Trends and the outsourcing of financial activities€¦ · outsourcing needs for the financial management of companies, along with their outsourcing prerequisites Target group •

AddValue & Itella 2009-10-221 AddValue & Itella 2009-10-221 FOR INTERNAL USE ONLY – VAIN SISÄISEEN KÄYTTÖÖN

Research series - Tutkimussarja 37/20092009-10-22

Kari Elkelä, Itella OyjPekka Törrönen, AddValue Oy

Trends and the outsourcing of financial activitiesQuantitative study – Summary report

AddValue & Itella 2009-10-22222

1. Objectives of study and implementation


Objectives of study and implementation Aims

• to determine outsourcing levels of financial processes and future outsourcing needs for the financial management of companies, along with their outsourcing prerequisites

Target group

• CEOs and CFOs of companies with over 200 employees and a turnover of over €10m

Implementation

• Quantitative pilot study conducted with individuals using a theme interview approach

• The quantitative data consisted of 124 telephone interviews in which 26% were CEOs and 74% were responsible for CFO tasks

• The analysis and the report were compiled by AddValue and Itella


2. Focus of financial management


Focus of financial management• The most important targets for development concern improvements in

reporting to management and in tools for forecasting; the electronification of purchasing invoices and improving cost effectiveness are also felt to be essential

• The opinions of CEOs and CFOs differ respecting the relative importance of different targets

• The most important targets for CFOs are the integration of the IT systems and processes of financial management, electronification of purchasing invoices and the strengthening of the role of financial management in strategic planning–that is, these are not considered so important by CEOs

• The scarcity of resources for development usually presents a further challenge


The priorities of financial management development

44

40

44

31

38

36

35

16

19

19

44

41

34

44

34

35

35

50

43

31

11

17

13

20

16

22

23

22

29

14

2

6

2

7

6

6

10

6

17

1

1

3

2

5

1

2

2

3

19

Improving reporting to leadership

Developing analysing and forecasting tools

Electronifying purchasing invoice handling

Increasing cost saving efficiency

Integrating financial IT systems

Integrating financial processes

Developing electronic sales invoicing

Measuring the profitability of processes

Role reinforcing in strategic planning

Concentrating volumes on service centres

0% 20% 40% 60% 80% 100%

Very important Important Rather important Less important Unimportant

Trends and the outsourcing of financial activities, May 2009 (n=124)AddValue/Itella - KE 2009-10-22


The prerequisites for financial development • At present half of the working hours in financial management are spent

on routine maintenance

• The target for financial management should be a little more than one-third of the time spent on routine tasks

• The hope is to devote more time to monitoring the profitability of organisational activities and reporting to management along withplanning, budgeting, strategic planning and creating the prerequisites for implementing already approved strategy–especially do CEOs desire that more time can be allocated to tasks related to strategy and planning

• It is clear that development of financial management has remained the task of the financial department and financial management service centre–the participation of the business operations management and outside experts is only occasional

• Financial management experts only spend a little over one-fifth of their working hours on development-related matters


Division of work time in financial administration now and target (%)

52

27

21

37

33

30

Maintenance of financial routines

Monitoring and reporting to management

Planning, budgeting and strategy

0 10 20 30 40 50 60

Now Target



Participation in financial administration development

52

38

14

12

2

30

18

38

25

12

16

19

37

48

48

2

5

9

12

31

21

2

2

8

Company’s own financial personnel

Financial service centre management

IT management and other IT Unit personnel

Business leadership

Outside consultants and experts

0% 20% 40% 60% 80% 100%

Continually Fairly regularly Now and again Infrequently Never



3. Attitudes towards outsourcing


Attitudes towards outsourcing • The recession increases rather than diminishes interest in outsourcing

• Organisations consider that during a recession there are excellent opportunities for financial management development investment

• Further, it is felt that it is important to reduce fixed costs and that outsourcing supportive tasks will enable the company to better concentrate on its core activities

• CEOs are much more sceptical than CFOs as to whether the market can offer satisfactory outsourcing solutions

• CFOs, on the other hand, are more worried about personnel issues related to outsourcing


