Finance & Accounting Outsourcing (FAO) 101

For many financial leaders, finance & accounting outsourcing has become a best-kept secret of success. Why? Well, we live in an increasingly connected world in a time of unprecedented technological advancement. More and more, the ability to stand out in business relies heavily on offering the best of what you produce in the shortest amount of time possible. In many cases, efficiency and agility represent the line that separates a business that's successful from one that's merely surviving.

Business process outsourcing has always had a significant role to play in this regard, especially where an organization's finance and accounting department is concerned. BPO is by no means a new concept, but it's been changing in tandem with the rest of the business landscape. We're going back to basics with an updated crash course in FAO – whether you're brand new to outsourcing or just need a refreshed take on the solution.

What is Finance and Accounting Outsourcing?

When we talk about outsourcing, we're referring to a very basic concept: contracting out a part of the work that a business regularly performs in-house to a third party. This can take on different forms according to your business’s needs. Irrespective of size or revenue share, the odds are very high that every modern business already engages in some form of outsourcing. Most businesses use an outside vendor to print marketing collateral and branded assets, for example. Others use a vendor to host and manage the website that represents their online presence, and still others hire third parties to warehouse goods or simply stock the break room with a steady supply of coffee.

More: 90% of CFOs Are Outsourcing Accounting Functions

Business process outsourcing simply refers to using a third party to manage the processes that supplement – but aren't critical to – everyday business operations. Functions related to finance and accounting make up a sizeable portion of these supplementary processes for a lot of businesses, and when a business opts to delegate them to a third party, that's finance and accounting outsourcing, or FAO.

Why Outsource Finance and Accounting Processes?

As awareness around outsourcing has increased and the market has grown, it's become accessible to businesses of all sizes. The reasons organizations have for outsourcing finance and accounting processes are as varied as the organizations themselves, but there are a few common threads:

• Better Focus on Core Competencies

  Unless a company's main offering is accounting and financing, the associated processes do nothing to differentiate that company from its competitors, no matter how critical. Completing these functions in-house requires either a significant portion of time and money spent on hiring, training, and retaining qualified talent to manage the work, or key decision-makers can do double duty and attempt a DIY approach.

  Either way, those valuable resources are being diverted from that same company's actual main offering to keep a peripheral portion of their operations running smoothly. Eliminating this burden by delegating it to qualified outside talent allows that company to refocus its efforts on the business-critical tasks that do make them competitive.

• Offset Talent Scarcity

  Finance and accounting is uniquely positioned for success in outsourcing – especially with an offshore model – because the accounting industry is faced with a pipeline problem that will likely only become more challenging. The American Institute of Certified Public Accountants (AICPA) estimates that 75 percent of currently employed certified professional accountants will retire within the next 15 years, and there simply aren't enough next-generation candidates coming in to replace them. In offshore markets like the Philippines, accounting is still considered a viable and reputable career option, and the individuals can be qualified to the same standard as state-side CPAs.

• Manage Costs and Increase Savings

  FAO is an effective way to decrease costs for many businesses for several reasons. Comparable labor in overseas markets is often much less costly, and traditional expenses associated with in-house labor are circumvented. Many companies find that the right partnership allows them to essentially bring on a new employee without needing to choose between the associated financial burden or sacrificing the quality of life standards they can already offer their team by way of pay and benefits.

• Reinvest Time

  For financial leadership, time is often as valuable a resource as money is. When a company chooses to outsource repetitive manual tasks and peripheral rework, they find they can budget the time they are no longer spending on those items elsewhere. They can invest that time back into tasks and functions that are value-added, including strategic planning and judgment-based finance functions like mergers and acquisitions (M&A), divestitures, and nurturing shareholder relations.

• Improve Finance & Accounting Processes

  As a company grows, downsizes, and changes in other ways, accounting processes don't always have a way to keep up. Disparate systems across business units, an overall lack of documentation and employee attrition all contribute to inefficient accounting and messy bookkeeping. Allowing a reputable third party to take the reins means that a system for universal documentation is built in, so streamlined, efficient processes become a byproduct of the relationship.

