One of the trickiest balancing acts for any finance leader is resource planning. That is, do you have the resources required to meet consumer demand or to effectively complete admin requirements.
It’s about finding a Goldilocks zone in terms of headcount. If the finance team headcount is too high, you’ll be incurring significant overhead without fully utilising staff. And if your staffing is too lean, you’ll struggle to get everything done without overworking staff.
Using outsourcing to fulfil bookkeeping and compliance requirements can be an effective way of overcoming this dilemma. Working with a third party, whether locally or with an offshore provider, allows you to flex resources when needed.
Business process outsourcing can be an efficient way of cutting costs. By only paying for service delivery as and when needed, you won’t have to worry about staff being underutilised.
It can also be cheaper than hiring additional staff members as you won’t have to pay for additional costs such as office space, computer equipment, benefits and employer taxes.
You can engage with suppliers to deliver jobs either at a set price or on an hourly basis. If work is delivered at an hourly rate, you can also cap fees.
Both options let you accurately budget costs associated with the finance department. With the price per job basis giving you confidence around the certainty of work being delivered on a project basis.
Outsourcing also allows you to scale resources up and down in line with the requirements of your business. For example, you may require more support during annual audits when finance team members are pulled away from business as usual to support auditors.
It’s critical for core team members to have adequate resources for audits. Getting audits filed speedily and on time will be a requirement for existing investors. Failure to do so may make raising further investment rounds or agree debt facilities more challenging.
Business process outsourcing frees up your finance team to focus on the audit. And lets them provide a better level of service to auditors. While also enabling existing everyday data processing requirements to continue unaffected.
Consider outsourcing any finance workflows that aren’t value-adding or strategic. These can be summed up as activities heavily reliant on data processing, including:
It’s still essential that these are completed in a timely and accurate manner. So finance team members will need to manage assignments and allow sufficient time for reviewing the output of outsourced work. If you are outsourcing VAT, why not check out our previous post on how to review VAT returns.
Strategic work which you should keep in-house includes:
These require team members to be ingrained in the day-to-day business to have timely oversight of how the company is performing and short- and long-term goals.
This range of tasks required a higher-value skillset than data processing. Team members will need to demonstrate strong communication skills, commerciality and an ability to manipulate and interpret data.
You might want to outsource certain business functions – but you’re unsure about what to include in a SLA with third party provider. Here’s a quick cheat sheet on what to include.
SLAs should agree on the full scope of work, including responsibilities and set timelines. Providing more detail will minimise the likelihood of disputes from suppliers.
For example, if you are outsourcing VAT returns, include set recurring deadlines for activities and cover what each party is responsible for.
As a rule of thumb, a timeline for outsourcing VAT returns may require you to submit transactions to the outsourcer two weeks after the period end. Give them a week to complete work, with the output being sent to you for review before they file the approved return.
Ensure SLAs cover security so that confidential company data isn’t leaked or misappropriated.
Alongside the need to protect this for organisational purposes, you may have an additional requirement by the FCA if you are in the financial services sector. You could face fines if adequate precautions are not put in place.
Ensuring outsourced suppliers incorporate GDPR is a good place to start. The gold standard is that they use tools accredited with the highest security measure, such as ISO 27001 and SOC 2.
To get comfortable with outsourcing, test the waters with relatively simple tasks. Such as weekly bookkeeping, to assess the quality of work from suppliers and become familiar with reviewing their work.
Once you can see outsourcing works for you first hand, you won’t look back.