While IT has long been a candidate for outsourcing, shifting accounting and finance operations to outside providers has been less common. But that’s changing. Outsourcing of finance and accounting is growing at more than 20 per cent a year as companies look to outsource the likes of bookkeeping and tax to save costs and focus on their core business.
While outsourcing can lower costs and boost productivity, there are risks that companies need to manage, including protecting confidential information. And outsourcing finance and accounting functions does not remove the need for rigorous and ongoing quality control.
Why outsource?
Stefanie Lowe, managing director of Penguin Management Services, which provides outsourced financial management and compliance solutions, says there are several reasons a firm would outsource its finance and accounting services.
A start-up firm may not want, or be able to afford, a full-time accountant or bookkeeper; international companies setting up in Australia and mobile workers, such as mining consultants, may not want the office infrastructure and costs of employing in-house finance staff; and some companies may also outsource specialised functions, such as payroll, to free up their finance staff.
Lowe says a business may, for example, have a financial comptroller doing payroll. “That may not be the best use of their time,” she says.
Companies can outsource a number of tasks, including processing accounts, preparation and presentation of Australian International Financial Reporting Standards (AIFRS) accounts, tax consolidation, tax returns, bookkeeping, cash flow and management report preparation, and balance sheet reconciliation.
Lowe says that since the GFC, there has been more emphasis on outsourcing credit control and cash management. Some accounting firms themselves are looking to outsource. “It’s happening more and more,” says Lowe. “Accounting firms also want to take advantage of the reduced cost of labour and expenses.”
