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Handing Off Finance

Small and midsize companies finally benefit from finance process outsourcing.

Re’Nu Office Systems may seem an unlikely candidate for financial business process (BP) outsourcing. After all, the Santa Fe Springs, California-based firm generated only $10 million in sales last year and employed a finance staff of five — hardly the profile of a traditional outsourcing client, one that usually signs a large, multiyear, multimillion-dollar contract.

Still, the company, which refurbishes and manufactures office panel systems (the walls that make up office cubicles) needed finance support. Before Re’Nu was acquired in February 1999 by $125 million office-workstation and equipment-marketing firm Business Resource Group, president Leigh Cook says, “We just couldn’t provide our new parent with all the types of information that it wanted as fast as it wanted with the staff we had. [Hiring] a controller probably could have whipped our finance department into shape, but the time the hiring would have taken would have been huge, and it would have been unfair to throw that at any one person.”

In response, Re’Nu outsourced its finance department in November 1998 to LOR Management Services LLC, a former CPA firm based in Los Angeles. LOR now handles all of Re’Nu’s finance functions, including monthly reports to its parent. The company also acts as Re’Nu’s application service provider (ASP) for its finance software package, Great Plains. And although Re’Nu encountered some initial bumps with connectivity to the remotely hosted programs (due to problems with an unrelated installation of a high-speed line), Cook says he is very pleased with his new outsourcing arrangement. It currently costs a fixed fee of $15,000 a month and has allowed Re’Nu to reduce its finance staff from five to two, one of whom is a newly hired controller who oversees the outsourcing contract.

Until recently, however, a company like Re’Nu probably wouldn’t have been able to secure a business process outsourcing contract at all. Such contracts are usually large and long term (10+ years), with the company’s existing staff and relevant equipment assets absorbed by the outsourcer, and with the client billed on a cost-plus basis. In addition, the primary financial BP outsourcers have been the Big Five accounting firms, which, until recently, wouldn’t even look at a client unless it had sales of more than $1 billion.

But a convergence of several factors has made it easier for clients like Re’Nu to find financial business process outsourcing (BPO) on a small scale. The Internet and the availability of bandwidth, for example, have allowed a new genre of outsourcers to arrive on the scene. Called “growthsourcers” by some, these financial outsourcing boutiques are springing up all over the country and delivering their services via the Web, which allows them to target a smaller market by centralizing their operations into shared services centers that serve multiple clients.

For their part, companies have grown increasingly comfortable with handing off processing functions of all types. And a hot job market argues in favor of that trend. Although no size estimates are available for this new market area, today, start-ups, dot-coms, and small and midsize firms are just as capable of outsourcing their financial functions as the big corporations are. In fact, says Frank Casale, executive director of the Outsourcing Institute, an outsourcing research, consulting, and marketing firm, “in the last three years, we’ve been overwhelmed with requests for information and help from small companies that want to use outsourcing across the board.”

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