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Home » Articles » Outsourcing » The finance organization facing recession with offshore options

The Finance Organization: Facing Recession with Offshore Options

Increasing number of CFOs pessimistic about the economy with 40 percent predicting an economic recession in 2008 - found by the latest Duke University/CFO magazine Global Business Outlook Survey. Salaries of those handling accounting functions increased steeply in the year 2007. The cost of finance organizations have been rising steadily in the past three years owing to Sarbanes-Oxley 404, IFRS, AS5, Proxy compensation disclosure, PCAOB and the like.

Now with the possibility of a recession looming large and a regulatory relaxation aiming to reduce complexity, reducing the cost of the finance organization has become a priority.

Worries about costs of labor, fuel and credit compounded with the relief on Sarbanes Oxley are driving CFOs to explore avenues of cost efficiency. Outsourcing to Offshore locations is one of the top options being explored. According to Bryan Hall, finance practice leader at Hackett "performing the non-core work in an appropriate low-cost location" is going to be more sought after now and shared-service organizations are expected to grow even further in Poland, Prague, Budapest, and, of course, India. Others like Charles Eldridge, a managing director at Korn/Ferry International also agree. "I see finance functions increasingly looking at ways to cut costs and that may mean going overseas," says Eldridge.

Off shoring Advantages

In a globalized world, to increase competitive advantage organizations need to invest into global competency models. For example companies that have been off shoring the traditional outsourcing functions such as accounts payable, travel-and-entertainment expense processing, and accounts receivable are in a much better position to expand into other financial functions and derive better cost leverage.

The ability to break down functions like internal audit, risk and compliance into segregated components that can be selectively off shored is a potential winner. Attractive cost efficiencies can be realized without compromising on control.

Roles of the CFO and Financial Controller may be skimmed and made predominantly strategic in nature. The Financial Controller for example can move out of his classic transactional accounting role and focus on financial planning and analysis. The CFO role in small and medium sized businesses can also take this track for increasing efficiencies.