Baselining before embarking on an Outsourcing Program

While there is a lot of content and guides on how to outsource your finance and accounting, when to outsource, or what to outsource, one area that really needs attention is measurement of performance. In the process of transitioning the operational procedures of one of the leading real estate companies in the US, we were surprised to find how the accuracy of transactions had never been measured.  And then along the way we realized that they were not alone. There are many companies which measure the throughput of finance and accounting transactions, but not the accuracy.

Most companies never really measure the service levels of their internal finance and accounting functions. For example, most companies will not know the turnaround time associated with their processes, simply because their systems are not capable of measuring and reporting the same. So when the CFOs of these companies consider outsourcing the finance and accounting function, it becomes challenging for them to define what their expectations of service levels are.  Defining ‘success’ becomes difficult, but it is also the most important to do when you embark on such a program.

The lack of historical service levels leads to everything having to start from the beginning. However, organizations could turn this around as an opportunity. Companies could consider setting standards before outsourcing their accounting, and make it imperative for the service provider to meet or improve from this baseline. In other words, it would be the beginning of the journey towards constant improvement.  Starting with this as an objective will mean more justification for outsourcing than just for cost or flexibility.

The other option is for companies to ask the service provider to constantly benchmark their processes to the best in the industry. Since the provider works for multiple clients across different industry segments, they will have industry benchmark data, which the company can benchmark itself against. This will again help the CFO internally demonstrate benefits of outsourcing and not just as a cost arbitrage.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *