Proper finance management plays a vital and significant role in deciding the success and failure of every company. However, keeping an in-house team of finance and accounting staff can be expensive, especially for most small business owners and start-ups. It’s one of the reasons why most corporations turn to the many advantages of business process outsourcing (BPO), particularly in the finance industry.
Furthermore, the financial services market is further anticipated to reach $28.5 trillion by 2025 at a CAGR of 6%. Outsourcing finance tasks and operations can free up time for your in-house team to work on higher-value activities and concentrate on nurturing client relationships to capitalise on this expected market growth.
In this blog post, we’ll delve into everything you must know about offshoring financial services, including the meaning, types of outsourced financial services, and why financial services companies are outsourcing their operations to BPOs.
Let’s get started!
What is Finance Services Outsourcing?
It is the process of moving certain finance and accounting functions within a company to a specialised external service provider. Effective money management decides the growth or decline of any business, particularly one looking to expand. Thus, it may become increasingly pricey to handle a finance department in-house, for which outsourcing serves as the cost-saving, scalable and innovative alternative in challenging economic times.
7 Various Types of Outsourced Financial Services
1) Accounting Services
This is one of the most common outsourced financial services. Accounting includes the detailed recording of all the company’s financial transactions.
And the following are some of the services involved in this subset of financial outsourcing:
Management Accounting
Management accounting is all about gauging and examining accounting data to help managers create sounder decisions. A management accountant will oversee budgets, sales and costs to determine future goals and needs in this financial service outsourcing solution.
Bookkeeping
Bookkeeping is the aspect of accounting where all of a corporation’s financial transactions are recorded into systematic accounts, known as ledgers. This also involves preparing financial statements, source documents and other reports.
Accounting Audit
Accounting audits are conducted to evaluate whether a corporation’s financial and accounting statements conform to the applicable laws, rules and regulations. Auditors collect evidence and information to examine whether accounting statements contain misstatements or other related errors of any kind.
Tax Accounting
Tax accounting is concerned with preparing payments and tax returns. In the business world, the concentration is on examining how company funds are spent and identifying whether something is or isn’t taxable.
Forensic Accounting
Forensic accounting compromise of conducting investigations into the finances of a business, commonly as a way to elucidate the nature of a financial crime such as fraud or embezzlement.
Statutory Reporting Compliance
Statutory reporting and compliance include submitting financial information to the relevant governing bodies, such as state, regional and federal agencies. The purpose of this process is to make sure that the company is conforming to laws and regulations.
Payroll Services
Payroll processing may also be involved in outsourced financial services. The professionals in charge of this outsourcing solution will manage employee tax, and salary computations and make sure that everything abides by labour laws.
2) Industry-Specific Financial Service Outsourcing
Insurance companies, real estate, banks and lending institutions are the sectors most in need of outsourced financial services specific to the functions they offer.
- Insurance Companies
Claims Administration
Processing insurance claims is one of the core functions of insurance companies, involving reporting claims and rendering appropriate releases upon settlement. Insurance firms usually outsource this service to enhance their overall productivity without boosting overhead expenses.
Policy Management
Policy management, in the insurance industry, is one of the primary tasks involving a variety of responsibilities, such as renewals, issuance, policy checking, and more.
Given how complex and time-consuming these tasks can be, insurance companies typically opt for offshored financial services. Managing policy management tasks to a reliable and capable remote team can save time, minimise costs and even lower risks.
Insurance Data Services
The insurance sector is an industry that creates a high volume of processing work and data entry. As such, outsourcing insurance data services can significantly lessen the strain on in-house staff, freeing them up to perform more high-value functions.
Insurance Software and Productivity Tools
Financial service outsourcing solutions for insurance companies also include software and productivity tools. When you partner with a proficient BPO provider, you can gain access to top-of-the-line technologies that streamline your operations and make it easier for your staff to do their tasks.
Annuity Services
Annuities are deep-rooted investments wherein your purchase payments are shifted into regular payments that help protect you during your retirement. Insurance companies issue these services to individuals based on their particular goals, whether they need legacy planning, spousal protection, or other annuity plans.
Operations Management
Keeping an insurance company’s operations seamlessly running is no easy task. Fortunately, having a reliable outsourced operations manager can help you with that. This professional will oversee and handle the company’s process, assuring the highest level of productivity and efficiency possible.
Call Center Support
Insurance companies are also in dire need of call centre support, in addition to outsourced financial services. These remote agents will frequently answer telephone calls to give information about insurance policies and benefits, collect premium payments, and sometimes dispense important health advice.
IT Support
Insurance companies must have efficient technical support to keep up with marketplace changes and their ever-expanding pool of insurance data. The best IT support provider will be cognizant of industry-specific practices and regulations and implement IT strategies that cater to an insurance firm’s unique business objectives.
Consulting
Insurance consultants specialise in various fields, including life, health and auto. They help individuals and corporations provide needed information about policies and premiums, determine their insurance needs, and prepare quotes for clients.
- Real Estate
Property Management
Property managers supervise retail, residential, or commercial properties including advertising, organising repairs and maintenance and collecting rent.
Sales Support
Real estate agents typically work on the road, and sales support teams help them virtually. Sales support staff are responsible for booking inspections, delivering proposals, setting up meetings and doing everything they need to assist the agent.
Virtual Assistants
In the real estate sector, Virtual assistants are remote workers that manage appointment scheduling, calendar management, data entry and other administrative tasks. Some virtual assistants also handle real estate social media accounts and answer calls.
