2006 Expected to Be Breakout Year for F&A Outsourcing

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The Accounts Payable Network recently conducted a survey to obtain a current picture of outsource and off-shoring practices corporately and within accounts payable departments. According to Paul Nowacki and Nikhil Rajpal of Everest group, outsourcing of finance and accounting (F&A) functions has been growing rapidly and the researchers expect 2006 to be a breakout year for it.

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The term outsourcing often refers to two distinct but sometimes overlapping strategies – outsourcing and off-shoring. In the context of the Outsource and Off-shore Practices Survey, outsourcing was specifically defined as work done by a third party, within or outside the survey participant's country. Off-shoring was defined as work done in a country other than the participant's, either by a unit within the participant's organization or by a third party. The overlap of outsourcing and off-shoring among respondents is:

  • 28 percent outsource onshore, while 34 percent outsource off-shore
  • 3.7 percent off-shore within their own organization
  • 31 percent neither outsource nor off-shore

One hundred and seven companies, representing various industries, participated in the survey.

Summary survey observations include:

  • Nearly two-thirds of respondents outsource some function
  • One-third of survey participants off-shore some function
  • Half of the participating organizations have a shared services center
  • Payables is the most common responsibility handled by the shared services centers, followed by payroll and the information technology (IT)

Accounts payable outsource practices include:

  • Within accounts payable, audit recovery is the most commonly outsourced function, followed by invoice scanning.
  • Cost reduction is the most common primary objective for outsourcing payables among organizations that outsource.
  • Three-fourths of payables departments that outsource some functions say they are satisfied or very satisfied; only 2 percent are not satisfied.
  • Invoice scanning leads the list of functions that are likely to be outsourced by accounts payable in the next two years, followed by data entry, according to respondents.

Organization-wide outsourcing practices include:

  • 64 percent of participants outsource
  • Payroll is the most commonly outsourced function of respondent organizations, followed by IT
  • Operating cost reduction and control is the leading primary objective in outsourcing, according to 56 percent of responding organizations that outsource
  • Nearly 60 percent of organizations that outsource are satisfied or very satisfied with it and another 35 percent are at least somewhat satisfied, while only 6 percent are not satisfied.

Organization-wide off-shoring practices include:

  • 37 percent of participants off-shore
  • IT is the most commonly off-shored function, followed by accounts payable
  • Operating cost reduction and control is the leading primary objective in off-shoring, accounting for 62 percent among respondents
  • Nearly half of organizations off-shoring are satisfied or very satisfied with off-shoring, another 41 percent are somewhat satisfied and only 10 percent are not satisfied
  • India is by far the leading location of off-shored work, by a factor of ten. It is distantly followed by Costa Rica, the Philippines and Australia.
  • One-third of organizations expect to increase off-shoring in the next two years
  • Accounts payable is the leading candidate for off-shoring in the next two years, according to 20 percent of participants who expect to off-shore additional work, followed by IT at 19 percent.

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