The evolving role of the CFO in today’s business world is nothing new. But the unprecedented challenges presented by the COVID-19 pandemic are lending a new urgency to the transformation.
The global shutdown and sudden shift to a work-from-home model shattered the scope of existing disaster recovery and contingency plans. Shaky balance sheets, supply chain interruptions, and escalating risk prompted 87% of CFOs in a PwC survey to express concerns that the pandemic will create significant impact to their business.
In the post-coronavirus era, the need to create Modern Finance Organizations that can lead strategies for short-term survival and long-term prosperity is greater than ever before. But traditional Finance Departments struggle to find the bandwidth for activities that provide strategic insight and drive growth, with 75% or more of their time bogged down by mundane back office tasks.
In Part 1 of our series on “Reconsidering Finance Outsourcing in a Post-COVID World,” we showed how nearshoring non-strategic activities gives CFOs the agility and resources they need to transform in-house teams into proactive, high-performance organizations ready to help companies successfully navigate the “new normal” that’s emerging.
The need to reduce risk colors boardroom discussions in the post-coronavirus reality constantly. And even before COVID, some CFOs worried that outsourcing finance and accounting functions could expose their organizations to potential downsides.
It’s true that different providers offer different quality of service – making the BPO partner you choose critical to success. But in the current business environment where resiliency, cost reduction, and an urgent need to focus on strategic initiatives take priority, even CFOs who hesitated to embrace BPO before are reconsidering finance outsourcing as a quick and effective way of modernizing the back office.
Let’s examine some of the biggest misconceptions about finance outsourcing - and explain why “outsourcing done right” not only reduces operational risk but increases the efficiency and effectiveness of processes mission-critical to “keeping the lights on” in a company.
Misconception #1: Outsourcing causes CFOs to lose control and weakens their ability to manage their organization effectively.
Fact: In reality, outsourcing to a reputable provider increases CFOs’ visibility and control. Processes will be better defined and documented than before, improving transparency and clarity. Comprehensive service-level agreements (SLAs) will effectively quantify and measure service quality, while in-house staff lacks similar motivation to achieve high performance levels. The typical SLA for in-house staff is “you ask nicely and hope they comply.”
COVID lockdowns proved remote work doesn’t create a productivity drain – as long as it’s implemented effectively. In the wake of the pandemic, Deloitte reports that 99% of CFOs have taken or intend to take measures to introduce or expand alternative working arrangements like remote work within their organizations.
It’s also important to note that outsourcing doesn’t have to become an all-or-nothing endeavor. Exceptional BPO partners will customize a hybrid approach, enabling CFOs to retain ownership of processes they consider core to business operations. For instance, a CFO might decide to outsource all of the Accounts Receivable (AR) function except Collections, preferring to keep direct customer interactions in-house.
Misconception #2: Outsourcing leads to poor communication, collaboration, and culture alignment.
Fact: With remote work emerging as the new normal, the ability to collaborate, communicate, and operate effectively is critical to success. Many BPO providers operate within a “black box” that provides little visibility to their operations. But “outsourcing done right” creates a customized, collaborative solution that serves as an extension of in-house teams – following the same processes in a remote format. It also involves a strong process for transitioning the work to eliminate gaps in service.
Time zones often trumps geography as a factor in impacting the effectiveness of an outsourcing model. To align with Western time zones, the Asian offshore model forces providers to either work overnight, which limits the quality of available talent, or work odd shifts that have minimal overlap with Western schedules. Slower response times, weaker collaboration, and lower performance levels are often the result.
The nearshore option eliminates this issue. Nearshoring enables agile, real-time communication because teams in different countries still follow the same schedule. The westernized culture and outstanding English fluency that defines the best nearshore locations also eliminates the cultural and language barriers that plague Asian models.
Misconception #3: Outsourcing providers can’t find the same talent as American organizations.
Fact: Before the pandemic, more than 90% of North American CFOs struggled to find qualified staff to fill jobs - forcing them to significantly overpay for low-value work. Once the economy settles back in, this is likely to recur. Additionally, many American workers consider transactional tasks beneath them, which impacts retention and the quality of the work they provide.
Nearshoring to Costa Rica solves these issues with a highly educated workforce that already performs back office work for 170+ multinational organizations.
These workers view transactional tasks as high-value work, a career opportunity rather than a “job.” They take pride in reaching the highest performance levels, and even if they didn’t, the provider’s SLA ensures quality and performance.
Misconception #4: At a time when efficient back office work is essential, outsourcing will cause productivity levels to drop.
Fact: While back office work doesn’t define what a company does best, it comprises the core competency of BPO providers. Not only do reputable providers have the expertise, technology, and process structures in place to perform transactional work at the highest level – they are constantly innovating ways to do it better. After all, at the end of the day, BPO is a tightly managed service driven by a business partner who is assessed according to contract performance.
Misconception #5: Outsourcing has too many hidden costs.
Fact: Some BPO providers nickel and dime organizations over services that fall outside contractual definitions. But exceptional BPO providers honor the “spirit of the agreement,” offering the operational flexibility to ensure the service they deliver achieves the desired results without additional cost. Business operations are not easily put into a box. Different things happen every day, and operations staff have to react and respond to events as they occur. A strong outsourcing partner will ensure that its staff responds in the same way - a true “extension of your team” mentality - and doesn’t use the contract to limit the work being done or charge extra to do it.
A perfect example is the closing process. As everyone who has ever closed the books knows, working overtime is the norm. Teams work late hours and even on weekends to complete all the closing tasks on time. This should be no different in an outsourcing relationship, where the outsourced teams work alongside the client’s staff to ensure a timely and complete closing process. And they won’t charge overtime to do it; it’s part of the job.
The COVID-19 pandemic sent the global business community into a tailspin. But it also created an opportunity for CFOs to modernize the finance function by taking an urgent look at operations that distract from their ability to focus on core business growth activities.
“Outsourcing done right” enables finance teams to become true strategic partners to their organizations, exchanging their traditional scorekeeping role for strategic initiatives that drive growth and help companies react swiftly to sudden challenges.
Outsourcing can increase risk when implemented poorly. Carefully selecting a quality partner is key to “de-risking” BPO and creating a Modern Finance Organization that can help a business not only survive but thrive in the post-coronavirus era.