SB Informer
Tuesday, January 30, 2007; 05:19 AM
Cybelink (www.cybelink.com),
an offshore financial and accounting BPO firm, published a new article
helping small businesses owners and accounting firms to learn how they
can successfully outsource their financial and accounting business
processes like bookkeeping, account payables, account receivables, Tax
returns, etc to offshore vendors.
Unlike big corporations who offshore Financial & Accounting
business processes, for a small business it is an arduous task. Big
corporations have both technical and management resources to manage one
or more offshore service providers, and they typically identify which
part of the Financial & Accounting functions to offshore, and they
will use a selection process to choose a right offshore service
providers to fulfill their needs. Small businesses may not have the
right resources to find suitable service providers to outsource their
accounting business processes. Nevertheless just like big corporations,
small businesses can successfully offshore the financial and accounting
functions, and can achieve all the benefits of offshoring. In this
article we will explore four simple steps, small businesses can follow
using their existing resources to identify and manage the offshore
service providers.
Step 1: Identifying What Finance and Accounting Functions to Offshore
Once you made the decision to offshore your first step is to find out
if you are going to offshore the complete F&A business process or
some specific functions within the F&A. If you're offshoring for
the first time it is better to offshore some specific functions within
your complete F&A process and then incrementally offshore the
complete F&A process. The best way to discover what F&A
functions to offshore is to ask the following questions and find
answers to them:
1. What are the non-critical F&A functions that can be offshored
with minimal guidelines to the offshore vendor by your employees?
The answer to this question will be, repetitive tasks that are non core
to your accounting process but needs to be finished for your complete
F&A process. Since these F&A functions require minimal
guidelines, the offshore vendor can certainly complete it without much
help from your employees.
2. How the finished work from the offshore service provider will be integrated into your complete F&A process?
The answer to this
question will make you to think about the bigger picture of your
company's complete F&A process, and you will start planning how the
finished work can be integrated to the complete F&A process with
minimal internal changes.
3. How the offshoring process will affect your employees who are performing those functions now?
This is a crucial question, which needs to be answered, so as to make
your entire offshore process a success and it varies from industry to
industry. Often times several offshore accounting projects fail since
the internal staff has not been properly explained the changes they
need to go through due to some or all of their responsibilities being
offshored, and what new responsibilities they will have in the company.
4. How the instructions for performing the F&A functions will be communicated to the offshore provider?
The answer to this question will determine if you need to invest in any
new software (Accounting software license, Secure FTP, etc) and
hardware technologies to transfer the work and instructions to the
offshore provider.
5. How the finished F&A function from the offshore vendor can be measured for quality?
You need to come up with a qualitative and quantitative benchmark for
the tasks you are planning to offshore. Using the benchmark metrics you
can compare the work performed by your employees and can compare it
with the work completed by offshore vendor. Without proper offshore
benchmark measurement it will be tough for you to justify the cost
associated with offshore outsourcing.
At the end of this step you should be in a position to clearly identify
F&A functions that can be transferred to the offshore provider.
Step 2: Selection of Finance and Accounting Offshore Provider
Based on your findings in step 1, you need to identify a suitable
offshore accounting service provider. The simple way to find offshore
accounting providers is to perform search on Google and locate
different players in the offshore market. The difficult challenge is
how do you know who will be appropriate for your needs? Visit their web
site and find more pertinent information about the offshore service
provider. From the web site you may find answers to most of the
following questions:
1. Do they have existing customers that you can do a reference check?
If the offshore vendor has existing customers then you can get valuable feedback from them about the offshore vendor.
2. How long they are in business?
Often times the relationship you establish with an offshore vendor will be a long-term, so it is crucial that you find out how long the offshore vendor has been in business and how well they're doing in the market place.
3. What are the offshore provider's F&A service
offerings?
Not all offshore accounting vendors are same, find out what the
offshore vendor's specialization is and see if they can be a good fit
for your work. From the offshore vendor's web site you can find out if
they have F&A offshoring as their core competency or it is one
among their many services offerings. It is not that a company can offer
a range of services and be good in all of them, but often times it is a
not the rule but an exception.
