Why is there such a trend toward outsourcing financial services?

These days, it seems like more and more companies are turning to outsourcing to take care of several arms of their businesses, for processes, and tools. Why is this trend so popular?

Why is there such a trend toward outsourcing financial services?

When it comes to financial services such as accounting, or ledger management, there are several reasons why businesses, FDs and CFOs are choosing to outsource.

To start with, outsourcing to specialists can be useful as companies would be working with industry experts, who are up to date with any new regulation, technologies, threats and sharing best practices in the industry.

Benefits, according to CIMA Global, include:

  1. Reduce costs;
  2. Gain access to better talent;
  3. Address staffing issues and labor shortages;
  4. Gain access to better technology;
  5. Improve processes and productivity;
  6. Reduce risks associated with ineffective inhouse processes;
  7. Re-assign employees to higher-value activities.

In addition to gaining access to a pool of specialised talent to which a business may not otherwise have, outsourcing financial services to an external company might free up resource, which can tie up cash flow and not allow the business to focus on what it does best. So, what can be outsourced within a business?The list is long, but in general, these are some of the things that are commonly outsourced in this area:

  • Credit analysis
  • Company valuations,
  • Stock tracking
  • Payroll
  • Accounts payable
  • Statistical analysis

Financial services can get complex, especially when operating in multiple jurisdictions, working in different currencies, across different shareholding companies or company entities, and it’s unlikely that mid sized companies would hire experts in all of these fields as employees. A specialised financial services company, by contrast, will have experts on hand (business experts, maths experts, statisticians, and recent MBA graduates whose sole jobs are to take care of the financial dealings of businesses like yours.

Outsourcing firms are in the business of staying on top of their field and of providing the very best in current best practices to their clients. To do that, they are constantly staying on top of developments in the industry, upgrading their hardware and software, and retraining their staff to stay abreast of the most current ways of doing things. In this way, they can provide clients like you with the best possible service. If a business were to take on these tasks themselves, they would likely spend a lot of money trying to keep on top of this, and might not be as successful as a dedicated firm that is being able to stay at the forefront of their industry.

Finally, another reason many companies are trending toward outsourcing their financials is that outsourcing allows for automation and the reduction of a company’s carbon footprint. When you take care of your financial tasks yourself, you go through a lot of ink, toner, paper, electricity, etc. Most dedicated financial companies work electronically, storing records and conversing with customers electronically, thereby reducing their – and your – carbon footprint.

There are many reasons why so many companies are heading in the direction of outsourcing for their financial needs. The reason you may want to do so are individual to your business, but these are the most common reasons so many companies are exploring this option. Why not see if the decision to outsource your financial services to tempCFO is right for you?

Further reading: TFG explores top productivity tools for small businesses


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