Companies are looking first to automation before moving their finance functions offshore, even as manufacturing and customer-service jobs are sent overseas.
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Companies that do outsource accounts, payroll and other personnel matters often avoid disinterested third parties, opting instead to send that work to businesses that have a vested interest in the company’s compliance standards, according to an ongoing survey by Hackett Group of Atlanta. Most companies have no plans to use overseas auditors, the Wall Street Journal reported, quoting the study.
The reason is fear of violating the tough internal-controls requirements of the Sarbanes-Oxley corporate reform legislation, the Journal reported. The already-complicated rules could become even more complicated if the work is outsourced.
Since 2004, Hackett has surveyed more than 100 large companies, at least 90 of which are publicly traded, on their paperwork and bookkeeping practices.
Only 4 percent said they have moved finance processes offshore, and only 7 percent said they were outsourced to third parties. Just 9 percent of companies are even considering outsourcing back-office functions to third parties in the next few years, the Journal reported. About 65 percent of the time companies turn to centralized shared-services centers. Also, about 23 percent of companies in the survey plan to automate payment-distribution processes in the next three years.
"It's not hard to find people who will tell you that comprehensive or full-service outsourcing is a tremendous growth wave in finance right now. But our analysis tells a very different story," said Hackett Senior Business Advisory Penny Weller. "While companies are looking at expanding their use of outsourcing and offshoring, it represents an almost insignificant portion of their finance efforts today."
While the survey bucks earlier predictions of a huge wave of back-office jobs flooding to India and the Philippines, no doubt exists that offshoring is a trend.
Deloitte Consulting LLP projects 2 million financial services industry jobs will move from Europe and the United States to cheaper labor markets in the next few years, the Sacramento Business Journal reported Monday.
"This is the very beginning of the bell curve of a new industry," Glen Keenan, president of Xpitax, a leading accounting outsourcing company based in Braintree, Mass., told the newspaper.
The ease of sending information long distances has enabled the trend of offshoring tax-return preparation, for example. However, only a tiny fraction of work is now sent overseas. Keenan estimates 250,000 to 300,000 U.S. tax returns will be prepared overseas this year.