The new de facto CFO? Accountants.

The role of being a trusted advisor will always be the sole domain of accountants

More and more accountants are outsourcing offshore to not only meet changing client expectations, but exceed them by becoming a de facto CFO.

With the end of another Financial Year on the horizon, many accountants are increasingly time-poor, resource-stretched and perhaps prone to using a phrase they know their clients may not like: “I’ll get back to you.” It doesn’t have to be this way. 

Outsourcing non-core, labour-intensive accounting and finance activities such as tax compliance and various transactional functions has been going on for years. Automation has replaced some lower level jobs, but more frequently reassigned and elevated them. 

It has also created greater cost efficiencies and a new opportunity for accountants to focus on higher end, strategic work. In other words, to do what a chief financial officer (CFO) does.

Why it works

A successful outsourcing model is managed through metrics and dashboards. All processes are documented in detail, with screen shots, rules and exceptions, making them less person-dependent and increasing the focus on six sigma tools. 

At its core, business process outsourcing (BPO) aims to reduce operating costs, add the benefit of a scalable back office and standardise processes. Small and medium-size accounting firms, in particular, frequently see a reduction in processing costs through access to state-of-the-art software. 

Interestingly, however, in a study conducted by UK firm Arvato, only 10 per cent of BPO clients described cost-cutting as the primary role of a BPO provider, perhaps suggesting that the game today is more about working smarter than simply cheaper. Access to specialist skills and expertise was nominated by 72 per cent of survey respondents, with 66 per cent citing “growth and expansion potential”.

Leveraging time differences to the advantage of local firms facing seasonal pressures or with a need to process surge loads is often also a driver.

Information security

This is not to say there has not been pushback on BPO, particularly with regards to some offshore jurisdictions. The patchy performance of international call centres has not helped the reputation of BPO, especially in Australia, but according to Harish Rao, Melbourne-based Global Head of Business Development, who leads the Australian office of Chennai based Sundaram Business Services, it mainly comes down to resistance to change and, more significantly, aversion to risk.  

Unfortunately, no organisation is immune to information security breaches, and wherever and however they happen, there is fallout. As such, information security is always top-of-mind among CFOs

To minimise potential risks, no one gets past Zone 1 – the general admission area – of SBS with a BYOD (bring your own device) unless it is a tracked, company-provided unit. The organisation is ISO/IEC 27001:2013 certified, meaning third parties actively test its defences. 

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Biometric scanning governs access to the main operations area and once inside, everything is under CCTV surveillance. The facility is paper-free and all external storage devices, such as USBs, are disabled.

“The only way to get information out is to memorise it,” Rao says. “When it comes to security, it’s important to be satisfied.”

Rapid growth

Whereas finance and accounting outsourcing (FAO) was once something of an unknown quantity and some people even feared it, Rao says this is now largely a thing of the past. In fact, in a relatively short time FAO has become a very big business.

“In terms of annual contract value, the global FAO market is currently at US$7.2 billion, with captives at offshore locations in India, Philippines and Eastern Europe worth about US$2.5 billion,” says Mohit Sharma, director of research and consulting firm Mindfields.

He notes, however, that as a raft of new processes such as statutory reporting, consolidation, general ledger analytics, actuarial valuations, and quantitative risk modelling are currently being considered for offshoring, the FAO market is set for a boost in the quantity and quality of services it delivers.

Time to value-add

All of which should be music to the ears of accountants.  

Offshoring companies have access to state-of-the-art technology that would be expensive to bring in-house and train internal employees to use. Further, developing countries are producing an ever-increasing number of university graduates and technology is making it simpler to work with teams remotely.

The ability of offshore providers to cut overheads, handle increasingly complex tasks and simultaneously empower companies to simplify their finance and accounting services, has another upside – it gives back to accountants the time to focus on their core competencies and stay abreast of the ever-changing skills demanded by clients.

“We’re just a piece in the larger jigsaw,” Rao declares. “A lot of the work accountants have done in the past is now being perceived as a cost, rather than value-add. Forward-thinkers have started to reinvent themselves and play the role of CFO for their clients.

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“Being able to manage cash flow doesn’t necessarily make you a good finance person. 

“Accountants are entering a different space where they can add real value, but previously they never had the time to do that. Compliance obligations cluttered around short timeframes meant they had little opportunity to advise clients on how to actually improve their business. They could talk about tax planning, but not become an advisor to people in specialist industries. There just wasn’t the time for them to obtain an industry-wide view.”

Rao believes accountants are using offshoring as a way to deal with that. They’re using it to become the finance department of their client – “you run your organisation; I’ll become your CFO”. They’re offshoring things that are rule- or knowledge-based – “anything that has no ambiguity.”

Business protection

Conversely, there are also benefits in staying close to some traditional bread-and-butter activities.

“Accountants usually outsourced bookkeeping to local bookkeepers,” notes SBS CEO Rajesh Venkat. 

“But it’s easy for a rival to build a relationship with your client either because they say they can do the work at a lower cost or with a better value-add. 

“We have started to encourage our clients to still take on bookkeeping because it makes their clients ‘stickier’. It’s difficult to change accountants if you’re part of that client’s whole finance process. 

“Historically, accountants fed work to bookkeepers because it was cheaper than doing it themselves. Moving the process offshore is cheaper than both.”

The “chocolate” factor

Venkat is quick to emphasise that the role of being a trusted advisor will always be the sole domain of accountants.

“The way to look at outsourcing is in terms of importing a service,” he says. “In a globalised economy, people have been importing products for years. You buy imported Swiss chocolate because the Swiss make chocolate well. People in some countries are able to run large process-oriented accounting factories, and you can import that as a service. It’s no different to buying a product.”

However, that service does not extend to replacing the specialised, expert financial advice an accountant can provide to clients.

 “That is where only accountants can excel,” Venkat says. “Outsourcing providers are good at running everything like a factory – tracking movement through the lifecycle of a job, putting in place the right IT systems and quality control processes, making sure there are appropriate controls for information security, while ensuring accuracy and on-time delivery.
“To do all of that, you need scale. A good outsourcing provider adds automation so that accountants can add value for their clients.” 

THINK BEFORE YOU LEAP

Freeing accountants to take on higher, value-adding activities can benefit their careers, their firms and its clients. Sundaram’s Harish Rao says that as is the case in any growth sector, outsourcing is not without fly-by-nighters.

Before outsourcing finance and accounting functions:

  • Identify your main strategic drivers.
  • Evaluate the full range of options: Do you have the expertise and staff to manage transitioning processes to an outsourcing provider?
  • Assess the internal capabilities of the provider: Does it have proven information security, quality control and other skills necessary to manage the outsourced processes?
  • Check experience and track record: Does it have a diverse portfolio of successful projects under its wings?
  • Technical expertise: Ensure the provider has done or has the ability to do your work in the format you need. Request a road map on how it will approach, develop and deliver what you require.
  • Pricing: Even if you are outsourcing only to save money, don’t opt for a provider based just on its bid quote. Choose one that understands your needs and never appoint a company that bids too far below your budget. 

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