With financial executives off-loading finance work to accounting firms, both sides may be profiting.
by Rick Telberg/At Large
Rick Telberg
You’d better watch out. Companies are looking for you? big companies. And they want to hit you with some money? big money.
Why you? Because you’re an accountant. You know money. Finance. Numbers. Technology. You can be trusted with somebody else’s payroll. Their accounts receivable. Their payables. Their purchasing, revenue accounting, general accounting. These are the activities that big companies most often outsource, and lately they’ve been outsourcing like never before.
Finance and accounting (F&A) market advisors agree, almost without exception, that companies were outsourcing F&A jobs more often in the third quarter of 2005 than in the first half of the year. Some see whole new markets in F&A outsourcing, from asset management for hedge funds to complex financial product development. And that goes without mentioning Section 404 of Sarbanes-Oxley.
And let’s make it clear: We’re not talking about offshoring here. This is finance and accounting work that’s going largely to U.S.-based, U.S.-owned firms. Some of the biggest players are household names – Accenture, EDS and IBM, for example. They may not be, strictly speaking, “CPA firms” but they are, nevertheless huge employers of accountants, financial managers and CPAs. The fact is that if you’re a financial manager, you’re probably looking to streamline non-strategic departmental functions. And if you’re an accounting firm or business services provider, you’re probably picking up some of that business.
Take mid-sized TAD Accounting, for instance, which boasts that “Our mission is to be a pioneer and leader in the outsourced bookkeeping and accounting industry.” Or national powerhouses Protiviti or Jefferson Wells.
That makes for a lot of potential customers for auditors who want to branch out into something new, different and lucrative. In some cases, these are opportunities for firms looking to branch into an area that fits the skill set of their personnel. It’s far easier to train staff to process accounts receivable than to conduct audits. In a market short of personnel, maybe the solution is a new market.
Interestingly enough, the biggest outsourcers today are financial services companies – companies that can relate to professionals of the accountancy persuasion. According to FAO Research Inc. of Cambridge, Mass., three-quarters of financial services companies polled between July and September indicated they were using or interested in using third-party assistance for some kind of enterprise service.
The company-wide scope of these outsourced services is especially interesting because large companies constitute the largest share of interested buyers of financial and accounting services. Well over a third of enterprise-wide finance and accounting outsourcing contracts were for amounts over $500 million. A fifth were for $250-to-$499 million. And the average value of contracts is expected to rise as companies get used to outsourcing more kinds of services.
Contracts were not only big but long – most spanning five years or more. Fewer than half as many extended from three to five years, and virtually none were for less than three years.
Financial services companies aren’t the only ones interested. Half of all consumer packaged goods and retail companies expressed interest. Thirty-eight percent of manufacturers may outsource soon. A quarter of healthcare, utility and business services companies also expressed interest. So did a quarter of governments.
The most commonly outsourced activities are transactional in nature, jobs handling accounts payable and receivable, payroll and so on. The general objective is, of course, to reduce costs, streamline business processes and upgrade information technology systems. But some companies are looking for longer-term benefits, such as transforming the internal environment of an entire enterprise or knitting together the disparate systems of various operating units.
Talk of outsourcing today comes under a dark cloud with visions of crackly phone calls to Bangalore or Seoul, but many companies, large and small, would prefer to trust their business to the shop down the street, the auditor who already knows the company, its culture, its people, its problems and its aspirations.
Clearly, the opportunities for CPA firms, from the sole practitioner to the international firm, are huge. Everyone wants to outsource. It’s just a matter of who wants to do the work. READ MORE →
