Reactivating and reimagining the finance function – A pivotal role for outsourcing?

9 June 2020

The path for businesses out of the coronavirus pandemic is fraught with difficulties. But with active support from internal functions, such as finance (including tax and treasury), the true impact of the pandemic can be assessed and the way forward charted. For now, however, with staff furloughed and technologies tested to extremes, that support may take time to come back on-line.

So how will finance teams get on their feet again? What will be their immediate people and technology needs? And how many will embrace the opportunity to transform or reimagine how their finance function might better serve the business at the dawn of the 'new normal'?

Emerging from coronavirus: immediate reactivate strategies

Short-term reactivate strategies for the finance function will be, in part, dependent on organisation-wide adoption of government guidance – self-distancing practices, health and safety protocols, remote working capacity etc. They are unlikely to focus on new technologies but rather on ensuring that existing ones remain operationally sound.

Matching the pace of business reactivation will require flexibility, with finance resource being rapidly scaled up or down as needed. However, existing teams may have been reduced already, staff may be on furlough, self-isolating or simply ill-equipped to meet those demands. With a freeze on permanent hires, the business may need supplemental resource in the short term with specific skills in accessing funding, optimising cash positions, preparing financial analysis on new and existing products or undertaking scenario planning. Interim or reassigned staff, together with a bespoke, short-term outsource service provision, may be important components of the reactivation process.

Certainly, levels of cost-effective outsourcing are expected to rise, especially if providers already have reliable home-working provisions in place. But those providers may need to redefine their services within a less rigid and more agile framework. Following the lead from IT, a flexible form of partnering or co-source may emerge with a series of 'shorter term, more modular contract structures.'

Beyond coronavirus: reimagine strategies

While short-term staffing models are important to stabilise the business, most organisations also have an opportunity 'to shelve incremental thinking and seek out transformational plans'. More radical staffing models, perhaps with a commercially-focussed finance team providing detailed rolling forecasts and closer decision support to the business, may demand changes to the competencies held within the current team.

But the heart of a reimagine strategy for finance will revolve around technologies that drive process efficiency and cost-savings on the one hand, while adding vital business insights allied to robust planning on the other; a digitised future-state perspective endorsed by the majority of participants in a recent survey of shared services.

At a basic level, this begins with a move from server-based to cloud technology – not just the core ERP but a route map to touch-free invoice processing, high-quality management information, analytics-driven forecasting, electronic bank interfaces etc. Each initiative removes human intervention, de-risking the finance function in the face of another future crisis while moving it up the value chain as a planning vehicle for new business channels.

Many businesses, counting the cost of the coronavirus, may hesitate to make such grand investments - working capital is still a priority and only 29 per cent of larger businesses have a ready-made business continuity plan to accompany a large technology upgrade. But there are alternatives. Access to a technology-rich, reimagined future may lie with a third-party 'software as a service' supplier. For others, a finance and accounting outsource (FAO) provider may provide timely access to relevant technologies at a fraction of the price (and without the commitment to systems selection, implementation or upgrade) while also securing the mainstream and niche finance competencies described above.

Agile, resilient and technology-rich FAO

Whether in reactivate or reimagine mode, for those businesses taking the FAO route, heavy technology investment should be a pre-requisite for selection of their provider. But there are four other key features that the post-coronavirus buyer of outsourced services should look at when re-starting and then future proofing their finance function.

   

Relational contracting terms, founded on goodwill between the parties, and fast-track change control to underpin the flexibility described above – switching services in and out of scope in an agile and collaborative fashion on the journey out of  the pandemic. Those terms are also now likely to classify coronavirus as an obvious risk, re-evaluating its status as a force majeure event.

       
   

Management of risk through robust business continuity plans, especially in regulated industries, covering disaster planning and recovery times, security of data etc. Are these being regularly tested against the circumstances of a 'Black Swan' event and do they reflect the augmented use of technology?

       
   

The SSO recommend probing how your outsourcing partner reacted to the crisis. Did they have an uninterrupted track record despite the move to remote-working? Several far-shore outsource centres, notably in India and the Philippines, struggled with the challenges of hardware, connectivity and self-distancing as two-thirds of staff moved to home-working. Inadvertent contract breaches and failures to meet service levels, sent some UK businesses 'scrambling teams to re-shore work back to the UK' to gain more control and reduce risk. This follows the pattern of re-shoring in some global supply chains.

       
   

An international footprint not only to deliver international accounting and compliance services but also to gather, respond to and exploit the ever-increasing volume of coronavirus generated regulations - well beyond even the traditional plethora of rules that tested multinational businesses before the virus. As finance teams are reactivated in the near future, the months and years ahead may see a major rethink for the finance function – whether 'in-or outsource; Bangalore or Boise; automate or operate' there will be a sharp focus on the trade-off between risk, efficiency and value. 


For more information on how RSM's outsourcing team can help your business through the coronavirus pandemic, please see information here or contact

Ian Sadler Ian Sadler

Partner


References:

  1. Why CFOs are turning to flexible staffing options in the post Covid-19 era: Forbes (6 April 2020)
  2. Companies expected to outsource more work due to Covid-19 pandemic: NTT. Economic Times (May 2020)
  3. Coronavirus- Covid-19 – TMT Market Insight: LexisNexis (April 2020)
  4. The CFOs role in helping companies navigate the Covid communications: McKinsey (30 March 2020).
  5. Covid-19: Tip of the iceberg for tectonic shift in shared services delivery models: SSON Survey (March 10-13th, 2020)
  6. ACCA Survey as reported in Covid-19 Webinar: 13 April 2020
  7. Coronavirus: 5 reasons to reassess your SSC and sourcing model: SSO Network (March 2020)
  8. Covid-19: No outsourcing for these business process management companies: Economic Times (March 2020).
  9. UK businesses rush to mitigate impact of India lockdown: New Street Group (March 2020)
  10. FlexDev predicts a shift in offshoring to nearshoring due to Covid-19: PR Newswire (April 2020).
  11. Play nice, outsourcing providers; there will be life after Covid-19: SSO Network (April 2020)