Financial Offshore Outsourcing - A Cost-Effective Alternative for Small & Medium Enterprises

Over the last decade, we saw that Financial Offshore & Outsourcing was perceived as a domain relevant to large corporates only. With global operations and multiple strategic business units, it was inevitable, that these large organizations will take a close and hard look at outsourcing Finance & Accounting Services.

But today, we see that a new trend is slowly emerging. Even small and medium sized enterprises are now looking at outsourcing Finance & Accounting Services.

A rapidly intensifying competitive environment is forcing even small companies to closely examine all areas of their balance sheet in order to stay competitive. The tumbling markets, falling exchange rates and escalating financial pressures have driven cost-cutting measures even deeper, and many small firms are turning to Finance & Accounting (F&A)outsourcing to reduce overall spend, conserve capital and increase efficiency. The resulting belt-tightening is greatly benefiting F&A outsourcing service providers. Simply put, organizations are investing money to save money.

Recently, I came across the singular instance of a new Finance Head of a relatively small organization, who was given the responsibility of building a finance team from 'ground zero' to support an existing business, which already had a significant customer base in place. Instead of adopting the time-tested route of recruiting a stream of personnel, he did something 'out of the box' - he outsourced most of his finance and accounting (F&A) work.

His superiors were initially skeptical of outsourcing, assuming that it was more appropriate for large global organizations. But he made it work, by first outsourcing all their transaction processing — and then after the first year, he was able to scale back as the processes became more stable, with no penalties.
In the past, it was unthinkable that one could strike an outsourcing arrangement to cover less than 10 employees. Simply because, most outsourcing vendors found it very unviable to service small enterprises.

However, over the last few years we see that as the processes become more defined and more importantly thanks to more-easily deployed technology, it's becoming increasingly viable for small organizations to outsource all or part of their F&A work offshore, and at very favorable rates.

So, how to make F&A outsourcing viable for smaller organizations? Vendors should focus on creating as standard an offering as possible, and host it in the cloud where smaller clients can access it remotely. This is in fact the other end of the spectrum, for vendors who are conditioned to working with large organizational clientele, wherein, the vendor works within existing client systems and processes.

In Summary:

In general, the price of F&A outsourcing has decreased between 6% and 8% a year for the past two years, according to a recent study by Alsbridge, an outsourcing advisory firm. Market competition is the major driver of the decline, with outsourcing providers taking smaller profit margins in order to win business. And the greatest beneficiary of this trend is the small and medium sized enterprise, as they are now able to leverage F&A outsourcing benefits, as a competitive advantage. Moreover, the availability of “turn key” solutions make F&A outsourcing a viable and practical solution for smaller enterprises. As a senior executive at Amicorp BPO stated, “Turn key solutions are increasingly gaining traction with companies that had not considered F&A outsourcing due to their size.”

For more information about our services please contact:

Hanno de Vriend
BPO Director
H.deVriend@amicorp.com

Fernando Cancino
BPO Sales Executive
F.Cancino@amicorp.com

Outsourcing Agreement for KYC Services – Key Parameters

With increased regulatory scrutiny and new regulations, organizations are finding it more difficult than ever to manage an efficient & effective Know Your Customer (KYC) process.

For many organizations, KYC obligations can prove to be an expensive and challenging proposition. And it may be tempting for these companies to consider outsourcing purely on financial grounds. However the regulatory obligations of the company must always be given primacy. Simply because the reporting entity itself remains liable for the discharge of its KYC obligations.

But, while selecting a vendor to manage your KYC outsourcing requirements, it is important that the organization looks closer and deeper across critical parameters, to ensure that the outsourcing company (vendor) meets the organization’s (customer’s) statutory obligations, effectively and efficiently.

The Outsourcing Agreement - A Closer Look at Key Parameters

• Articulate clearly the overall scope of the customer-vendor relationship.

• Define the operational parameters, specifying which elements of customer's KYC obligations and related compliance activities will be under the purview of the vendor.

• Similarly, also specify what elements of customer's KYC obligations and related compliance activities, will be retained by the customer.

• Provide a detailed description of the customer identification procedures which are the primary responsibility of the vendor.

• Including critical components such as, collection of regulatory KYC specific information, verification of the KYC information in accordance with the regulatory requirements, etc

• Specifically define formalized service levels, reporting methodologies and the timing of the delivery of reports to the reporting entity.

• Put in place, appropriate indemnities and limitation of liability wording to ensure that the vendor is made contractually liable if it fails to meet the required standards to responsibly manage the customer's KYC obligations.

• Specify how changes to the outsourcing services agreement may be requested and re-priced to meet any changes in regulatory requirements

• The agreement should detail out the modalities with reference to handling of all records and documents and should also specify whether the vendor is to provide or make available for inspection any of the records as required by the customer

• Last but not the least, in the event of termination or expiry of the contract, the agreement should provide for a transition period, to ensure the timely and systematic replacement of the vendor with a proper handover of all records and documents related to the KYC process.

