Financial Services
How does outsourcing enhance efficiency in financial services operations?
According to a survey by a leading audit, consulting, and advisory company, businesses can reduce operational costs by up to 60% by outsourcing non-core activities such as financial operations. To do them in-house, you require significant funds, the right talent, and technology.
Reducing costs and improving operational efficiency are some of the primary reasons businesses outsource financial services. According to research, 59% of companies leverage expertise and economies of scale to reduce costs and make financial operations efficient.
This article covers topics such as the right time for financial services outsourcing, benefits, and types of services to consider outsourcing.
When should you outsource financial services operations?
It is crucial to know the right time to outsource financial services operations. Some of the indicators are –
Fast growing business
If you have a rapidly growing business and are investing too much time in managing financial operations and compliance, your core operations, marketing, and sales suffer. It can be difficult and costly to hire a local team to manage tax compliances, manage payroll and employee benefits, budget, and plan financially.
A lack of in-house talent or expensive hiring in your location
Managing a full-fledged finance department, and investing significantly in resources, training, logistics, supplies, hardware, and office space can be an added expense, reducing the efficiency of core business operations.
Pressure to reduce cost
Growing businesses tend to be a challenge if you are investing significant surplus money in managing an in-house finance department. This becomes a significant burden, potentially forcing a price increase on your product or service and making business inefficient.
Resource and time wasted on non-core operations
Outsourcing is essential if your management and team’s significant focus is on non-core business operations, such as books, taxes, salaries, benefits, and compliances. This diverts time and energy from core tasks and reduces business efficiency and growth.
How does financial services outsourcing improve efficiency?
As a growing business, you need to invest time in core operations. For example, an e-commerce business must focus on implementing technology, streamlining supply chains, and getting the best suppliers on board. Here is how financial services outsourcing helps –
Access to the right expertise
Accounting and finance are ever-evolving with newer laws and compliances. Outsourcing financial services operations lets you leverage the knowledge of experts who are up-to-date with the industry’s latest standards, regulations, and tax laws. This saves you from any defaults and penalties, thus increasing your efficiency.
Rapid scalability and flexibility
Most businesses have a high and low season. They do not want to keep paying for staff, logistics, and office space when there is not enough revenue, as it depletes surplus funds and reduces efficiency in core operations. With financial outsourcing, businesses can scale up their financial services and manage their spending accordingly during tax season and financial audits.
Access to technical infrastructure
Accounting, finance, and payroll require advanced software systems, along with artificial intelligence, machine learning, and data analytics. You also need reliable storage for data that is accessible across locations. Financial services outsourcing partners offer state-of-the-art accounting and taxation systems, data analytics, and reporting - often at a fraction of the cost.
Better risk management
Implementing robust internal access controls, segregating responsibilities, and enforcing data security protocols through a financial service outsourcing partner can greatly enhance data protection. Data breaches can severely damage a business’s reputation and impact operational funds. By minimising risks of fraud, ensuring regulatory compliance, and maintaining strong internal controls, you improve overall business efficiency.
Types of financial services outsourcing to enhance efficiency
- Business intelligence analytics – Leverage big data and analytics to gain valuable insights into the company’s financial performance.
- Financial planning and analysis – Leverage the expertise of financial experts in budgeting, financial forecasts, and variance analysis. Make data-driven decisions and optimise the business’s financial performance.
- Financial control – This includes bookkeeping, accounts payable (AP), and accounts receivable (AR) necessary to maintain accurate records in the system. A healthy cash flow is an outcome of timely inward and outward payments.
- Payroll processing – Outsourcing payroll processing streamlines complex tasks like salary calculations, tax withholdings, and benefits management. This approach reduces errors, ensures compliance, saves time, and allows businesses to focus on strategic growth instead of administrative work.
As markets evolve, leveraging financial services outsourcing can help businesses stay competitive and adaptable in an increasingly complex financial landscape. It offers businesses a strategic advantage by reducing costs, enhancing operational efficiency, and providing access to industry expertise and advanced technology. Discover how you can transform the financial sector operating models, standardise processes, improve business performance, and reduce operating costs with tailored services at Infosys BPM.