Which Finance and Accounting Functions Can Be Outsourced?

Outsourcing finance and accounting processes does not require an all-or-nothing approach. Many organizations choose instead to test the waters with a small set of processes – or even a single accounting task. You'll recall, after all, that a common reason for moving to an outsourced model for financial processes is to achieve an optimized distribution of the financial workload, freeing up your skilled in-house talent to focus on value-added, strategic duties.

Most companies start with a highly transactional, highly repetitive task to assess the challenges, benefits, and changes that come with partnering with a BPO provider that offers accountancy-specific outsourcing. Accounts payable (AP) and accounts receivable (AR) are two such transactional bookkeeping functions that are popular outsourcing candidates. Let's look at why.

Because AP and AR are highly manual transactional processes, they are often assigned to entry-level accounting professionals in an in-house model. Employee attrition is high in these areas, because as employees progress along their chosen career path – either by moving up or moving out – new talent must be sourced to fill these roles. This means downtime, which represents its own cost in lost productivity, plus the additional cost of hiring and training new team members to take over the role, all while the already scarce talent market drives the cost of this talent upward.

That's a lot of money and effort dedicated to a routine bookkeeping process. With an outsourced model, expensive talent can be assigned to business-critical or high-judgement accounting tasks, while an FAO partner manages the sourcing, training, and deployment of overseas talent where less competition – and less compensation inflation – exists.

Additional transactional accounting tasks to outsource:

While organizations often feel most comfortable relinquishing control of these low-value bookkeeping tasks to a remote team, that shouldn't suggest that these are the only types of work an offshore team can handle. Remember, in markets like the Philippines, talent is plentiful and highly qualified across the board, so individuals who specialize in higher-level accountancy can also be found for the work that typically falls to controllers or senior-level accountants. This can be especially useful for organizations that do business in markets where labor is increasingly scarce and inaccessibly expensive, or for small to mid-sized businesses that need to scale quickly and nimbly.

Judgement-intensive accounting processes to outsource:

• Process oversight

• Treasury and risk management auditing and audit reporting

• Compliance

• Budgeting and forecasting

• Data extraction and analysis

• Bank relations

• Debt management

Ultimately, the individual goals and needs of a company will drive the processes they choose to outsource. A decision matrix is a useful tool when it comes to determining which parts of your finance and accounting operations are the best candidates for successful outsourcing.

Learn More: Download our F&A Decision Matrix to see which of your own finance and accounting processes can be streamlined at a decreased cost in an outsourced model.

How to Choose a Partner for Finance & Accounting Outsourcing (FAO) Services

Once a company decides that outsourcing fits into their F&A operations strategy, the next step will be to look at potential FAO providers and choose a vendor that feels like a good fit for their values, goals and workflow. A reputable BPO provider will be able to speak to your concerns and provide case studies, client referrals and a pilot project agreement along with a quote or bid when you put out your request for proposals. There are a number of considerations organizations will want to address when they are comparing outsourcing providers.

• Experience

  A BPO provider with a proven track record of success is essential. You will want to look beyond the amount of time they have been in business, however, and ask potential vendors to speak directly to the partnerships they already have with other clients. If a provider can maintain and grow the services they offer to individual clients year after year, that's a sure sign that they are doing something right.

• Process

  You'll want to know what to expect from the day you pull the trigger on an FAO model. Understanding how a provider handles the onboarding process – from initial knowledge-sharing to implementation and beyond – is a key component to choosing between potential vendors, so look for BPO providers that can give you a thorough, transparent rundown of how that happens.

• Accounting and Finance Technology

  There are two major technological concerns that any provider should be able to address directly.

  1. The first is whether or not they use cloud-based technology. In 2025, a provider that does not offer a solution to potentially siloed data and information with the option to move yours to the cloud is a provider that is not prepared to help you scale when you need to.

  2. Second, look for providers that are technology agnostic. If a vendor insists that you migrate your processes to their platforms, reconsider partnering with that vendor. A good partner should be prepared to work with the technology you already use and not force you to adopt theirs. You should have ownership of your processes from start to finish, and a reputable BPO provider will not try to convince you otherwise.

