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Financial and Accounting (F&A) Outsourcing Opportunities

Due to current economic slump, many small businesses from developed countries are considering finance and accounting outsource services like accounts payable, account receivable, and general bookkeeping services. As the small business see the value beyond cost savings in large corporations due to higher-value F&A outsourcing, they are considering outsourcing higher-value accounting projects like accounting and financial process innovation, real-time accounting integration, budgeting and forecasting. Some small businesses are considering outsourcing their entire accounting and financial operations to outsource vendors. Increasing confidence in accounting outsource providers skills, availability of tools and technologies, and accounting process standardization are making the shift for the small businesses on outsourcing higher-value accounting projects.

Accounting outsourcing provider maturity in Small Business
Both the accounting outsourcing buyer and the provider relationship has matured for the past several years. Now several small businesses are considering their accounting outsource providers as the strategic partners. They are not using the accounting outsource providers just to save cost but to introduce innovation and efficiency in their accounting and financial business processes. Outsource providers have been continuously improving their service offerings using both technology and accounting business process innovations. These accounting outsource providers have been working with several small businesses and CPA firms for several years, each small business has its own accounting software packages and use different accounting processes to maintain their business transactions. By working with several small businesses the outsource providers learned to standardize and reuse the accounting process improvements across different vertical domains like retailing, manufacturing, and service based industries.

As the accounting outsource providers gain accounting business knowledge for a particular vertical industry, now they are started marketing their services to other small businesses on that business domain. As they gain accounting process experience naturally, they are finding their own niche in vertical business domains to sell their services.

Accounting Software Integration
Financial accounting business processes integration is another important trend in small business accounting outsourcing that started recently. Most of the small businesses have been using more than one software package to mange their financial and other business data:

• Accounting software like Netsuite, QuickBooks, and Sage
• ERP systems like Epicor and IQMS
• CRM software like Microsoft Dynamics CRM and Onyx CRM software

Small businesses use many other homegrown software tools and technologies to manage their day-to-day business operations. All these software are running in silos, and the business owners have difficult time in consolidating all their business data. They need the integrated view of all the data to produce various reports and to set strategic directions for their company. They have two choices to integrate all their financial and account data:

• Upgrade from different software technologies to use enterprise software like SAP or Oracle to mange all their financial data and business transactions.
• Develop custom interfaces using in-house IT team to integrate all their software systems
• Outsource their financial and business data management

Among the three choices, outsourcing is the cost-effective choice for the small businesses. Small businesses are already outsourcing their general bookkeeping, accounts payable, and accounts receivable tasks to outsource vendors. It is logical step to outsource integrating various accounting software systems to a qualified outsource vendor. Now the accounting outsource vendors with their IT expertise started offering both custom and prepackaged solutions to small businesses to integrate myriad accounting packages. This helps the decision makers to make appropriate decisions based on real-time data analysis.

Need for Small businesses Financial Accounting
For decades, most of the small businesses have been developed stand-alone accounting applications to automate specific accounting and financial tasks. This type of stand-alone applications provide benefits only to specific departments within a small business but fails to give a complete picture of their business to the management. For example, the financial transactions in the accounting software package will give the detailed picture of the financial status of the company. However often small businesses need to analyze trends to see where improvements can be made in customer service, sales, and payments. Most of the small businesses are manually mining the data from different software sources to produce the reports for the management.

Following are some of common problems you see in small businesses:

• Change of customer data in CRM but it does not show up in their accounting software
• When sales department takes orders it has to be reentered in the accounting software
• Salespeople couldn’t see how many orders are already shipped to the customer and how many of them are already paid by the customers.

Now this is where the technology savvy accounting outsource providers can step in to help the small businesses in achieving their goals. The accounting outsource providers write custom interfaces to retrieve the data from different sources to produce various financial reports needed for the small business management’s team. Developing custom interfaces may not be cost effective for some small businesses. In this case accounting outsource providers with offshore presence can use their offshore locations to manually key the data from one software to other. This helps the small businesses in achieving their business goals without costly software upgrade or in-house IT team.

Outsourcing in CPA Firms
CPA firms serving small businesses have been outsourcing tax and other general accounting services for some time. Now these CPA firms are considering outsource providers for other higher-value accounting services. CPA firms can leverage their relationship with small businesses and help them in outsourcing their higher value accounting projects. For example, projects like real-time accounts integration needs process knowledge specific to a small business, IT skills, and accounting process standardization skills. CPA firms may not have all the skills needed for the real-time account integration projects. They can act as a liaison between the small business owners and outsource providers in outsourcing real-time account integration projects.

CPA firms that partner with outsource providers gain a competitive advantage over those that don’t. By aligning with an accounting outsource provider, an accounting firm can virtually tap into several different small business markets without making a heavy investment of time and capital. This means the CPA firm minimizes its risk while maximizing its potential for significant market gain. Currently many small CPA firms are not embracing these types of projects for their small business customers, but this trend is happing in several big accounting firms. As the need increases for accounting integration projects in small businesses, more small business focused CPA firms will start partnering with accounting outsource providers.

F&A – Software As A Service
With growing popularity of Software As A Service, many small business owners are tapping into SaaS accounting solutions like ClarityAccounting, NetSuite, Intacct, etc. According IDC Research SaaS will grow by 40% in 2009. The impact of Colud Computing and SaaS will be huge on the all outsource vendors. Accounting and financial tasks like bookkeeping, accounts payable, accounts receivable, invoicing, account reconciliation, etc., lends itself to SaaS model. In the near future, more small businesses will embrace SaaS for their daily accounting tasks. Accounting outsource vendors with right marketing strategy can win these SaaS customers.

Summary
While cost saving is the major criteria in all the financial and accounting outsourcing deals, other business benefits like accounting process efficiency and innovation can be achieved from the outsource vendors. Accounting outsource providers are highly motivated to drive down unit cost and improve process innovation through technology and accounting process standardization. Small business outsource buyers already started using their outsource vendors for various higher-value accounting projects. Both small business owners and the accounting outsource providers are seeing technology as the key enabler in accounting process innovation beyond traditional cost reduction. As the small business accounting outsource market matures, more CPA firms and small businesses will be use the accounting outsource providers for all their higher-end accounting outsource needs.

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