GroupBDO | We're ready to on-board our Team | BPO/ FAO Business Development and Sales Outsourcing in the United States
Altogether, customers owe US and European companies a total of 5.6 trillion dollars in A/R. Broken down, this amounts to 2.6 trillion for the US alone and 3 trillion in Europe.
Financial institutions, insurance companies and collection agencies strive to insure, finance and collect these vast fortunes of overdue payments, for a fee. Outsourcing A/R’s can be an attractive solution for some companies; however, many suppliers and manufacturers prefer to do it themselves and collect their past due accounts directly from their clients. If well-planned and well-executed, this can generate real gains – especially in this day and age where credit is more and more expensive and increasingly difficult to obtain.
Credit has been scarce and expensive since the beginning of the late financial crisis. Still, there is a lot of money available to those who know where to look. According to Booz & Company, close to 1 trillion dollars are hidden in the inventories and A/R’s of American public companies. A vast fortune that would be very welcome in these days of despair for much-needed working capital. Transforming this hidden money into hard cash is feasible with use of the proper strategies.
The study’s authors believe better management of A/R alone would free up close to $943 billion immediately. That money could easily be used to finance company operations or could be reinvested into the economy under one form or another. Imagine what could be done with such an influx of capital.
In the beginning it was said that there were two reasons to consider outsourcing: You had to because things were running badly, or because you knew the function was not your core competency. Things have changed. Today outsourcing has matured and is recognized widely on three development levels: Tactical, Strategic, and Transformational.
1. Tactical Outsourcing addresses specific problems being experienced by the firm, providing a direct way to address them without losing control over the process. Examples might be:
- Absence of talent or the financial resources to accomplish tasks.
- Headcount reductions and generating immediate cost savings.
- Accompany large-scale corporate restructuring or major systems implementations.
- Address issues created by Merger and Acquisition creating multiple disparate systems.
2. Strategic Outsourcing typically addresses the corporation realizing that many back-office functions are not the core competency of the Mission/Vision, such as:
- Outsourcing non-core functions allowing focus on strategic issues.
- Maintain broader control over outsourced functions.
- Creating a partnership model over basic transactional outsourcing.
- Bringing functional process redesign and improvements.
3. Transformational Outsourcing, said to be the Third is all about redefining business and process, the single most powerful tool in addressing the continuous changes created by an ever-changing business environments of both Tactical and Strategic Outsourcing, Transformational Outsourcing is typified by:
- Being centered more on partnership and creating value over simply cutting costs.
- Broader offerings delivering both process and technology capabilities.
- Emergence of one-to-many platforms targeted at specific functions.
- Managing uncertainty by better addressing corporate governance and compliance.
- Improved business intelligence and analytics to guide for continuous improvement.
BPO and FAO Outsourcing | Growth in 2013
The BPO/FAO marketplace is expected to grow dramatically from 2012 forward, slowly shaking off the past two years where many intended partnerships went on hold due to the economic climate.
At GroupBDO we see this demand today in the discussions we are having with Small and Mid-Market (SME) firms, perhaps many entering the FAO outsourcing space the first time, or adding to outsourcing activities already underway.
Termed more challenging than merely labor-arbitrage in the SME space, we work with our providers to bring the components that will be required for success: technology implementation, incorporation of elements of SaaS and Cloud computing, and the deep domain support, governance, and change management to meet today’s Transformational Outsourcing demands.
BDO | Demand Generation | Growth 2013 and Beyond
Business Development Outsourcing (BDO), a component of Sales and Marketing Outsourcing, is expected to be one of the fastest growing outsourcing processes over the next several years. GroupBDO’s Demand Generation is already a proven process realizing results for our client business development and sales operations. BDO is growing in part icular as firms seeking to stimulate post-recession growth. Performance based Demand Generation has always been a GroupBDO core offering and we constantly refine our methods to increase our success rate.
Where does GroupBDO fit in?
GroupBDO has brought focus to the downstream order-to-cash process by assembling the outsourcing components to match the task that Transformational Outsourcing brings today. We do this by:
- Partnering with providers who bring deep end-to-end accounts receivable focus and delivery.
- Understanding your unique situation and bringing the solution that fits best.
- Walking side-by-side across the differing phases of the outsourcing process.
- Bringing one-to-many technology platforms that exceeds the needs and provides true business transformation enablement.
- Establishing effective governance from our first meeting forward.
- Helping CFO's see the value of Variabilization. The transformation of fixed cost into variable cost.
FAO to Achieve Strategic Objectives
The No. 1 reason for companies to consider outsourcing finance back-office functions is the need for cost reductions; however, we are seeing a myriad of additional drivers compelling companies to consider, and ultimately choose outsourcing as an operational alternative.
Cost-related benefits will always be the top of mind reason to outsource services. However, in some of the current Finance and Accounting Outsourcing (FAO) contracts, it has been noticed that apart from just cost savings, the outsourcing of services helped in accomplishing a few customer objectives such as:
- Leveraging FAO to undergo a major, company-wide, global change agenda
- Helping consolidate internal finance operations after a merger and/or acquisition
- Transitioning an existing FAO contract from one provider to a different provider
- Using FAO to help a new competitor enter into an existing market
- Using FAO to help an existing competitor enter into an already-established market
- Adding FAO to a larger, company-wide portfolio of sourcing initiatives.
We see, FAO contracts transitioning mostly in one of the following ways.
- Some take the “toe-dipping approach” to FAO that is outsourcing one function at a time and expanding to a broader model
- Others are taking a “lift and shift” approach to FAO that is transitioning everything at once, or in pieces
- Still others decide to fix the process first so that they have a handle on exactly where things stand pre-outsourcing, and can determine at a later date their current scenario post outsourcing.
