Results from EquaTerra's latest research.
 
by Stan Lepeak 

 
EquaTerra’s last installment discussed the various competing CFO agenda items in the market ranging from cutting costs to helping grow the business. Clearly the use of alternative finance and accounting (F&A) service delivery models such as shared services and outsourcing are becoming more commonly employed tools to address these agenda priorities.
 

 
The important question is to what degree do service delivery models such as finance and accounting outsourcing (FAO) deliver on the drivers CFOs and F&A organizations laid out during the planning stage? New EquaTerra research finds that for the most part FAO efforts are delivering on the goals sought by users and that FAO users are generally satisfied with their FAO service provider performance.
 

 
EquaTerra recently released the inaugural edition of its global FAO Service Provider Performance and Satisfaction Study (SPPS). In this study EquaTerra polled key FAO decision makers - CFOs and their direct reports - actively engaged in and managing over 110 of the largest multi-process FAO deals in the market utilizing the top multinational, regional and India-based FAO service providers. The deals were a mix of single country, regional and global efforts, encompassed all F&A process areas, and included buyers from all major commercial industry groups. The results reflect positively both on the ability of FAO to deliver on the drivers its users seek and on the performance of the FAO service providers.
 

 
There are a variety of drivers that buyers have when pursuing FAO. The most dominant driver is achieving cost savings as identified by 84 percent of study respondents as the original driver for FAO efforts. Ninety-two percent of respondents identified it as the predominant driver for future FAO efforts. Other drivers cited include quality improvement of F&A processes, FAO as a change agent to improve F&A capabilities, access to external F&A skills, resources and talent and enable greater financial flexibility.
 

 
One of the most important findings in the SPPS study is the degree to which these drivers are being achieved. Eighty-six percent of study participants indicate that FAO contributed significantly or moderately positively to meeting the primary drivers for its undertaking. There is consistency in this finding across all three FAO process areas outlined in the study.
 
 
One key reason identified for having success in meeting the objectives include clearly defined and measurable goals around which there is consensus among key stakeholders. In this respect achieving costs savings is relatively straightforward though buyers cost cutting aspirations have become more aggressive over the past 24 to 36 months. Improving process quality becomes more subjective and difficult to measure while achieving goals that involve things such as “innovation’’ can prove challenging both to define and measure.
 

 
Additional cost reductions are becoming more difficult to achieve over time. This is a result of major initial savings from FAO (i.e., ‘“low hanging fruit’”) being achieved, one time outsourcing benefits captured, practical minimum costs thresholds (e.g., 1% of revenue) being realized and limited overall F&A budget growth in slow and no-growth economic periods. For these reasons it is important that FAO buyers and their service providers strive to ensure cost savings goals are met. They must also balance cost reduction goals against the potential for F&A process improvement and enhancements. Examples of this include the following.
 
 
•       Expanding FAO efforts into more strategic and less transactional areas where quality is a premium and overall cost pressures are less relevant/acute
•       Enabling cost-effective process improvement in F&A core areas
•       Introducing new capabilities, technologies, etc. at lower cost levels than is viable using internal resources
•       Using FAO to support growth initiatives in a cost effective manner
 

 
FAO buyers polled in this market study are also generally satisfied with the performance of their service providers. Ninety-one percent of all respondent organizations are somewhat satisfied (23 percent), satisfied (48 percent) or very satisfied (20 percent) with the overall performance of their service providers. Ninety-seven percent of respondents are satisfied enough to be ‘promoters’ of their service providers to peers, a further strong indication that customers feel that their service providers are generally doing a good job. The top provider got a score of 89 percent. The worst performer, however, lags behind with only 60 percent. The market average is 80 percent which is encouragingly high. Learn more on the level and the ‘how and why’ of buyer FAO service provider satisfaction in the next installment.
 
Stan Lepeak is managing director of EquaTerra Global Research