Why outsource your finance functions?

Suppose the workload does not require the equivalent of at least 2 accountants. In that case, you may face a dilemma–Hiring a junior accountant who may lack the skills for financial statement drafting, OR hiring a senior accountant whose time may not be fully utilised on tasks that could be performed by junior staff

Are you considering hiring a finance team or restructuring your existing finance team? Many small and medium-sized enterprises (SMEs) and multinational corporations (MNCs) opt to outsource their finance functions or parts of them.

A full-fledged finance team typically performs two crucial functions—

  • Ensuring compliance with regulatory requirements for financial reporting (e.g. Singapore’s Companies Act, ACRA and IRAS requirements), and
  • Providing relevant and accurate financial information that facilitates informed decision-making.

By performing these functions efficiently, finance teams can add value to the business and help drive its success.

In today’s competitive business landscape, SMEs and MNCs, face increasing pressure to optimise their operations, minimise costs, and maximise profitability. One area where many businesses are finding value is by outsourcing their finance functions. Outsourcing finance functions involves partnering with external experts to handle various finance-related tasks. Such tasks include accounting, bookkeeping, payroll processing, financial reporting, tax compliance, and more.

In this article, we will explore why businesses, including SMEs and some MNCs, outsource their finance functions and the benefits they can derive from this approach.

1. Cost saving

Businesses can achieve cost savings through outsourcing by optimising the allocation of tasks among accountants of different levels. While junior accountants typically handle bookkeeping, drafting financial statements and conducting financial analysis require more experience. Suppose the workload does not require the equivalent of at least 2 accountants. In that case, you may face a dilemma.

Hiring a junior accountant who may lack the skills for financial statement drafting
Hiring a senior accountant whose time may not be fully utilised on tasks that could be performed by junior staff

This could result in either not meeting your expectations or underutilising the skills of the senior accountant. Therefore, outsourcing is often more cost-effective than hiring an in-house team.

Outsourcing eliminates the need for salaries, benefits, and training costs associated with maintaining an in-house team. Businesses can avoid the cost of setting up and maintaining an in-house finance department, as well as investing in their knowledge and other resources.

2. Access to expertise & technology

Many areas of finance functions require specialised knowledge and expertise. Outsourcing provides access to specialists who are experienced and well-versed in specific areas, e.g. accounting standards, tax laws, etc. These experts can offer valuable insights and advice, helping businesses make informed decisions.

Additionally, outsourcing can provide access to technology that may be cost-prohibitive for businesses to acquire on their own. External accountants rely on technology and streamlined processes to ensure compliance, reduce manual errors and accelerate finance processes. This can result in faster and more accurate transaction processing and reporting. This enables businesses to stay current with the latest technology and industry best practices.

3. Focus on core business activities

Outsourcing accounting and CFO services allows a business to focus on its core activities and strengths. It frees up time and resources for other critical business areas, such as marketing, sales, and product development. By entrusting finance functions to external experts, businesses can ensure that their financial processes are handled efficiently and effectively, while they can concentrate on growing their core business.

4. Scalability and flexibility

Outsourcing provides businesses with the flexibility to scale their finance operations up or down based on their unique needs. As business needs change, businesses can easily adjust the level of services they require from their outsourcing partner. Various situations give rise to such business need change, e.g. during periods of high growth, economic downturns, or seasonal fluctuations.

Through outsourcing, businesses can manage their finance functions more efficiently without the need for lengthy hiring and training processes. It also ensures that the right level of expertise is available when needed while avoiding unnecessary costs during slow periods. This in turn enables businesses to quickly adapt to changing circumstances. So, when unforeseen events like the COVID-19 pandemic hit, businesses can adjust their finance operations accordingly, providing cost-effective solutions.

5. Better business continuity plan

Outsourcing can serve as a better Business Continuity Plan (BCP) as redundancy and continuity measures are absorbed by the service provider. In the event of staff turnover, the impact on the operations of the business is minimal as the service provider is responsible for managing their own workforce. This ensures that the business can continue its finance operations seamlessly, without disruptions caused by staff changes or turnover.

Backbone can be your outsourcing partner

We have your back. Backbone can be your outsourcing partner, providing you with professional and reliable services to support your business needs. Our team of skilled experts can assist with various finance functions. Find out more how we can help here. With our expertise and commitment to quality, we can be your trusted outsourcing partner, delivering cost-effective solutions.

Feel free to contact us!

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