A new Auxis study uncovers 50%+ outsourcing cost savings for most transactional processing positions
There’s a major shift happening in corporate Finance Departments, and it’s leaving New York City CFOs with a dilemma.
Finance departments are under increasing pressure to optimize costs, improve productivity, and intensify their focus on strategic activities that boost business value. Yet, the average Finance Department spends more than 75 percent of its time on transactional, non-value added tasks – and that’s probably a conservative estimate.
The historically low unemployment rate in the U.S. further complicates matters, making hiring and retaining skilled professionals a pricey proposition.
The national 3.9 percent unemployment rate is the lowest in five decades – and that number dips even lower to 2.1 percent for accounting and other Finance related clerks. Such low unemployment is great for the economy, but it’s forcing CFOs to overpay staff for low-value work – and that’s without mentioning the headache and cost of high turnover.
This is especially challenging in New York City, where salaries already run 40.5 percent higher than the national average.
FAO Outsourcing: Helping to Solve the Problem
Nearshore outsourcing has proven to be a successful method for organizations of all sizes and industries to help deal with these challenges. According to a recent KPMG report, on average, organizations are managing 83% of their Finance & Accounting function under a Shared Services Outsourcing model, and 59% are planning to increase its reliance on BPO.
Transitioning the transactional activities within your existing accounting operation to a nearshore partner not only improves back-office efficiencies and frees up your finance team to focus on more important work, but it offers substantial savings in labor costs.
Given the great success, Auxis has experienced with multiple northeastern organizations that have outsourced their Finance Operations to its Nearshore Delivery Center in Costa Rica, Auxis recently released its 2019 Labor Savings Report NY vs. Costa Rica to put real numbers to your assumptions about the outsourcing cost savings opportunities your organization can achieve.
The report provides a detailed look at the difference in labor costs between accounting positions in New York vs. outsourcing them to Auxis’ Global Delivery Center in San Jose.
The boost to your bottom line
The Auxis report found that companies enjoy average labor savings of between 42 and 51 percent by outsourcing finance and accounting positions from New York to Costa Rica. That’s the equivalent of $44,000 to $63,000 per head. The study included positions within Accounts Payable, Accounts Receivable, General Accounting, and Payroll. The cost analysis considered annual salaries, benefits, and office space.
Extrapolate that out over the number of employees performing transactional work and you can start to see the significant boost nearshore outsourcing can give to your bottom line.
Lower-level positions represent the highest savings percentage, compared to managerial roles. For instance, an accounting clerk whose fully loaded cost ranged from $93,355 and $107,844 in New York, only costs $42,000 in Costa Rica – providing a whopping savings of between 55 and 61 percent.
But an average Accounting Manager costs companies between $172,825 and $203,998 in New York, versus $125,000 in Costa Rica – offering a lower but still respectable savings of between 28 and 39 percent.
Since there are more low-level positions in back-office operations than supervisory and managerial roles, most companies will exceed the average 42 to 51 percent savings. In fact, if we only include positions below the manager level, average savings jump as high as 56 percent.
A detailed cost comparison per position can be found by downloading a copy of the full report.
Benefits beyond labor savings
Of course, the difference in labor costs isn’t the only benefit companies should expect from their FAO outsourcing partner. The report also touches upon how many organizations have become too top heavy over the years, and their span of control isn’t aligned with industry best practices.
Productivity efficiencies are another significant source of savings. The outsourcing provider’s economies of scale – combined with the expertise they offer for process improvement, automation, and overall best practices – often translates into additional savings of at least 10 to 20 percent.
Auxis has found that just the implementation of Robotics Process Automation (RPA) can generate productivity gains of more than 40 percent in targeted areas. To learn more about RPA, you can download the Auxis 2019 RPA Survey Report: Where Are We With RPA.
The Costa Rica advantage
Consistently ranked as the #1 nearshore outsourcing city in Latin America, workers in San Jose, Costa Rica are exceptionally qualified to perform finance & accounting roles. Besides boasting the best education system in Latin America with the highest rates for literacy and proficiency in English, Costa Rica is home to more than 350 multinational companies. This means the opportunity to leverage a significant pool of accountants that are used to working with US GAAP, and are familiar with the pace and demands of closing the books, US-style
These companies recognize that although Asia-based models may offer slightly lower costs, the price differential isn’t worth the service, language, geographic distance, time zone, and cultural barriers that can accompany them.
In 2009, Auxis opened its Global Delivery Center in San Jose. Its goal: to help North American companies of all sizes and industries reap the cost and process efficiencies that nearshore outsourcing offers without the headache or heavy financial investment of opening their own facility.
Assessing the Outsourcing Opportunities in your organization
If you are intrigued about the real size of the outsourcing opportunities in your finance operation, the next step would be to schedule a complimentary consultation to discuss how Auxis can help you identify and quantify the savings and efficiencies of incorporating nearshore back office capabilities. The key questions that will be answered as part of the assessment include:
What is the overall labor savings opportunity?
What functions/processes/activities make sense to outsource and why?
Do you have the scale required to outsource with Auxis?
What savings opportunities exist beyond labor arbitrage? (e.g. RPA, organizational re-leveling, control enhancements, etc.)
You can download your complimentary copy of the full Auxis NY vs. Costa Rica Outsourcing Cost Savings Report here:
Recognized as one of the Top 100 Global Outsourcing Providers, Auxis’ unique perspective as both advisor and outsourcing operator allow its clients to obtain real benefits and ROI from every engagement. To get started with your Outsourcing Opportunity Assessment, click here to schedule a free consultation.