As a result of the economically-demanding climate we have seen over the past few years, businesses of all sizes are increasingly looking for new ways to stay competitive as well as keeping a tight control on business expenditure. Many organisations have turned to outsourcing or insourcing some of their business processes to achieve this, and these have become essential tools to support and drive company growth and control costs.

In addition, the burden on UK companies in terms of corporate reporting continues to increase; since 2007 AIM listed companies have been required to report under IFRS, and from 1st January 2015 many unlisted companies in the UK will be required to adopt FRS 102. Companies are seeking to maximise efficiency and value for money in their finance function whilst balancing reporting obligations and the need of fast-growing businesses for quality management information.

With rapid developments in online accounting systems, communications and cloud technologies, establishing an insourced finance function with a collaborative structure has become an effective and efficient mechanism to support growth.

Outsourcing takes many forms and recent research suggests the UK outsourcing market contributes roughly 8% GDP (equivalent to ~ £207 bn per year). Outsourcing plays a vital role in supporting other industries and in an article discussing the economic impact of outsourcing†, Roger Martin Fagg visting fellow at Henley and Ashridge business schools and former advisor to the Bank of England, is quoted as saying:

“Outsourcing has a positive effect on the macroeconomic environment if the outsourcing taking place increases both the efficiency and the effectiveness of the business. You have to have the two for it to be a worthwhile activity. If you’ve only got one, then you haven’t got a sustained position…”

This raises the question of how best to achieve an increase in both business efficiency and effectiveness within an outsourced finance and accounting model?

In 2005, the market analysts, Gartner, proposed a modified form of outsourcing, “Multi Sourcing” (a better description, and the one we tend to use, is “Collaborative Working”) where some of the function or process is sourced externally but some remains under the control of the company.

By layering relevant expertise and value-add onto the level of transaction processing that the client wishes to maintain “in-house” (general administration, basic invoice processing or day-to-day accounts processing) you can establish an efficient and responsive structure.

We have found that key to creating a successful collaborative working structure is:

  • Building close relationships between stakeholders from an early stage
  • Careful planning and testing of workflows, controls and communication paths
  • Clear and transparent systems; these may include dedicated email addresses, cloud software package solutions, electronic invoicing & payments that make it easy for the client and minimise transaction costs

So are what are the advantages of a collaborative working approach?

  • It enables the organisation and senior management to focus on their core activities and competencies
  • Cost savings are available as you can match more closely the resource and expertise with demand
  • Office space and other overhead savings are available, especially where the supplier uses cloud-based solutions to deliver results from remote locations
  • Staffing responsibilities are owned by the supplier, reducing HR overhead – it is their responsibility to ensure they have adequate cover of the required expertise, and that the employees have adequate career progression and professional development

Common concerns expressed by companies considering an outsourcing arrangement include:

  • Confidentiality and data security risks
  • Problems with quality of work, ensuring controls are fit for purpose and general oversight on a day-to-day basis
  • Control of work prioritisation
  • Concerns regarding ease of communication

It is therefore important to address risk mitigation, good governance and robust process controls as being essential for a successful outsourcing solution. These should be built into a collaborative working process from the very beginning.

Communication is also very important, and a successful collaborative approach to an outsourced finance function relies on regular free-flowing communication whereby the client has easy access to “their” finance team and vice-versa.

We also advocate a ‘Pay as you go’ approach, where the insourcing partner regularly and pro-actively communicates with the client to clearly identify what work needs to be done, give an estimate of how long that will take and record hours spent on the task as it progresses, providing progress updates to the client. An open approach such as this provides clarity over work schedules and costs.

By flexibly layering relevant expertise and resource to match requirements, a reliable cross-company team is built that can ensure quality of output. This approach can adapt to changes in business strategy and structure and deliver the increase in efficiency and business effectiveness that are desired in an outsourced finance function model.

If you would like to discuss any aspects of insourcing finance functions, please contact Anne Ovens.


From Micro to Macro. How outsourcing makes economies tick, The economists view, NOA, Yearbook 2013

Multisourcing: Moving Beyond Outsourcing to Achieve Growth And Agility, Harvard Business School Press; 2005