Finance & Accounting (F&A) Business Process Outsourcing (BPO)

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Business process outsourcing - BPO (subcontracting or externalization) is a method of subcontracting various business-related operations to an external organization. There are various categories of business process outsourcing: 1- finance & accounting, 2- investment and asset management, 3- human resources, 4- procurement, 5- logistics, 6- real estate management & 7- miscellaneous. Finance & Accounting (F&A) Business Process Outsourcing (BPO) is a method of subcontracting various finance functions to a third-party provider.

What is Finance & Accounting Business Process Outsourcing?

Finance & Accounting (F&A) Business Process Outsourcing (BPO) is a method of subcontracting various finance functions to a third-party provider.

In this paper, the first part will be dedicated to finance & accounting business process outsourcing, the second part will be about the selling process, in the third part interactions between the business process outsourcing provider & the customer (firm) will be & finally the functions outsourced will be discussed.

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I- Finance & Accounting (F&A) Business Process Outsourcing (BPO)

 

Finance & accounting (F&A) business process outsourcing (BPO) is a method of subcontracting various finance business processes (function or the full department of finance) to a third-party provider (shown in Figure 1: Business Process Outsourcing). The primary goal for a firm deciding to outsource business processes is to cut expenses, free up time, and focus on core aspects of the business.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1: Business Process Outsourcing

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II- Selling Process

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An externalization will involve an RFI – request for information, then an RFP – request for proposal, a letter of intent, a service-level agreement & finally contract signing (shown in Figure 2: Business Process Outsourcing Process (Selling Process)). There are 2 agreements in a business process outsourcing process, the BUSINESS PROCESS OUTSOURCING AGREEMENT (VENDOR FORM) & the BUSINESS PROCESS OUTSOURCING AGREEMENT (CUSTOMER FORM). Within the agreement, the contract term will be determined (depending on the customer objectives in outsourcing), this term of the BPO agreement may fall into the following range [1 year to >8 years] with the ability to be renewed.

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Figure 2: Business Process Outsourcing Process (Selling Process)

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III- Interaction between the Provider & the Customer

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Business process outsourcing will involve interaction between the vendor & the customer. Each party (the vendor & the customer) will appoint one individual for the management of the BPO contract and the overall provision and receipt of services. This will involve the establishment of a management committee with the customer in order to provide advice with respect to the customer’s strategic and tactical decisions regarding the establishment, budgeting, and implementation of the customer’s priorities and plans for the Services among others.

 

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IV- Finance Function Outsourced

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Finance function (finance business processes) outsourced involve: general accounting | payroll | treasury/cash management | accounts payable | accounts receivable | credit | fixed assets | contract maintenance | collections | financial systems | tax & regulatory compliance | budgeting | securities & exchange commission and regulatory reporting |interpretation & analysis of financial statement. Interpretation & analysis of financial statement is the process of analyzing a firm’s financial statements for decision-making purpose, internally, it is used as a monitoring tool for managing finances. There are 3 main techniques for analyzing financial statements: 1- ratio analysis, 2- horizontal analysis & 3- vertical analysis. In figure 3 the transition of a business process is shown.

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Figure 3: Business Process Outsourcing _ Transition of a Business Process​

 

To conclude, finance & accounting (F&A) business process outsourcing (BPO) is a method of subcontracting various finance business processes (function or full department) to another organization. Business process outsourcing enables firms to be efficient & effective.

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