- Banks and Lending Institutions
Back Office Process Management
One of the outsourcing solutions that banks and lending institutions can benefit from is back-office support. Specialised remote teams work on administrative tasks, making it possible for the company to concentrate on its primary functions and elevate its overall efficiency.
Consumer and Commercial Lending
Typically, banks and lending institutions may also outsource professionals to handle commercial and consumer loans, making sure that all debt-based funding arrangements conform with laws and regulations.
New Customer Acquisition
Banks and lending institutions sometimes offshore their customer acquisition to a capable external provider. By doing so, their corporation. can keep up with industry trends, generate a sustainable acquisition process and strategy and continually gain new clients and grow with ease.
Account Servicing
Banks and lending institutions enable capable remote teams to solve customer concerns, handle client accounts, and act as a liaison between the company and the customer in this financial service outsourcing solution.
Higher-Value Functions
The banking industry’s less commonly outsourced financial services are higher-value functions like forecasts, budgets, regulatory returns, and capital management.
3) Unit Pricing and Custody
Merchants usually provide unit pricing as a service to their clients because it helps customers compare the prices of packed goods with greater ease. In many cases, the custody arrangements and striking of unit prices are outsourced to BPO companies regarding unit-linked products and funds.
4) Investment Management
Investment management, one of the offshored financial services businesses and individuals can opt for, includes devising strategies for managing financial investments and assets. The aim of professional investment management will rely on the client’s specific goals. Investment managers help individuals with portfolio management, stock selection, asset allocation, and many more.
In the business landscape, investment management pertains specifically to ensuring that the business’s assets are maximised and maintained.
Many insurers and fund managers now outsource this service to professional financial BPO outsourcing companies, enabling them to make the most of their assets and portfolio without costing too much money and time.
5) Financial Controller Services
Financial controllers are some of the most frequent types of outsourced financial services. They monitor a corporation’s accounting activities, ensuring that the ledgers accurately and precisely mirror all financial transactions. Usually, they may also be responsible for tax and insurance reporting.
Instead of employing an in-house financial controller, some companies outsource these services to a BPO vendor. Leveraging financial accounting outsourcing services can enable businesses to concentrate on their core competencies while knowing that an expert takes care of all their tax reporting and record-keeping functions.
6) Underwriting and Claims Payment
Another type of outsourced financial service that corporations can go for is underwriting and claims payment. Underwriting refers to the process whereby someone takes a financial risk, whether an organisation or individual, which may mean an investment or loan. Some insurance companies enable external providers to process insurance claims or accept particular underwriting risks on their behalf.
7) Financial Analysis
Before establishing long-term business plans, organisations need to administer financial analysis, and many choose to offshore this process. With the assistance of a trustworthy outsourced financial services provider, a company can identify new projects or investments, set financial policies, assess economic trends and plan for future business activities.
Investment finance and corporate finance settings both benefit from financial analysis. Analysts will thoroughly analyse a company’s financial statements to help fund managers generate business decisions or aid investors in selecting the best investment opportunities.
The Reasons Why Financial Services Companies are Outsourcing Their Services to BPOs
Financial Processes Are Usually Complex
Processes like supply chain finance management and accounting require tons of experience and expertise. That’s why many organisations prefer to outsource them to a reliable and dedicated BPO service provider instead of placing inexperienced in-house staff on the job.
Revamped Efficiency
By outsourcing complex finance tasks, business owners and local employees alike can dedicate their resources and time to the core and more profitable business activities instead.
In a nutshell, outsourced finance tasks can:
- Offload administrative responsibilities
- Frees up time for other roles towards growing your business
- Optimise current expenditures
Cut Hiring and Infrastructural Expenses
An onshore finance department can cost you a lot. From employment and training costs to office rentals, equipment and management, most corporations have to shell out a large chunk of investment just to handle their financial and accounting reporting needs. However, when you choose to outsource the finance department, you can greatly reduce these costs.
Partnering with a financial services outsourcing service provider, you save on the following:
- Talent acquisition and onboarding costs
- Training expenses
- Infrastructural costs and rentals
- Software pricing
Keeping Up With The Up-To-Date Technology
Contracting services to a third party usually have the latest software and tools for performing the finance function, enabling your business to benefit from its constantly cutting-edge infrastructure.
Have Access to Global Talent and Expertise
Let’s put it this way. When you hire in-house finance employees, you’re usually restricted to the talent pools available locally. However, the best fit for your business may not always be the ones from your country or city.
Fortunately, this isn’t the case with outsourcing. Contracting out your finance tasks enables you to work with top-class professionals in the financial services industry from across the globe. These professionals are accustomed to working remotely to render as much, if not more, quality and value when compared to an in-house team.
Moreover, thanks to time zone differences, collaborating with a global talent pool makes it possible for you to expand your corporation’s operating hours. Through effective communication and management, you can take advantage of the timezone disparity to massively increase the efficiency of your financial activities.
Operational Resilience
As you can upscale or downsize your offshored processes at any point, outsourcing acts as armour against unforeseen circumstances and the operational risk of a volatile market.
Conclusion
In hindsight, growing in business means being agile, efficient, open to change, having access to forward-looking and reliable reports, and being equipped with the right tools. Outsourcing your finance operations render these solutions without breaking the bank.
Boost your company’s financial operations by outsourcing to an excellent marketplace, The Lead Enquiry, and work with our best BPO service provider partners across the globe! Contact us today.