Using FAO to Consolidate Finance Functions
Unilever set upon an ambitious change program to integrate its business groups and countries into a simpler,more efficient organization that would optimize cost synergies/savings and leverage its scale.
The company ultimately chose to outsource its finance functions for:
- Faster and more direct access to the benefits of economies of scale
- Faster roll out of technology
- The ability for Unilever Europe to focus on its core business.
Unilever Europe entered into an FAO contract with IBM that is expected to last seven years, including an initial two-year transition period, which is now in the process of being completed. Outsourced services include: Accounts payable, bill-to-cash, travel and expense, fixed assets, credit and collections, and general accounting.
This initiative thus far is seen as a groundbreaking success by Unilever Europe, and serves as a key enabler for its company-wide change program, having already delivered against the expected benefits. The company also believes that this approach to FAO provides a solid basis for the future service in Europe, as this could be a model that can be leveraged elsewhere within Unilever. Additionally, by de-capitalizing,Unilever has access to a flexible delivery model that accommodates evolving business requirements, while ongoing investment in people, infrastructure and technology is performed by its outsourcing partner.
BEYOND COST SAVINGS
The value proposition of F&A BPO now encompasses many added business benefits beyond a simple arbitrage of labor to help decrease transactional processing costs. These benefits can be summarized as follows:
- Access to scarce talent. Many companies are struggling to find the F&A talent they need. The U.S.-based talent pool has been shrinking considerably, and many companies are finding that F&A BPO service providers can usually offer skills, like payroll and accounts payable, significantly over and above basic transactional tasks — and at significantly lower cost.
- Focus retained finance function on critical activities. The retained finance function can focus its time and resources toward driving ongoing quality into its financial processes and staff development and determine ongoing transfer of experience and skills from their service provider. Moreover, the finance function’s retained management can focus time and energy on service level agreement setting and rolling out governance programs, while working closely with their provider. These collaborations are often decade-long “marriages” and require increased energy and focus to achieve effective results with compromise required on both sides on many occasions.
- Continual cost reduction and performance enhancement due to process standards followed by provider. Companies can often achieve cost reduction initially through labor arbitrage, and then through increased economies of scale and increased performance levels from services providers as they continue to mature and further their offshore investment. Contracts are frequently structured to demand annual performance improvement and reduced baseline costs, while expecting the provider to drive process improvement and innovation. Additionally, today’s companies are quickly realizing that F&A BPO is an opportunity to make rapid, impactful changes to their business and take advantage of the standards service providers are developing. Many service providers are going to market with differentiated value propositions that are geared to moving companies onto their existing delivery models, with a heavy skew toward offshore delivery. They have quickly realized that they need to demonstrate industry-specific F&A process excellence to win credibility.
- Ability to increase working capital and directly impact the bottom line. Experienced providers can devote increased resources, and have more efficient processes for managing cash flow from end-to-end solutions, such as order-to-cash and procure-to-pay. Improving the effectiveness and velocity of the cash flow can help improve management decision making, not to mention the positive impact on working capital.
- Availability of new F&A technologies. Many leading F&A BPO service providers are continually developing solutions that can work in tandem with the customer companies’ technology, or even replace it in certain cases. Providers are focused on F&A BPO solutions that can be standardized on incumbent ERPs (SAP and Oracle) with bolt-on tools and application solutions in discrete areas where value can be reaped. Additionally, solution areas like order-to-cash have moved beyond the performance of simple account collections using a billing application. They are frequently now bundled process solutions that often cross organizational boundaries (e.g., dispute management, cash-flow analytics and reporting capabilities). The benefits of bundled process outsourcing can include improved opportunities for process redesign and associated cost reduction, synergies from staff working together in the same environment, the ability to create a more leveraged management team and potentially fewer contact points with external and internal customers.
- Potential to integrate multiple disparate financial platforms, applications and middleware into one global standard. The cost savings enjoyed through labor arbitrage can offset significant enhancements to financial systems as a part of the F&A BPO initiative to achieve a single, unified global chart of accounts. We have seen many companies in the past delay F&A BPO initiatives to resolve inherent issues with their accounting systems, but there is a clear move within many of today's initiatives to combine systems integration with the F&A BPO transformation, especially where the same provider can be deployed to improve the F&A systems as part of the BPO initiative. BPO provides the opportunity for companies to make rapid changes to their business, especially where there are multiple silos of financial data strewn across geographies and business entities.
- Transferable of risk to the supplier. Managing offshore resources in today’s business environment can be very difficult. In particular, offshore captive organizations that are not Tier 1 global brands in lower-cost geographies (e.g., India) will find it increasingly difficult and expensive to hire, train and retain quality staff resources — not to mention accounting for the geopolitical risks associated with owning offshore assets and employing offshore labor. Many companies are quickly realizing they are far better off having experienced providers take on these associated risks, as they have invested heavily in their staff development and governance programs. This can also save companies hefty management costs in running captive operations.
- Preparation for a business slowdown. The desirable time to consider creating more effective and efficient F&A processes is when business is good and there is sufficient time to plan and manage the outsourcing transition. Additionally, providers are more willing to collaborate and share the benefits when companies are not feeling immediate cost-reduction pressures.
- Preparation for Merger and Acquisition (M&A) activity. Outsourcing F&A forces the company to move to standard processes across business units. This can help facilitate future M&A activity by decreasing the effort associated with the integration and by improving the likelihood and accelerating the timeline of realized synergies. It also allows the company to focus on the core business during integration, leveraging the service provider’s skills and platform for integration of F&A.
To discuss how we can help your organization, call our sales team at 512.852.4356