Given the current economic environment, how can F&A outsourcing help you deliver benefits that impact 2009?
by Chris Gattenio
 
In this market it’s understandable for organizations to seek quick bottom-line relief, leaping at any opportunity to cut costs. While FAO certainly holds significant promise for lessening the negative effects of an economic downturn, strategically choosing the right partner in an FAO provider is one of the largest determining factors for both short- and long-term success. Opting for the lowest cost option does not always offer a sustainable strategy, and many organizations live to regret their haste as they later seek the potential to transform and innovate, and only then realize their partner’s limitations.

That said, one of the best-kept secrets of F&A outsourcing is its ability to generate relatively immediate returns when partnering with an experienced provider. While full-scale transformation can (and should) take considerable time and investment, there are two key factors in determining how quickly an organization will generate results from FAO.

First, ensure that you choose a provider whose FAO approach is based on a framework for operational excellence—a multi-client standardization model. They should be able to easily demonstrate standard onboarding, design, process, technology, measurement, and transition blueprints for your business. This is a critical component to ensuring rapid results, as standardized delivery capabilities indicate repeated, successful implementations across multiple clients and regions. How service providers consistently drive improvement across their client base and leverage key learnings is something to look at closely.

Second, if you need to build support for outsourcing or don’t want to commit to broad scope or transformation, think staged improvement. The start-small-and-grow model in FAO has become increasingly popular over the past few years, as a result of both economic pressures and new industries embarking on FAO for the first time. For those who are not yet ready to embark on full-scale transformation, know this: An average orgazation’s Accounts Payable department represents a full 10 percent to 15 percent of global staff, thus AP processes are included in more than 89 percent of all outsourcing contracts (Everest Group). Many organizations have already discovered the immediate value in outsourcing their AP processes first, while extending their FAO engagements to include additional processes over time. The critical component here is selecting a provider that demonstrates how it will extend across FAO with a defined path to continually optimize and transform your FAO processes.

Standardized Delivery Model
Standardization is one of the hallmarks of transformational FAO. Organizations already know disparate systems, inconsistent and inefficient processes, and a lack of tracking and analytical measurement of key metrics can be detrimental to the effectiveness of a business. What is often overlooked, however, is how a service provider’s approach to standardization can make the difference between lengthy and immediate results.
An FAO provider that brings a framework of proven operational excellence to the table can help accelerate negotiations to standard, bringing your team to a decision quickly. With a blueprint for standardized onboarding and rollout, templates for design and measurement of processes, and an approach for process enablement through technology, a standardized delivery model will ensure faster, achievable F&A results.

Today, F&A processes are fraught with variability, creating obstacles to outcome achievement and inhibiting efficiency. Managing these variables through daily measurement, root cause analysis, guidelines for resolution and implementation of controls and compliance standards can significantly simplify individual processes, allowing faster, smoother resolution of issues.

By enabling processes through technology, formerly labor-intensive, manual tasks can be automated, increasing productivity and providing visibility into data and systems. This not only delivers immediate cost savings, but enables rapid availability of critical information, allowing organizations to be better equipped to make informed, strategic decisions.

An FAO provider with a strong culture of standardization will embed daily tracking capabilities that can compare a common set of metrics across clients, enabling ongoing, real time visibility into best practices and common challenges that can be revisited and adjusted as needed. The combination of process and technology-enabled standardization and measurement can rapidly reduce your organization’s costs and improve visibility throughout your F&A processes.

Recent market research indicates that some FAO providers are generating savings for their clients of up to 25 percent in the first year, with ongoing improvements thereafter. These providers bring an embedded, standardized approach, with the ability to share proven examples across their existing client base that are directly applicable to your business. Process simplification and standardization will already be built into their systems, and recommendations for immediate improvement should be easily accessible.

Phased Growth in FAO
Accounts Payable is currently the most common process outsourced in F&A. Many organizations are adopting a “toe-in-the-water” approach to FAO, embarking with a broad vision but utilizing a staged implementation strategy. This phased approach to FAO often incorporates a single process—usually Accounts Payable—where optimization can be achieved quickly, with the goal of phasing into additional FAO processes over time. A service provider’s technology capabilities serve as critical drivers for incremental value, expanding with the client’s requirements as they arise.

Addressing the process inefficiencies that hamper AP performance can lead to rapid results, helping you achieve both immediate and long-term benefits. Mitigating the process, technology, and organizational complexity inherent in AP processes can achieve multiple benefits, including: Error reduction and cost processing can be automated, decreasing working capital requirements and increasing compliance; early payment discounts can be captured quickly, increasing your vendors’ timely access to cash through effective invoice and payment processing; and rapid account settlement results in reduced duplication and dispute resolution efforts.

Organizations looking to implement a staged improvement model should seek out a provider with experience that extends across F&A. Outsourcing your AP processes is a strong start to achieving rapid results, but a partner that offers broad experience can support your interests and be flexible in growing the relationship—optimizing other processes at your desired pace of change.

Whether you seek a phased or multi-process approach to FAO, organizations that seek out partnerships with providers that offer a proven, standardized delivery model will ultimately achieve the strongest benefits in both the short and long term. Organizations that enter into an FAO arrangement with considerable thought to the long-term benefits of partnership will emerge from the current economic crisis more flexible, competitive, and with financially stable processes. While cost rationalization continues to cycle to the top of the CFO agenda, organizations that have flexible, competitive models recover faster and are able to address market turmoil challenges more effectively.