To understand why is so effective at saving firms money, you should first understand that companies like yours tend to have “core competencies” — those capabilities that the firm can do so well it stands out from other companies.
For example, a bakery’s core competencies include producing the finest quality dough, operating industrial ovens, and serving baked goods to customers. Most bakeries would not consider accounts receivable collections or bookkeeping to be their “core competencies.”
Every hour spent on these extraneous, non-core tasks reduces the operating effectiveness of the bakery. The same applies to your business: Every hour spent on an accounting task is an hour that is not spent on winning new customers, delivering quality products and services, and developing new and innovative products and distribution systems.
In this guide, you will learn about the key benefits of accounting outsourcing, as well as the implementation process and best practices for ensuring a smooth engagement.
The Tangible Benefits of Accounting BPO Services
The most apparent benefits of outsourcing your accounting function are the reduction in fixed employee costs and ancillary benefits such as insurance and retirement plans that most employers must offer to stay competitive.
Other benefits include:
- Cost savings: Hiring, training, and retaining a full-time accounting team can be costly. Outsourced providers can deliver the same services at a reduced cost due to economies of scale.
- Access to expertise: BPO firms specialize in financial services and stay updated with changes in regulations and industry standards. They provide a team of experts who can handle complex financial tasks proficiently.
- Scalability: BPO services can easily scale with your business. As your company grows, the outsourcing partner can adjust the level of service to meet the increased demand.
- Enhanced focus on core business functions: With accounting tasks outsourced, companies can concentrate on their core business functions, leading to enhanced performance and productivity.
- Risk mitigation: Outsourced firms often have robust systems in place for data security and are updated with compliance requirements and U.S. GAAP standards.
The BPO Accounting Process Explained in Easy Steps
Naturally, management accounting falls under many different disciplines, including auditing, technical accounting, and more basic processes like bookkeeping.
The accounts receivable collection outsourcing process looks like this:
- Select a partner: Your firm should evaluate potential service providers on their expertise, technology infrastructure, legal compliance, cost-effectiveness, and track record in accounts receivable collection.
- Transfer receivables data: This could involve securely sharing digital files or providing access to your firm’s accounting system and CRM platform.
- Begin collection process: The outsourcing partner will then take over the process of contacting debtors, following up on overdue payments, and carrying out any necessary legal actions. They might use various techniques, such as letters, phone calls and emails.
- Receive performance reports: These reports can include information about the status of each account, amounts collected, outstanding balances, and other key metrics.
- Evaluate changes in key activity ratios: The most common accounting ratios to evaluate include the accounts receivable turnover ratio, working capital turnover, asset turnover, and inventory turnover, in addition to days payable outstanding.
How to Avoid the Downsides of Outsourcing
As with any function, outsourcing the accounting work stream can result in difficult challenges if not handled appropriately. Below are several best practices that are especially helpful for managing these outsourced services:
- Due diligence: Conduct a thorough evaluation of potential BPO partners. Consider their track record, expertise, data security measures, and client testimonials before making a decision.
- Clear communication: Establish clear communication channels and regular reporting schedules to stay informed.
- Set expectations: For maximum success, most companies will establish service level agreements (SLAs) that include key performance indicators (KPIs) to monitor the quality and efficiency of the team. Metrics could include the accounts receivable turnover ratio and return on assets.
- Privacy and security measures: Ensure that the BPO provider follows strict data security protocols to safeguard your customers’ private data and other identifiable information. Failure to do so can cause your firm to incur major legal penalties, including lawsuits and governmental regulatory actions.
- Gradual transition: Instead of outsourcing all processes at once, consider a phased approach. Start with less critical functions, evaluate the performance, and gradually extend the scope of outsourcing. For instance, start with expense bookkeeping and transition to more complex functions like receivables collection.
Learn More About BPO Accounting Services Today
Ready to get started? Learn more about how outsourcing your firm’s accounting processes can boost operational efficiency. Call 800-684-2276, request more information online, or send an email to contact@confieBPO.com.
