Finance to Go

The steady growth of the outsourcing industry is forcing CFOs to look afresh at the entire finance value chain.

There are practical difficulties, too, admits Anoop Sagoo, vice president of Accenture Finance Solutions in Europe. Cutting loose even repetitive, transactional finance processes such as accounts receivable (A/R) is rarely as simple as uncoupling, say, payroll or other non-finance processes. “Finance in most organizations remains a spider’s web of connections between different departments, which always makes it complicated,” he says.

That’s why plenty of CFOs will continue to resist the outsourcing tide. But at the very least, the fact that the option is open to them is making many finance chiefs look afresh at the total finance value chain. In doing so, they’re delving into metrics such as cost per vendor invoice, general accounting costs as a percentage of revenue, payment cycle times for travel and entertainment in days, and A/P error rates as a percentage of claims. Says Rick Roth, Atlanta-based chief research officer at Hackett, the business advisory group: “World-class companies are looking broadly, asking, is this process of competitive advantage to me, and what’s the best way to do it? Should it be done within a business unit, in corporate headquarters, in shared service centers (SSCs) onshore or offshore, or should we outsource it altogether?”

Location, Location, Location

Hackett calls this model “selective sourcing”; others call it “smart sourcing.” For his part, Searle of Cendant TDS prefers the term “multi-dimensional sourcing,” in which cost — the traditional driver of outsourcing and offshoring — is only one input. “You look at the whole range of F&A services, along processes and across your global footprint, and map them to your existing and desired cost structure, your service delivery requirements, your available and planned systems, processes and infrastructure, your in-house and desired skill levels, and your company risk profile,” he says.

That’s exactly what Searle did while corporate controller between 1998 and 2003 at 3Com, a $700 million Massachusetts-based network equipment maker. Shared services at 3Com had been used in the United States since the mid-1990s, while the worldwide billing, credit, and collection functions were in a global centre in Singapore and three regional centers in Santa Clara, California; Buenos Aires, and Hemel Hempstead, in the United Kingdom.

After spending a few years rolling out various performance improvement initiatives — including document imaging technology, electronic funds transmission, and online expense reporting — Searle turned his attention to location, and the optimal distribution of finance services. Having looked at possible outsourcing alternatives, Searle and his team decided to ship out a number of global functions to the centre in Singapore — among them fixed asset accounting, vendor master maintenance, and English-speaking expenses processing and reimbursement. Meanwhile, despite the higher labor costs in the United States, an assessment of “risk and complexity” led Searle to retain certain activities in North America, such as worldwide commission processing and payment, inter-company accounting and sales data management. Finally, the team decided to leave several processes in the old regional hubs — such as general ledger, revenue accounting, local payroll and VAT compliance — largely because of language and time zone considerations.

Discuss

Your email address will not be published. Required fields are marked *