Posted by Robert Half Management Resources on Friday, November 7, 2014 - 00:00 | Follow me
Companies are seeking new ways to cut costs and improve efficiencies, especially when it comes to routine operating functions. CFOs or controllers tasked with evaluating internal processes and spending have likely faced the decision of whether to outsource or use shared service centers as a means of streamlining operations and reducing expenses.
How can you decide which option is best for your business? Here are some tips.
Evaluating the popularity of outsourcing and shared service centers
As part of the 2014 Benchmarking the Accounting & Finance Function report, Robert Half and Financial Executives Research Foundation (FERF) surveyed nearly 1,600 financial executives in the United States and Canada to collect data and opinions on the use of shared service centers and outsourcing. Key findings include:
- Payroll is the most commonly outsourced function among U.S. companies at 47 percent. Tax follows at 42 percent.
- Smaller companies may be more likely to outsource due to resource limitations.
- Among U.S. companies, the functions most often handled by shared service centers include general accounting (28 percent), accounts payable (17 percent) and payroll (14 percent).
Many times, outsourcing can reduce employee workloads and provide greater cost savings than shared service centers. Additionally, a partner with superior technology and processes can provide additional benefits.
Consider the following before you outsource:
- The success of outsourcing relies heavily on several factors, including the function being outsourced and the quality of the provider. Allow adequate time to vet partners and choose an organization that complements your own staff’s skills and knowledge.
- Outsourcing often requires extra time and resources to reap the full benefits. For example, if partnering with an overseas organization, it may be worthwhile to send an employee abroad for quality assurance purposes.
- Be prepared for bumps in the road. You’re working with another company, so consider how changes in that organization (such as attrition rate) could affect you.
While payroll and tax are commonly outsourced functions, many companies remain hesitant to outsource accounts payable and accounts receivable due to their inherently sensitive natures. If you’re considering outsourcing sensitive tasks, pay added attention to a company's security measures.
Shared service centers
One of the primary benefits of shared service centers is they’re housed internally. Consolidating functions from multiple departments within a single enterprise allows organizations to improve efficiency while maintaining control over procedures. With shared service centers in-house and using familiar processes and procedures, they also alleviate concerns about the security of sensitive operations.
Still, using shared service centers may prevent companies from enjoying additional improvements and savings that can be brought about through the fresh perspective of an outsourcing partner.
How to choose
When deciding between outsourcing and shared service centers, it’s important to understand your goals. If cutting costs is the top priority, it may be best to outsource. On the other hand, if you’re undertaking acquisitions, seeking to eliminate redundancies or attempting to improve proprietary and sensitive functions without relinquishing control, a shared service center may be the better option.
For more survey results and insights on outsourcing and shared service centers, download Benchmarking the Accounting & Finance Function.