In Summary:

A clear, comprehensive agreement is arguably the most important factor that will determine the success or failure of any KYC outsourcing project. That is why great care and diligence has to be placed, while drafting out the agreement with the vendor. A comprehensive agreement will not only protect the organization’s interests, it will also ensure that the KYC outsourcing company (vendor) fully understands what is required, in terms of scope of work. This is fundamental to any successful outsourcing partnership.

For more information about our services please contact:
Hanno de Vriend
BPO Director
H.deVriend@amicorp.com

Fernando Cancino
BPO Sales Executive
F.Cancino@amicorp.com

Outsourcing of Finance & Accounting Services - Truly an Effective & Efficient Solution

The last decade has witnessed a rapid increase in organizations outsourcing their finance & accounting services, to specialist service providers. By managing operational processes far more efficiently and in a very cost-effective manner, specialist F&A (Finance & Accounting) Outsourcing service providers, offer both large and small enterprises, a singular advantage. Further, by outsourcing their finance & accounting services, to specialist service providers, the organization, in turn, is able to concentrate far more effectively, on its core competencies.

By managing operational processes far more efficiently, and backed by a team of seasoned finance professionals, the more established F&A outsourcing service providers, ensure that the operational flow is both efficient and more importantly error-free. Further, by outsourcing finance & accounting services, the organization is able to substantially reduce its manpower requirements, and this enables them to adopt a lean and mean structure, which can effectively focus on its core competencies.

Finance accounting outsourcing has simplified the entire operational process, for many organizations. Maintenance of accounts is a tedious and time-consuming affair and needs considerable attention to detail, as even the slightest mistake can hamper the efficient functioning of the business entity. Any flaw or ignorance of accounting processes can affect the reputation of a business severely. These mistakes or flaws can have considerable negative impact on business, customer relationships, and regulatory affairs.

The process of finance accounting needs dedication to detail and commitment to processes. Finance accounting outsourcing can prove to be a powerful business tool. There is a great demand for finance accounting outsourcing as more and more businesses adopt this strategy. Growth rates show considerable improvement when a company takes the assistance from an outsourcing firm to manage their finances. We have, in the past, seen loss-making units becoming profitable with the appropriate guidance from the finance experts of finance accounting outsourcing organizations. So the merits of outsourcing finance & accounting services to specialist service providers are considerable.

But, vendor selection has to be done diligently, in order to ensure that this is a successful exercise. One should carry out a detailed inquiry about the firm’s reputation and credibility along with its performance so that it can give a clear picture about their work ideology. Moreover, one should be sure about the authenticity of the firm because the organization will be sharing private and confidential documents with the service providers. The finance accounting outsourcing firm is not only responsible for maintaining the records of the transactions but also for performing other finance related activities. It should efficiently manage back office services, general ledger, bookkeeping to tax computation and filing and data entry. The more established and professional finance & accounting outsourcing service providers certainly ensure that the customer organization receives the highest level of professionalism, efficiency and quality.

Finance accounting outsourcing firms have professionals who have years of experience in this area. Thus, one can confidently delegate sensitive tasks to seasoned professionals. This is the most cost effective accounting solution. Outsourcing combines various value benefits and provides the client with an efficient and cost effective way to manage financial and accounting operational processes.

In Summary:

With growing complexity of their core business and increasing competitive pressures many organizations are looking increasingly beyond their traditional organizational and geographical boundaries to find more efficient means of conducting business day to day. New business operating models are emerging that challenge the conventional wisdom concerning what makes an organization successful or capable of differentiating itself in the marketplace, now and in the future. Standing still is not a viable option for those that want to thrive.

For more information about our services please contact:
Hanno de Vriend
BPO Director
H.deVriend@amicorp.com

Fernando Cancino
BPO Sales Executive
F.Cancino@amicorp.com

Trust Outsourcing Vendor? The Winner Chooses Wisely!

This decade will indeed be a challenging one for businesses throughout the financial services industry, characterized by a sustained pressure to reduce opertaional costs. As a result, the importance of cost-effective back-office activities, including accounting, financial administration and governance in Trust and Company Management operations is bigger than ever.

One way Banks, Trust companies and similar organizations can maximize the relationship value of providing Trust and Wealth Management services while minimizing costs is by strategically outsourcing various components of providing those services.

For trust companies and banks considering outsourcing their operations, the additional challenge of meeting the demands posed by an increasingly complex regulatory environment might just be the factor that helps validate their decision.

