Industry Poll: Finance Outsourcing Can Help

February 9, 2005 (PLANSPONSOR.com) - Companies that have outsourced finance functions have achieved greater control over governance and compliance issues instead of less as was once feared, a new report asserted.

An Accenture news release said that 43% of the executives surveyed who had already outsourced a finance function reported that by doing so, they had strengthened their governance and compliance systems. A nearly identical amount (44^) said outsourcing had made no adverse impact on their governance and compliance efforts.

The report was conducted by the Economist Intelligence Unit on behalf of Accenture Finance Solutions, which provides outsourced finance and accounting services to businesses and governments.

According to the survey, 51% of respondents said the concern over the ability to maintain governance and compliance best practices is keeping them from taking the outsourcing step for their finance functions

However, among those who have had a good experience, 56% of the respondents said outsourcing providers are better equipped to deal with frequent changes to tax codes and accounting rules, while also providing an increased level of visibility into processes and transparency of information, the news release claimed.

Other survey findings included that 82% said that the establishment of finance outsourcing service-level agreements is essential for success Рones that define core finance processes and compliance requirements. Respondents also said clear lines of accountability were important, followed by instituting systematic status reports for outsourced processes, ensuring continuous evolution of the control framework and administering penalties for compliance and governance lapses, the news release said.

Executives noted several areas of compliance and governance that are of particular concern to them when outsourcing finance functions, including:

  • the quality of financial reporting provided to the management team by outsourcing service providers (64%)
  • service provider’s knowledge of the respondent company’s unique requirements and controls to prevent fraud (60%)
  • compliance with tax laws and accounting standards (50%)
  • transparency of accounts for auditors’ visibility (36%)
  • While 46% of respondents believe that Sarbanes-Oxley and related compliance legislation has had limited or no impact on their company’s outsourcing of finance functions, 39% said such legislation and activism reduces the likelihood of companies outsourcing finance functions.

Respondents said the top finance functions that should still be kept in house include:

  • budgeting and forecasting (81%)
  • treasury and cash management (71%)
  • information management and analysis (68%)
  • financial risk management (66%)

The online survey covered 203 senior executives including chief finance officers, finance directors and vice presidents of finance, representing companies around the world with revenues ranging from less than $500 million to more than $8 billion.

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