Outsourcing Financial Services in 2020

Outsourcing Financial Services in 2020

February 26, 2020 0 By Draga Mihalkov

It was revealed that outsourcing in foreign practice, including financial, both in the domestic market and in the external one, is directly related to many components of the enterprise’s competitiveness, it provides the following benefits. SpdLoad writes a lot about outsourcing, especially how to outsource web development. 

The ability to concentrate resources on the main business processes, as non-core, but providing vital processes for the functioning of the business entity, as well as requiring special training and high qualifications, for example, financial activities, are transferred to the outsourcing company, the leader in cost reduction and competitiveness in this direction.

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Having outsourced these non-core business processes, the client company’s management will be able to concentrate on the core business, trying to make it innovative.

Outsourcing allows business entities-clients, mainly organizations of small and medium-sized businesses, to attract highly qualified services of professionals of outsourcing companies at lower prices in the labor markets. Using outsourcing, an enterprise for many types of activities can reduce costs or even reduce them to nothing, including selecting specialists, further improve their qualifications and training. The annex to the contract describes the level of quality of the services provided (Service Level Agreement, SLA), the responsibility of customers and contractors for certain actions and the timing of their execution is recorded.

In addition, when concluding an outsourcing contract, it becomes possible to distribute risks for the correct implementation of any actions, for example, in accordance with tax legislation, between partners (client and contractor). When outsourcing, including in financial outsourcing (especially international), there is an introduction to the best examples (financial instruments, technologies) of conducting a business process in practice. Resource and financial advantages include obtaining world-class technology at a lower cost.

Image source: affinityoutsourcing.net

Investing in innovative technologies requires financing and is risky, and at an incredibly fast pace of change in information technology, it is difficult to keep pace with all innovations and new solutions in the field of financial management. It becomes advisable to use the services of outsourcing companies that have resources, experience, and constantly support technology at an innovative level.

The introduction of integrated computer systems that have network support and are managed from geographically remote SSCs (shared services center) has led to the transformation of finance functions, including associated with processing transactions that require significant time. Significant changes are taking place in the financial decision support systems that add value/value to the company and, as a result, transform the “functions” of financial managers. Conventional financial and managerial activities are designed based on web technologies, cloud technologies, as a result of which the costs of business entities are reduced by 30-70%.

business transaction

source: russoassoc.com

In 2020, using web support, half of all types of finance functions will participate in the organization’s activities and will be aimed at continuous monitoring and implementation of competitive advantages. Modern professional financiers, including Ukrainian companies, spend a lot of time processing transactions and solving technical problems, which is not at all typical for financiers of companies in developed countries that are players in international outsourcing services markets.

The transformation of the functions of financial management will require advanced training of performers, the integration of their work in other units of the business entity, taking into account the changed conditions, including and in world markets, where the outsourcing financial services market and its constituent segment appeared – the financial outsourcing services market, in which foreign financial services providers act both as customers and as service providers.

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The above advantages help reduce the costs associated with financial management, allows you to more effectively manage finances and be integrated into the business process, which helps to focus on customers and services, add value across the organization, and also respond in a timely manner to constantly changing customer needs. Financial outsourcing (F&A) service providers typically provide one-to-many services, which contributes to the emergence of a “scale effect”. The new function of finance is to ensure that finances are used as efficiently and productively as possible.

F&A service providers in international practice for the development or use of new financial instruments acquire licenses and become active participants in the international market segment AF & S and F&A services. Specialists of the financial services executor, using outsourcing as a tool in financial management, should perform the usual functions: planning (current and strategic financial planning); drawing up budgets, estimates; providing sources of financing, searching for internal and external sources of short- and long-term financing; financial resource management; cash management in accounts and cash registers, in settlements, securities portfolio management; loan management; accounting, control, and analysis; formation of accounting policies (UP), processing and provision of accounting information in the form of financial statements, analysis and interpretation of results, internal audit; asset protection, risk management, choosing the best way to ensure risks.

Image source: finance-monthly.co

Advanced features include a guarantee of value to shareholders and other interested parties. In foreign literary sources, “finance” is considered a factor in changing the value and value of the company. The transformation of the functions and role of finance should be aimed at improving the performance of companies, while financial and other resources should be used most efficiently and rationally as soon as possible within the entire business. This will be facilitated by both web support and other tools.

To support the competitiveness of the outsourcing company’s specialists, it is necessary to solve the following tasks: professional retraining of employees, guaranteeing the formation of competencies in terms of collecting, analyzing information, including the design and implementation of processes with web support, including using models and systems of business intelligence and systems for managing performance indicators and monitoring; participation in the reengineering of organizations with the cultivation of the transfer of broad authority and responsibility; taking financial perspective into account when evaluating ideas and proposals aimed at improving the business, etc.

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Currently, the services of an outsourcer in financial management, with some exceptions, are not very popular in Ukraine. In developed countries, for example, the Society of Management Accountants of Canada, in its publication Redesigning the Finance Function, reports that the updated finance function will require experience and skills to provide customers with analytical and strategic services as presented in the works of M. May [5]. Researchers at the Institute of Management Accountants (IMA) report that in advanced economies, professional financiers are already divided into three categories:

a) business consultants, specialists who provide recommendations and support SBUs (strategic business units) carrying out actions aimed at a continuous increase in performance indicators and to add value, including using business intelligence systems that run web-enabled processes that use scenario planning. As a management tool, they already use financial outsourcing F&A and other outsourcing financial services A&FS;

b) business analysts (business analysts), who act as financial management specialists, perform the functions of a service provider, analytics, etc., monitor performance indicators, generate reports by areas of activity (SBU) and carry out competitive analysis and financial controlling, as well as performing some functions of financial management and carrying out management accounting;

c) technical specialists (Technical Specialists), specialists in the field of financial management and accounting, carrying out traditional tasks of transaction processing, as well as engaged in financial and control activities, preparing reports, exercising its control, which is aimed at reducing the costs of their activities.

These specialists manage issues of tax planning, accounts receivable and accounts payable, carry out the solution of treasury tasks using web support and with the further transition to a virtual treasury function.