The mid-market accounts for approximately one-third of private U.S. employment and includes close to 200,000 businesses. It’s a powerhouse of the American economy.
Yet middle market companies face significant challenges. Despite changing economic conditions, rising costs and having to do more with less, they need to stay competitive and go up against against huge multinational organizations.
In today’s volatile economy, the pressure is starting to show.
As reported by Inc.com, the 2015 fourth quarter survey by the National Center for the Middle Market (NCMM) indicates that corporate financials took a hit, with the middle market bearing the brunt of it. And, The Wall Street Journal reveals that, although private middle market revenues are robust, rising wages and a strong dollar are hurting profit margins.
Growing Pains: Trying to Keep Up in the Digital Evolution
The fastest-growing mid-market companies are leading the way with digital technology, using it to help streamline front-end processes like customer service to maximize efficiency and promote growth. The mid-market C-suite understands the need for a real-time operation and decision-making environment, and how it can make them more productive than their less digital counterparts.
Yet, as reported by Chief Executive, a joint study from NCMM and Magneto Commerce reveals that although 63% of mid-market leaders rank digitization as very or extremely important, only 36% consider themselves to be digital leaders.
There’s a disconnect between what the mid-market needs to deliver and what it’s currently capable of. Why? Usually a lack of resources.
The increasing pressure to cut costs doesn’t end at front-facing customer oriented processes. The F&A department can sometimes be viewed as “necessary money pit”. As a whole, mid-market companies struggle with controlling and reducing costs, not knowing how or where to cut costs, while still keeping on top of daily activities surrounding typical functions like AR, AP and reporting.
In the past, BPO was only an option for larger enterprise organizations with bigger budgets. But two key trends are opening up the gates to F&A outsourcing.
First, as the F&A outsourcing market becomes more and more mature and more saturated, providers are now eyeing the mid-market for new deals. As well, cloud-based technologies have brought about the advent of as-a-service offerings that have made outsourcing increasingly accessible and affordable. (Take a look at the latest Horses for Sources report on F&A that mentions the mid-market.)
It’s now easier than ever for the middle market to achieve cost benefits from leading-edge approaches. BPO providers offer services tailored to the unique needs of the mid-market, helping to digitalize F&A with tools like optical character recognition and automation.
Over the last few years, the appetite for capital expenditures – in both enterprise-level and mid-market companies – has dwindled. Outsourcing offers an ideal solution for middle market companies looking to access world-class technology without investing in a new infrastructure.
It’s a highly appealing, scalable solution to ensure that accounting best practices and standardized processes and improved controls are in place, while minimizing costs. It also allows the company to focus its best resources on big-picture strategy – so they can develop the necessary innovations to compete with larger enterprises.