevaluated to ensure the value provided continues to evolve with the changing needs of the business.

(3) Beware of common outsourcing pitfalls.

When the business case around finance outsourcing fails to yield the expected benefits, leaders often fault 1) quality or accuracy issues, 2) a failure to anticipate or control for hidden costs, or 3) an operating environment misaligned to supporting its customer(s).  Company leaders and CFOs should ensure the finance outsourcing transformation team has expertise in integration planning and management (e.g., service level agreement (SLA) design, program management and communications, etc.), operating model design (roles and responsibilities, performance management, internal controls and governance, etc.), and technology enablement (performance visualization, data aggregation and reporting, etc.). Expertise in these areas can mitigate, lessen, or even eliminate the impact of common pitfalls, clearing the way for a company to realize the benefits of finance outsourcing.

(4) Evaluate alternative or non-traditional options.

Traditionally, CFOs had a standard set of choices for business process outsourcing (BPO) service providers.  Most providers offered established, longer-term delivery options located in lower-cost locations that capitalized on the benefits of performance at scale and labor arbitrage.  These solutions could be the right choice for some CFOs at larger or more mature organizations. Alternatives are also available to those businesses that may not fit the typical BPO client profile, including short- and long-term solutions like interim managed services, BOT (build, operate, transfer), and hybrid outsourcing in diverse locations. These options provide CFOs with more flexibility around things like cost, contract duration, the scope of services provided, and delivery model structure. The alternatives can also allow companies to tailor an optimized support model when a traditional provider isn’t the right fit.

(5) Engage the right outsourced team that can expertly tackle short- or long-term needs.

Knowing that pressing needs will arise alongside more extensive and visionary initiatives, company leaders and the office of the CFO should develop a network of advisory professionals that can provide finance outsourcing to meet short-term needs and support longer-term strategies. For instance, an interim CFO could use an outsourcing model to support the rapid implementation of a new bolt-on customer invoicing technology solution, allowing the organization to realize benefits like derisking the cut-over by providing additional resources to operate in parallel on two systems or allowing internal subject matter experts additional time to review and edit key data.  By contrast, outsourcing efforts can be more comprehensive and far-reaching and might require specialized expertise. For example, an outsourced team could oversee audit cycle issues and support a multi-year effort involving restatements while overhauling accounting processes for several target company acquisitions and integrations. Here, it will be critical to engage outsourced expertise that is available for a longer engagement, provides the requisite skillset, and can ensure a sufficient level of resource continuity and minimize repeated cycles of knowledge transfer and training.

In today’s operating environment, CFOs have options and flexibility in the design of finance outsourcing delivery models that were previously unavailable. Realizing the full, strategic potential of finance outsourcing relies on consistent, effective planning and communications throughout the organization. Success also depends on partnership with a team that has the necessary experience and capabilities to avoid common pitfalls and respond appropriately to a variety of scenarios.