However, choosing the right outsource service provider, becomes a critical activity, for Trust companies and Banks. I have seen many instances of vendor selection based on an unstructured and cumbersome process. This can seriously hamper the long-term success of the outsourcing process. More importantly, the cost to both wealth managers and their clients can be steep, including not realizing the strategic benefits, significant disruption for the end-clients and lower-than-anticipated financial savings to the firm.

THE WINNER CHOOSES WISELY

First and foremost, a firm must understand its core value proposition and how it expects to benefit from outsourcing before it goes through the vetting process of choosing a provider.

Next, any dynamic and rapidly changing environment calls for flexibility in a service provider. Given that most outsourcing contracts are based on a long-term tenure ranging anywhere from 3 to 6 years, this flexibility becomes an important factor. While flexibility is a key factor in evaluating a service provider, it however, is not the only one. Trust firms should also look for agile and scalable servicing platforms, proven servicing relationships built entirely around clients’ operational needs, long-term financial strength and a history of compliance integrity. So, it is vitally important that a Trust company or Bank, takes into account all these factors and evaluates them in a systematic and detailed manner.

Similarly, while service models vary, trust firms should look for a relationship-based model geared toward their specific requirements. Some useful indicators include a provider’s feedback mechanisms, its systems for establishing employee goals and rewards, and a consultative approach to problem-solving.

The more successful outsourcing relationships represent long-term partnerships between a wealth management firm and its service provider. A selection process that takes this into account should reflect the consultative nature of outsourcing. A structured and systematic vendor selection process will ensure that you give a fair opportunity for this long-term partnership relationship to evolve, and this will ultimately ensure the success of the outsourcing decision.

For more information about our services please contact:

Hanno de Vriend
BPO Director
H.deVriend@amicorp.com

Fernando Cancino
BPO Sales Executive
F.Cancino@amicorp.com

Effective Transition Management in Outsourcing - It’s a 2-Way Street!

The successful closure of any outsourcing deal is merely the first step, in the effective management of transitioning of services from the company in-house team to the selected outsourcing service provider.

Many managers, surprisingly tune-off, once the outsourcing deal is struck, much to the detriment of that process. They fail to remain vigilant during the crucial phase of transition management. Translating the outsourcing deal, into a viable operational process is indeed critical.

The key success factor is the realization that, managing the transition, is not merely the responsibility of the service provider. Managers need to recognize that transitioning is a joint effort and requires the complete involvement & commitment of both the client organization and the service provider.

Over the years I have come across numerous instances, wherein the client managers, seem to feel that their job is done, once the deal is signed. The onus shifts completely on to the service provider, thereafter. Yes, the major impetus, in effecting a smooth transition hinges to a great extent on the experience and competence of the service provider. But such a transition is doomed to fail, if it is perceived as merely a one-way-street. Any transition, in order to be successful, needs a joint commitment and active involvement of both parties.

Every transition process will encounter a host of hurdles which need to be quickly identified and resolved. While the vendor may have past experience of doing many transitions in the past, one must recognize that each transition is unique since there are two different parties involved and the challenges differ for each transaction. Recognizing this fact by the managers is the first step in successful transition management.
I have attempted to put down some very basic issues that must be kept in focus while attempting a successful transition management process.

1.Get the right team in place

• Successful transition, hinges completely on having the right people at the right place and at the right time. It is also important to ensure that the transition team comprises of people with the required seniority as well as expertise to manage change.
• Besides the mandatory technical expertise, it helps considerably if the team members have prior international experience and direct customer interactive experience.

2.Foster a positive work environment:

• Change always invites hostility from some segments within the client’s operational environment. Conduct regular team building activities to foster better understanding, open communication and working relationship. Open communication of the future plans and team building measures would help to reduce the inherent hostility and help to build an effective team.

3.Facilitate Interactivity

• Don’t make the transition a one way street where the incumbent team is the only one sharing knowledge. Encourage the incoming team to share their learnings at regular intervals to gauge how effective the learning process is. These playback sessions may include the incoming team making a presentation explaining the application, business processes and flows, use cases, operations etc.

4.Address communication and cross cultural issues –

• These are the most overlooked and hardest ones to deal while transitioning the services to an outsourcing service provider. These issues create communication challenges, breed mistrust and jeopardize the entire engagement. Arrange cross cultural training for both vendor and customer teams. This should be done in the initial stages of the transition itself to lessen the risk and reap more benefits.

5.Perform reviews diligently

• Ensure review/inspection is done regularly at each stage of the transition. This will ensure that communication is prompt and clear and will also ensure problem identification and quick corrective action.

These are some very basic do’s which, if done diligently, will ensure effective management of transitioning of services from the company in-house team to the selected outsourcing service provider.

For more information about our services please contact:

Hanno de Vriend
BPO Director
H.deVriend@amicorp.com

Fernando Cancino
BPO Sales Executive
F.Cancino@amicorp.com