4. How the company has been setup in handling privacy, security, and confidentiality of data?
This is very critical element in choosing a right offshore vendor, you
will be sending vital data to offshore provider, and you need to make
sure that the security infrastructure at the offshore location
adequately meets your needs. You may not travel to offshore location
physically to do an audit of their infrastructure. But from their web
site you can get a general idea of an offshore provider's security
infrastructure.
5. Does the company have a regional presence in the country where you are located?
It is good if the company has a regional presence but not necessary
requirement. With the high level Internet and Telecommunication
technologies available, it is possible to establish a relationship with
the offshore vendor without them having any regional presence.
Step 3: Pilot Project with Offshore Vendors
Based on the results in Step 2, you can narrow down to one or two
offshore vendors for the pilot project. The main purpose of the pilot
is to find answers to following questions:
1. How well they have completed your work based on the instructions you provided to them?
You need to evaluate their quality of the service based on the benchmarks you developed in the former step.
2. Does the offshore vendor have a cultural fit to operate with your own internal employees?
Often times there will be a cultural mismatch between your employees
and the offshore team. Find out how both the groups work in solving the
problems that arises during the course of the pilot project.
Particularly you need to focus on how the offshore vendor communicates
with your team, problem escalation, offshore employee's work schedule
etc.
3. What pricing models do the offshore vendors can work?
Pricing is another key factor for companies to offshore there
accounting processes, but it shouldn't be the only criterion for you to
consider. Generally there are two pricing models offshore vendors can
work, hourly rate or a monthly rate for an offshore employee. Based on
your individual requirements you need to find out which will be most
beneficial for you.
Step 4: Finalizing and Contract negotiation with the Offshore Provider
Based on your findings in Step 2, identify one offshore vendor to
outsource your accounting work. In this step you need to start the
contract negotiation with the offshore vendor. There are several legal
and contractual issues that must be identified in this step, and it is
good to have an attorney look into to the legal issues. But there are
several non-legal issues you need to identify before the contract
negotiation with the offshore vendor.
1. How long the contract needs to be signed?
Based on your finding in step 1 and 2, you need to determine how long
you need to create a contract with the offshore provider. Some times it
makes sense to have a month-to-month contract and in some conditions it
is good to have a long-term contract with the offshore provider.
2. What type of pricing model will be most cost effective?
You also need to choose the best pricing model that is suitable for
your work, the period of the contract and the price will go together.
So you need to determine an optimal contract length and price for your
accounting work.
3. How long the offshore vendor needs to provide the service after the end of the contract?
This is a substantial element that you need to identify before writing
the contract. At the end of the contract you need to renegotiate the
fee and other elements, during this period you and the offshore
provider may not agree the terms and conditions of the contract and you
or the offshore provider may decide not to renew the contract. In this
scenario it will take time for you to find a new offshore vendor or to
have your own employees to do the work, so you need to cautiously plan
and write the contingency in the contract.
4. How the offshore vendors will maintain the quality of their work?
It is a good idea to explicitly specify how you will measure the
quality of work delivered by the offshore vendor and what course of
actions the offshore vendor will take in case if it does not meet your
expectations.
5. How the security risks will be addressed in the contract?
As mentioned earlier security is a paramount in financial and account
offshoring, to safeguard your data, you need to assess the points of
potential risk in sending the work to the offshore vendor and to
structure the issues in the contract. This might be as simple as having
a clause in the contract that tells the offshore vendor to use secure
software to transfer all the critical data or it could be complex like
regular visit to offshore service provider to perform audit check of
their security infrastructure.
The offshoring of Finance and Accounting functions is a growing
phenomenon and mostly big corporations are gaining advantage of it. By
meticulous planning, small businesses can also take part in this
phenomenon by following the appropriate steps reported in this article.
The steps mentioned in the article do not represent a complete list but
it addresses most of the significant issues faced by the big companies
and explains how they solved it. By following these steps small
business can also successfully offshore their Accounting and Finance
work and increase their productivity in a cost effective way.