Attitudes towards outsourcing financial activities

36

19

34

31

24

28

23

18

7

44

60

42

38

37

23

27

18

20

10

7

15

6

14

8

12

12

21

6

13

6

13

19

30

21

28

35

4

2

4

12

6

10

17

26

19

Recession creates circumstances for development

Financial activities same regardless of branch

Important to reduce fixed cost

Personnel decisions most difficult in outsourcing

Outsourcing support concentration on core business

Own personnel in key financial positions

Outsource if calculable economies result

No risky projects during recession

Satisfactory outsourcing solutions not available

0% 20% 40% 60% 80% 100%

Fully agree Partly agree Not agree or disagree Partly disagree Fully disagree



Benefits of outsourcing• Above all, it is thought that outsourcing helps the company concentrate

on its own core tasks

• The second most often mentioned benefit was cost savings

• Four benefits share third place

– performance-related costs

– service constantly available

– uniform method of work

– superior performance

• CEOs and CFOs experience benefits thus

– CEOs emphasise uniform methods of operation and concentration on core business

– CFOs stress cost economies and shorter lead-times for processes


Most important utilities from outsourcing

37

30

20

17

17

16

9

4

Concentration on core business

Saved costs

Pay for output, no fixed costs

Service always available

Similar operation modes

Better expertise available

Shorter turnaround times

More effective reporting

0 10 20 30 40 50

% chose in top3



Obstacles to outsourcing• Very often enterprises doubt the expertise of an outsider in their business

area, and whether outsourcing will produce sufficient economies

• For some companies one of the disadvantages of outsourcing was the possibility of surrendering strategic information to outsiders and another the difficulty of integrating the outsourcing company’s systems with those of their own organisation

• 34% of CEOs believed that all financial tasks could be outsourced–only 11% of CFOs shared this opinion

• A strong desire was felt to hold onto the controller tasks, as well as reporting and the duties of the chief accountant


Most important obstacles to outsourcing48

47

35

31

10

9

9

7

5

11

Outsider not acquainted with branch specialities

Does not achieve sufficient economies

No strategic information to outsiders

Difficult to integrate into own systems

Difficult to reorganise tasks

Communication and maintenance suffer

Desire to avoid personnel reductions

Transition expenses too great

Outsourcing ties down own resources

Unable to say

0 10 20 30 40 50 60 70

% chose in top3



4. Choice criteria for outsourcing services


Selection criteria for outsourcing partner • The selection criteria emphasise reliability, price and high quality of

services

• CEOs’ values stressed reliability, quality and comprehensive solution

• CFOs put relatively more emphasis on expertise in specialised tasks


Choice criteria for outsorcing services52

49

45

24

23

19

19

17

8

7

7

Reliability

Price

High quality of service

Sufficient resources

Customer-oriented approach

Business branch expertise

Ability to offer total solution

Ability to meet schedule

References

Offers international services

Clear plan for possession

0 10 20 30 40 50 60 70

% chose in top3



5. Summary


Summary (1/2) Why outsource?Why outsourcing is attractive:• Companies are worried that too much time is consumed in financial

routines. Instead it is hoped to devote more of the work contribution to development, monitoring profitability and budgeting

• The greatest benefit from outsourcing is considered to be that relocating routine to outsiders affords better possibilities for concentrating on the core tasks of financial management

• Cost savings are considered important, especially now during a recession, although companies are still sceptical about whether they can achieve real economies by outsourcing

Potential outsourcers:• A prerequisite for willingness to outsource is a greater than average

desire to develop the company’s financial operations• Every forth enterprise with 200-500 employees favours outsourcing, that

is, they have the attitudinal prerequisites necessary for implementing outsourcing solutions.

AddValue & Itella 2009-10-2222222222

Summary (2/2): How do the attitudes of CEOs and CFOs differ? • CEOs are definitely more inclined towards outsourcing financial management

than CFOs that have to take into account an important process close to themselves

• 34% of CEOs believe that all tasks related to financial management can be outsourced–only 11% of CFOs share this opinion

• Generally in their attitude towards outsourcing CEOs are not inclined to believe that the market is able to offer suitable outsourcing solutions for financial management–for their part CFOs are worried about the personnel issues

• CEOs expect strategic benefit from outsourcing–CFOs efficiency • The expectations of CEOs emphasise uniformity of methods and possibility of

concentrating on core tasks–for CFOs cost savings and shortening of lead-times of processes take precedent

• CEOs consider the outsourcing of collection an important target–on the other hand, CFOs stress reception, scanning and handling of purchasing invoices

• Doubt about the sufficiency of resulting economies is an obstacle to outsourcing in the view of CEOs–whereas CFOs consider the special characteristics of their own area of activity as the greatest challenge

• The criteria for choice of outsourcing partner is reliability, quality and total solutions for CEOs–for CFOs relatively more financial expertise

Documents

Trends and the outsourcing of financial activities€¦ · outsourcing needs for the financial management of companies, along with their outsourcing prerequisites Target group •