3 Reasons to Outsource your Financial Processes

Taking recourse from cliched sayings about Time, Money and Expertise, we have some real up-to-date facts and figures you should know.

It does not come as a surprise that the financial services industry has been witnessing rapid changes in the last 5 years. This is partly due to the infamous Enron and WorldCom scandals, but more so because of the boom that outsourcing and offshoring have been enjoying in the same time period.

Technically speaking, the scandals should have been a threat to the financial processes outsourcing boom - due to obvious security reasons and the not-so-obvious paranoia that gripped corporate world in the aftermath of the scandals: strict regulatory and compliance measures.

However, studies over the past few years show an entirely opposite trend - financial services outsourcing is booming, for more than just one reason!

Outsourcing addresses 3 main concerns of the outsourcer - she may be a CXO, an entrepreneur, a CPA, a public company, a stock broker or an SME. These 3 concerns form the 3 crucial reasons that are driving the outsourcing boom.

An Outsourcer's Desire:

• To save money on financial processes and use it for funding other processes
• To spend less time with processes and channel that time elsewhere
• Better financial info that makes sense with numbers she can really utilize

Save Even More Money

Numerous corporate bosses have realized that they cannot ignore an offshore strategy - more specifically an ' India' strategy. This is mainly because of the obvious cost-savings: a recent study showed that most outsourcers claim anywhere near 32% cost savings thanks to outsourcing overseas.

Below is an annual salary comparison chart of two of the biggest players in outsourcing - America and India - the former being the sender of work and the latter the recepient.

• Accountant , United States : $41,000
• Accountant , India : $5,000
• Financial Operations, United States: $37,625
• Financial Operations, India: $5,500

It is no wonder then that 2005 saw a 46% increase in the number of financial institutions with offshore operations, along with an estimated 500% increase in offshore jobs. Industry executives believe that by 2010 more than 20 percent of the industry's global cost base will have shifted offshore, with average savings climbing to 37 percent from 32 percent today. (Source: Deloitte Research)

Spend Less Time on Processes - Use it Elsewhere

Outsourcing also allows companies or individuals to spend less time on the processes that are crucial yet monotonous. Outsourcing your financial functions helps you save time and utilize it on other crucial functions of your business - improving operations, business development, marketing etc. It helps you to take control of your business and concentrate on the main aspects of your business, instead of spending an unusually long time on monotonous processes.

The IBM Chief Finance Officers Study of 900 senior finance executives worldwide finds that almost 50% of executives report that finance staff is tied up in transactional activities, such as processing accounts and tax transactions. Only a quarter of staff are focused on decision support—performance and growth focused activities. This comes as a huge cost to the future competitiveness of companies, concludes the study.

Here's a classic case of how easy it is to outsource your financial functions. Instead of entrusting your bookkeeping to an accountant or handling it internally, simply fax your documents to a toll-free number.

Through the magic of digital imaging, the documents reappear in India, in real time, on the computer screen of an Indian accountant who simply enters the figures in the client's books, accessed through the Internet.

If you are a CPA firm, you can ask your clients to fax their documents to the toll-free number and complete the process with less time and money than usual.

There are numerous such cases where outsourcing your financial functions will be a great time-saver. However, keep in mind that outsourcing is successful when you are convinced that your offshore outsourcing partner's processes will add value to your own operations. If it is just a common-place partner that promises only cost-savings then you ought to think twice before signing him on.

Better financial info that makes sense - Tap the offshore expertise

Expertise is a major concern for most outsourcers. As a small and medium business, you are forced to play a plethora of roles in your business - Filing Clerk, Bookkeeper, Accountant Sales & Marketing Manager, IT Manager, Human Resources Manager, Solicitor, Business Analyst, Secretary, Communications etc.

You can't grow your business because of lack of expertise and do everything yourself neglecting what you do best. You don't delegate because there is no one to delegate to and you struggle because you don't have the expertise.

If you are thinking you cannot hire a professional onshore due to lack of funds, think offshore. After having compared the salaries of US and Indian professionals early in the article, you already know by now that it is quite easy to hire expert professionals in India.

Offshore professionals, particularly Indians, come with a good range of skills and expertise - as good as the professionals onshore. While you have to pay additional money for an onshore professional to do your processes, as well as formulate valuable financial information and analysis that can act as business intelligence, offshoring is quite different.

Conclusion

Offshoring is radically changing the structure of the financial services industry, creating a truly global operating model and dramatically reducing the industry's cost base. Offshoring provides compelling benefits - but only for financial institutions that do it properly. A move offshore has to reduce - and not increase complexity in order to yield cost and financial benefits. Managing vendor programs is crucial to achieving this balance.

In terms of geography, India has emerged as the undisputed location for offshoring, especially in the financial services industry. Deloitte research shows that around 80 percent of all financial service offshoring takes place in India..

In essence, as financial services outsourcing surges to unprecedented levels, India is fully prepared. It's in India's benefit to do so - to ease all the 3 concerns that form the 3 reasons for outsourcing financial functions from across the seas.