• Security

  When it comes to financial data, there's always a security concern. Breaches in data security can be catastrophic for companies, whether they've chosen to outsource part of their finance and accounting operations or not. Any provider you speak to should be able to show that they are ISO certified, and have facilities security protocols in place. Ask them what those protocols are.

• Metrics

  An important thing to determine when looking for a provider is how performance and vital metrics will be measured and delivered. It can be helpful to go into discussions with potential providers with an idea of what you would like to see improved and the specific KPIs you want to see met.

• Culture

  You need to make sure that your partnership has certain commonalities when it comes to your respective company cultures. Look for candidates who share your values and listen to your concerns. A good culture fit will make the process of onboarding and continued communication seamless and will ultimately feel like a part of your team as opposed to a separate entity.

Offshoring: Additional Finance and Accounting Outsourcing Considerations

Keeping the above criteria in mind, there are a few more factors to evaluate when offshoring. Let’s explore these concepts in more detail to help you make an informed decision when pursuing finance and accounting outsourcing.

• Country

  While the Philippines is a popular choice for accounting and finance outsourcing because of its English-proficient workforce, cost-effectiveness, and cultural alignment, there are other countries that might fit your business. India, Brazil, Mexico, Malaysia, and Vietnam all provide competitive FAO services. These countries have a large pool of skilled accounting and finance professionals to choose from.

• Time Zone

  One of the primary considerations of offshoring your financing and accounting is time zone differences. Time zone differences can cause communication challenges, like delays in work efficiency and productivity. It’s important to know that because outsourcing is a large industry in countries such as the Philippines, they regularly work on US hours as part of their normal day-to-day. You can also synchronize work schedules between your offshore team and the US team so you can get a 24-hour clock to move items faster.

• Assurance Services

  Offshore accountants and finance professionals have similar credentials to US-based; however, they aren’t recognized the same under US standards. For example, only CPAs can issue assurance reports, like reviewed and audited financial statements. As your company begins to grow, this may be a requirement to obtain certain financing sources. Be aware of these requirements before offshoring.

5 Steps to Implementing Finance and Accounting Outsourcing

Successfully transitioning outsourced finance and accounting services requires extensive planning and careful execution. Your business needs to preserve its core competencies, such as quick invoice generation or rapid inquiry response times, while making the transition. Here are five steps to a successful FAO implementation.

1. Define the Scope

   First, define the scope of your accounting and finance outsourcing. Which services do you plan on transitioning? Assess your needs and set clear objectives. For example, if your goal is to improve efficiency in invoice management, which services could you benefit from outsourcing?

2. Set a Timeframe

   Now, set a timeframe for your outsourcing project. When do you plan on having the outsourcing process finished? Maybe it’s before an upcoming product release or within the next three months. Setting a definitive timeframe keeps the implementation process on track.

3. Assess Finance and Accounting Risks

   While finance and accounting outsourcing have numerous benefits, it is important to assess any potential risks. Think of everything, from security risks to the risk that customers are unhappy communicating with an offshore accountant. Then, create a plan to mitigate these risks.

4. Train Professionals

   Next, it’s time to train your team. While your team will have the necessary accounting and finance experience, they still need training on your expectations and internal processes. Take the time to onboard your outsourced professionals like you would an in-house team member.

5. Monitor Performance

   On a regular basis, monitor and evaluate the performance of your outsourced accounting and finance professionals. Are they meeting your expectations? How could they improve? Companies with successful FAO implementations are constantly improving their processes.

Personiv delivers a uniquely flexible approach for its clients by developing custom finance and accounting solutions designed to save time and money. Our teams of highly skilled talent stand ready to complete projects with quality and confidence, allowing customers to focus on goal-reaching strategic priorities. With more than 25 years of experience and sites in three countries, Personiv hires, trains and retains top talent to provide customized, global solutions.

Ready to get started? Begin by downloading our free outsourcing worksheet and checklist, or speak directly to a client relations director about where outsourcing fits into your finance & accounting strategy this year.