Source - By Frank Carosella, CEO of InterControllers, Inc

Clearly, accounting is very important to every company. No business can operate without accurate or timely information. However, few companies differentiate themselves in the marketplace based on their accounting proficiency.

 Accounting is an example of an important but non-core process. Established companies and start-ups are turning over their non-core financial processes to suppliers with superior software and manpower who can do the job at a lower cost.

 Why is financial outsourcing exploding? Why are companies who in the past were reluctant to let go of the purse strings eager to begin an outsourcing relationship? The competitive pressures of the Internet are compressing cycle times from months to hours. They need better accounting services and they need to know their numbers ASAP. But they have neither the time nor the dollars to invest in state-of-the-art accounting software or the finest talent that would enable them to do that since they must continually invest in their core competencies. The Internet is forcing companies to consider outsourcing their accounting.

 If time is money, outsourcing accounting flows to the bottom line. An in- house accounting department can sometimes take as long as 30 days to prepare a simple monthly report. If the firm has all the information on line, it can prepare a report with footnotes in two to three weeks after the quarter is over.

 Cost Reductions Show Up On The Bottom Line:

Another major driver is the cost reductions that occur through outsourcing. Cost reduction remains the number one reason buyers want to outsource, according to a new book by Mary Lacity and Leslie Willcocks. Price reductions occur because outsourcers use economies of scale to produce savings.

 Financial outsourcing also provides process expertise. Because these providers focus on nothing but accounting, they are inherently better at it.

 Outsourcing providers also have access to experts in arcane areas of accounting. For example, specializes in helping companies who are summoned to an audit with the IRS. Few companies need to have an IRS expert on staff. But when an audit arrives, they need to have someone to represent them who understands the 15 allowable exceptions to the rule in question. Outsourcing allows companies to benefit from their knowledge while keeping these specialized, high cost resources on their payroll, not yours.

 Outsourcing Accounting From The Outset.

Many of the new companies are outsourcing their accounting functions from the outset. They are able to enjoy world class accounting processes virtually overnight. A new company start up, needed a Chief Financial Officer to represent it at investor meetings. But there wasn't enough work or enough cash to hire a full time CFO. So the new company received the CFO services on an as needed basis from its outsourcing accounting firm.

 Scale is also important to a growing company. Outsourcing allows companies to grow exponentially because the supplier has the additional capacity available. Companies burning investment capital now can have revenue of $100 million a year later and experience little or no disruption in accounting services or quality. Of course, the same applies when a company needs to shrink in size.

 In today's compressed world, companies worried about remaining in the black need to consider outsourcing their accounting function. In my opinion, the decision is black and white. Outsource!

 Publish Date: October 3, 2002