Why the Outsourcing of Financial Services is Gaining Traction

 
Outsourcing is on the rise.
 
Digitalism had already accelerated the adoption of this business practice, moving it from a purely cost-saving measure to an integral aspect of a modern corporate strategy. But COVID fast-tracked this digital transformation within companies by an  average of six years . Now, savvy business owners are outsourcing non-revenue-generating activities, like their financial services.
 
But why is outsourcing financial services gaining traction with large and small companies alike? 
 
Here are the reasons your business should consider this nimble business strategy. 
 

Should You Hire Internally or Outsource? 

 
In the primordial stages of the business lifecycle, the initial members of the company juggle several duties simultaneously. Many of these ad-hoc roles may not be in their wheelhouse or original job description. For instance, on any given day, a business owner may have to play the role of CFO, accountant, marketer, salesman, and manager.
 
Early on, this lack of expertise is usually not a significant hurdle. However, as the company grows, the management of each role becomes more time intensive and complex. 
 
Eventually, the various tasks become too big for one person to handle. When that happens, you have one of two choices: hire internally or outsource the job to a specialist. 
 
Practically every growing company will inevitably face this dilemma. Depending on your business, either option could work. In the past, most companies preferred to keep all hiring in-house. But today, the tide is turning; increasingly, businesses are outsourcing at least some of their activities so that they can focus on core competencies. 
 
And one of the most popular areas for outsourcing has become financial services. 
 

What Are Outsourced Financial Services?

 
Proper management of finances and bookkeeping is an essential element in the success or failure of a business. Because of its importance, historically, companies preferred to maintain an in-house finance and accounting department. 
 
However, that  practice is shifting .
 
Increasingly, modern companies are turning to expert accountants, controllers, and CFOs for part-time assistance and guidance. Depending on the business and its needs, they may hire a single accountant for a specific critical initiative, such as preparing taxes. Or, they may outsource their entire accounting and finance departments.  
 
And what is considered a part of outsourced financial services? Common services include: 
 

• Accounting Services  – Outsourcing accounting can save a business valuable time on data entry and reconciliation, minimizing errors and accelerating the month’s end close. Common tasks accounting services cover include: 
• Accounts payable and accounts receivable
• Month-end close
• General ledger reconciliations
• Transaction Coding

• Controller Services  – Some companies maintain an accounting department but do not have an expert capable of managing the team and guiding its actions. By hiring a financial controller, you could receive access to a financial adept who can:
• Prepare financial statements
• Implement accounting system integrations
• Train and manage the accounting staff 

• CFO Services  – CFOs play an essential role in a company’s long-term success, translating financial data into strategic financial growth initiatives. A fractional CFO could provide insight and support that covers: 
• Strategic advisory
• Budgeting and forecasting
• Financial modeling
• Staff training and mentoring
• Risk management 

• Audit and due diligence readiness  – Some financial service outsourcers provide M&A and regulatory support. The  right  experts could assist your company as it prepares for an audit or performs due diligence. 

• HR Services  – From onboarding to payroll and compliance, many of Human Resources’ day-to-day tasks fall under the auspices of the financial services department. Some financial service outsources will also cover the  primary  duties of an HR team. 

Benefits of Outsourcing Financial Services

 
Several factors contribute to the growth of financial services outsourcing.
 
For growing businesses, some of the key advantages include: 
 

• Cost-savings  – Outsourcing is almost always cheaper than hiring an employee in-house. There is no need to pay a full-time salary and benefits. Furthermore, you can save time, money, and energy by avoiding the lengthy recruiting, hiring, and onboarding processes.
• Financial flexibility  – A fractional financial service provider works when and where you direct them. You have the power to dictate the level of support required. This allows you to save when there isn’t work or scale up financial support as circumstances demand.
• Specialization  – Some business owners have the knowledge and experience to handle bookkeeping activities early on. But the vast majority of business owners will reach a stage in the company’s growth where bookkeeping and reporting become too complex or time-consuming for them to handle. By entrusting such activities to specialists that fully understand your industry’s financial compliance and regulatory requirements, you ensure that you and your employees can focus on core competencies that drive revenue.
• Expert insights  – Whether you receive support from a CFO, a controller, or an accounting expert, each outsourced financial service provider offers years of relevant industry experience necessary to move your business in the right direction. For instance, an outsourced accountant could help you: 
• Ensure compliance 
• Gain access to accurate, critical data
• Minimize errors  

• Access to better tools  – Growing businesses have to minimize overhead costs. By outsourcing financial services, you can save money that would otherwise be invested in various financial tools and technologies while still benefiting from their availability.
•  Compliance – Depending on your industry, you may be beholden to several regulatory and compliance requirements. Financial reporting for them can be incredibly complex. Top financial service providers will stay up-to-date with the most recent laws; their knowledge can help ensure company compliance while reducing the risk of violations.