Document - Outsourcing the Finance and Accounting Function

American Institute of Certified Public Accountants
Executive Summary—Outsourcing the Finance and Accounting Functions
The use of finance and accounting outsourcing (FAO) continues to rise throughout the world.
The FAO market, as measured by the number of contracts signed for large FAO agreements
(those that include five or more processes and/or have a contract value of at least $50 million)
has increased steadily since 2000, and by more than 45 percent since 2005 (Fersht). A March
2007 IDC (Interactive Data Corporation) report, forecasts that the global FAO market will
exceed $47.6 billion in 2008. Although the United States will remain the largest segment of the
FAO market, the fastest growing region includes Europe, the Middle East, and Africa (EMEA)
(Bingham).
In the past 18 months, several large outsourcing agreements covering multiple finance and
accounting processes were finalized. Earlier this year, the world's top personal paper products
manufacturer, Texas-based Kimberly-Clark Corporation, entered into a five-year contract with
FAO provider Genpact. Genpact will operate Kimberly-Clark's global accounts payable, travel
and entertainment expense management, pricing administration, accounting-to-reporting, and
supply-chain accounting processes. Late last year, Aktiebolaget SKF hired outsourcing provider
Capgemini to manage multiple finance and accounting processes for several of the Swedish ball
bearings maker's European operations. A few months earlier, the British Broadcasting
Corporation (BBC) signed a 10-year, $160 million deal with outsourcing provider Xansa, which
will manage much of the BBC's purchasing and sales transaction processing, financial
management and project accounting, payroll processing, and other finance and accounting
processes. The BBC reported that the arrangement will help it save more than $375 million over
the course of the relationship (FAO Today News).
The use of modern multi-process FAO began with a 1990 meeting in a London hotel between a
BP CFO and a partner at the consulting firm now known as Accenture. The two men discussed
the severe challenges the oil company confronted: plummeting oil prices, new, highly agile
competition, and a burdensome cost structure. The discussion produced an innovative idea:
rather than simply providing advice on how to make the CFO's function more efficient,
Accenture would take over the CFO's entire accounting function, with the exception of control
and financial policy. The following year, more than 300 BP employees from numerous locations
transferred to Accenture's outsourcing center in Aberdeen, Scotland. There they performed
forecasting, payment processing, joint venture accounting, and other processes that Accenture
designed and managed.
BP reduced the costs of the outsourced processes by an estimated 50% over the term of the
agreement, which has been renewed several times and continues today, a time when the oil
giant spends an estimated $1 billion annually in outsourced services of all types with various
vendors. Between BP's pioneering FAO venture in 1991 and 2002, the worldwide growth of
multi-process FAO progressed at a slow pace. During that period, the vast majority of
companies pursuing FAO focused on single-process arrangements. Since 2003, however, the
use of multi-process FAO has surged, growing by roughly 30 percent (from year to year) during
each of the past four years, according to The Everest Group and Deloitte Consulting.
Despite the growth of all forms of outsourcing relationships – those involving finance and
accounting and, even more so, those involving human resources (HR) and information
technology (IT) processes – dissatisfaction has remained surprisingly high among buyers,
according to numerous surveys of business executives involved in outsourcing relationships.
Fifty-four percent of a group of 228 global CFOs (two-thirds of these CFOs work for companies
with more than $1 billion in annual revenue) indicated that outsourcing does not deliver the
benefits promised by the media and outsourcing vendors. However, 73 percent of those same
respondents asserted that they would be interested in outsourcing from a few processes up to
every process "that's not core," (CFO Research Services, 2006).
Together, those seemingly contradictory attitudes – a strong willingness to outsource and
skepticism about outsourcing's benefits – suggest that:
• Outsourcing promises valuable opportunities but poses formidable challenges and risks;

Unformated preview of the document: 'Outsourcing the Finance and Accounting Function': Part 2, Part 3