Good financial management is one of the most critical aspects of business operations, which is why the job market for professionals in the finance industry is skyrocketing. For example, according to the Bureau of Labor Statistics, the job outlook for financial managers is projected to grow by 17% between 2021 and 2031 (which beats the 5% average for all occupations).
Competent finance professionals are unquestionably indispensable in any organization. But maintaining an in-house team can get costly, which is why many companies look into outsourcing their finance roles.
If you are considering the same, this article will give you a comprehensive guide to finance outsourcing. We will discuss the pros and cons and give a few examples of the types of finance roles you can outsource.
What Is Finance Outsourcing?
Finance outsourcing refers to engaging financial services or talent from outside your organization. Compared to having a finance department in-house, outsourcing means hiring a third party to take on finance functions, including:
- Financial analysis
- Financial planning
- Risk management
Keep in mind that financial services are not necessarily accounting services. The former focuses on planning and directing financial transactions, while the latter records and reports those transactions. Finance professionals do not usually take on accounting functions, which is a critical distinction to keep in mind when outsourcing your finance roles.
Companies outsource their financial management functions for several reasons, which we’ll discuss in the next section.
What Are the Benefits of Outsourcing Finance?
Businesses have turned to finance outsourcing to benefit from cost-efficiency, better talent, and access to new technologies and systems. This may mean they use an outsourcing company or a freelancer.
A key benefit of outsourcing your company’s finance functions is the savings it will lead to. For one, you won’t need to incur training costs because the freelancer or outsourcing company you hire will already have the necessary expertise and experience required to get started immediately. All you need to do is onboard them to your company and familiarize them with your operations.
In addition, your finance outsourcing costs will be lower than the salaries you would have to pay by hiring from your local area. This is especially true if you hire talent from regions with lower wages and living costs, such as Latin America (LatAm). You can engage the remote services of senior finance talent based outside the US for a lower monthly cost than their US-based peers.
Exposure to new technologies and systems
Hiring a finance team in-house requires you to invest in technologies, software, and systems for them to use. But outsourcing does not come with these costs. Your outsourced talent will likely already have access to the tools they need to take on the job. They will also regularly update both the software they use and their knowledge of new systems to stay competitive.
This allows you to take advantage of new technologies and systems without the cost of purchasing or investing in them outright.
Access to finance specialists all over the world
There are many limitations involved in hiring talent in-house. The talent pool you can access may be limited by where they live (for example, their distance from your main office) and the salary you can offer. This limits the number and quality of candidates that might apply for your finance positions.
Finance outsourcing breaks down those barriers, allowing you to access talent from anywhere. This gives you access to a broader pool of candidates with the necessary skills and qualifications (from top universities worldwide) to take on the job. It also might mean that, although you might not have the resources to pay top talent locally, there still will be high quality talent who considers your salary offer fair.
What Are the Risks of Outsourcing Finance?
Though overflowing with benefits, finance outsourcing will also have some drawbacks that you need to be aware of.
Outsourced finance professionals will usually work autonomously (unless you are working with an outsourcing company). They likely have their own process and ways of going about finance tasks—and sometimes, this may not align with your company’s or in-house finance department’s processes or preferences.
You lose some control with an outsourced team compared to having a fully in-house finance department who you can mold according to your company’s standards. Thus outsourcing your finance roles could be a risk if you want to have full control over how the company’s finance functions are carried out.
Working with talent from different parts of the world can become complicated when time zones are considered. You and your outsourced team may have different working times, which can lead to delays in response times and challenges in communication. This can become an issue when dealing with critical matters or projects that need immediate attention.
If fast responses and work overlap matter to you, then it would be in your best interest to outsource finance talent from nearshore countries in LatAm, where workers will be in the same time zones as the US.
Experience with US laws
Finance functions in the US need to comply with the US Generally Accepted Accounting Principles (US GAAP), while most other countries use the International Financial Reporting Standards (IFRS).
Not all financial analysts based outside the US will know and understand US GAAP, especially if they have completed their degrees and other qualifications in other countries. You will need to ensure that you enquire with any potential candidates whether they have sufficient knowledge of US GAAP to keep your company compliant with US regulations.
If compliance and understanding of both US GAAP and IRFS is something that you require, make that clear in your job description.
What Finance Services Can You Outsource?
If you’re considering outsourcing all your finance functions to a single individual, let us be the first to tell you that’s not the way to go. Finance professionals usually have specific fields of expertise. That’s also good news because you can choose which specific functions to outsource.
Here are some finance roles that you can hire remote talent for.
A financial controller takes on a broad scope of responsibilities, from accounting and bookkeeping to other financial management tasks. They will usually report to the chief financial officer (CFO). Outsourcing this function in your financial management can help yield accurate financial reports and analyses of your financial state and give you access to strategic guidance to improve your finances.
A financial controller’s responsibilities include the following:
- Audit reporting
- Compliance management
- Employee and vendor communication
- Management reporting
- Policy and procedures guidelines and adherence
- Transactional processing oversight
Financial planning and analysis (FP&A)
FP&A professionals take on activities that help support your business’s financial health. These include:
- Planning and budgeting
- Integrated financial planning
- Management and performance reporting
- Forecasting and modeling
They help your company enhance your financial condition and create strategies that will allow you to execute your functions with your budget in mind.
Business intelligence analyst
Business intelligence professionals use technology and systems to analyze and convert data into actionable information. While perhaps not always thought of as a finance role, having a strong business intelligence analyst in your finance department is key to having the data needed for the CFO to make financial decisions. They help retrieve important insights to facilitate data-driven decisions. Among their roles include:
- Assisting in software and hardware launches
- Creating policies and procedures for data collation and analysis
- Evaluating and screening data
- Assessing data and analytics
- Overseeing the use and collection of data
- Improving business operations
Chief financial officer (CFO)
A CFO is the highest-ranking professional in a company’s finance team. They are primarily responsible for overseeing all finance functions to ensure the financial health of your organization.
Their roles include:
- Tracking the company’s cash flow
- Analyzing financial strengths and weaknesses
- Creating corrective action plans
- Preparing financial forecasts
CFOs must be adept at their jobs and have the expertise to lead a company into excellent financial health. Hiring a freelance CFO can be of great benefit, allowing you to focus your attention on growing your business and other core aspects while your CFO uses their expertise to attend to and monitor your business’s financial situation.
Financial analysis isn’t in everyone’s skill set, so a good CFO is worth their weight in gold to ensure your cash flows stay healthy and you have the information you need when it’s time to make critical decisions.
It’s undeniable that outsourcing finance talent can provide numerous benefits, including cost savings and access to highly skilled professionals.
A strong finance team is essential to ensure your organization’s financial health and make strategic decisions that drive growth. Partnering with companies like Near enables you to access a pool of highly skilled and cost-effective finance professionals in LatAm, allowing you to focus on core business activities.
See how Near can help you access the expertise you need to make informed financial decisions and take your business to the next level.