An emerging trend is evident among companies towards outsourcing the FP&A function with a view to improving efficiency and enhancing business performance. However not all activities are suitable for outsourcing, given that there are a number of associated data privacy issues. Financial planning teams are responding by starting to explore more sustainable and suitable outsourcing decisions for the benefit of their organisation.
FP&A outsourcing is gaining traction due to the scalability, agility and cost-effectiveness it offers to businesses. General transactional processes form a major component of the activities that are outsourced to FP&A vendors. These responsibilities then grow gradually into higher value-adding services as the level of trust between finance teams and their vendors improves over time.
While operational activities tend to be outsourced, core strategic decision-making processes typically remain within the organisation. This is due to the confidentiality of company information. With this structure, chief financial officers (CFOs) can reduce the level of number crunching activity performed in-house to specialise in the delivery of more sound business strategies.
Pros and cons
Although there is a strong economic case for FP&A outsourcing, organisations may also encounter several risks. Data security is a key priority for those that engage FP&A vendors due to the access that these service providers gain to company information. Engaging a vendor who does not understand the company’s reporting requirements and needs is a possible risk, as it results in a significant wastage of resources.
Outsourcing the function can potentially add significant value to an organisation’s FP&A. However, if the outsourcing process is not researched and implemented thoroughly, as well as accurately, it can also risk impeding business performance.
Companies have therefore begun to carefully assess their need to outsource FP&A functions before hiring a vendor. They aim to understand the potential gains that outsourcing provides for their business and manage the related risks. In order to strike this delicate balance, finance teams must conduct initial thorough research to assess whether they need to outsource segments of their FP&A. If they choose to hire a third-party provider, the next step is to ensure that the vendor’s skill sets and experience are aligned to the financial reporting systems in the organisation.
The trend towards outsourcing is more evident in certain industries. Organisations operating in business-to-business (B2B) environments tend to outsource more as their financial planning processes are typically comparatively more standardised. Conversely, organisations within dynamic consumer industries are more likely to hire in-house financial planners to work closely with the marketing teams, and align FP&A reporting styles to constantly-evolving marketing strategies.
In today’s business environment, FP&A vendors are moving from merely providing transactional services to being business partners. Clients are increasingly seeking vendors with multiple skill sets, who can add value through the quality of reports generated and the market intelligence shared with their clients.
While the outsourcing trend has gained momentum over time, a complete shift of the FP&A function to vendors is highly unlikely. The degree to which outsourcing has been pursued varies widely from company to company across various industries, according to their financial reporting needs.
Mellissa Mayne is a Manager at Robert Walters Singapore – Commerce (Contract) division, specialising in the recruitment of contract professionals in the accounting and finance, procurement and supply chain, as well as HR and business support fields.
Europe’s introduction of the General Data Protection Regulation (GDPR) next May will have implications for businesses around the world and US corporates should start getting ready if they haven’t already done so.
The recent NotPetya cyberattack underlined the need for organisations to address their exposure and how to mitigate the risk.
Accidental data breaches are causing almost as much concern as the steady rise in ransomware attacks, reports insurer Beazley.
The statement issued by the bank also suggests that fiat currencies are superior, due to their price stability.