The fortunes of manufacturing companies are impacted by social, economic and political factors. With a protectionist President Trump in the White House, Brexit on the horizon and AI knocking at the door, most manufacturing companies need to be ready to sail through stormy seas.
In this scenario, CFOs and CEOs are under pressure to do more with less and are on the lookout for avenues to improve efficiency, cut costs and rapidly transform processes. With the right manufacturing accounting services provider as a partner, they have the right support to achieve these goals. Let’s take a close look at the key benefits that manufacturing companies seek from F&A outsourcing.
CFOs are too tied up to give full focus to transforming the finance & accounting department. However, they also feel a pressing need to implement new technologies, streamline processes and improve productivity of the accounting department. CFOs or CEOs in this situation find outsourcing F&A functions a very attractive solution to the problem. By partnering with an experienced and reliable service provider, manufacturing companies can achieve finance transformation without disrupting operations.
It’s no secret that the accounts payable departments in manufacturing companies are under a lot of stress – paper-based processes, lack of communication between different sites and non-standard processes make it notoriously difficult to pay suppliers on time. Many AP departments find it difficult to answer supplier queries regarding the status of an invoice in real time, or within a set timeframe. Supported by automated systems, outsourced AP teams are often able to deliver a much better supplier experience.
Manufacturing companies lose hundreds of thousands of pounds every year owing to delay in payments. Highly efficient AP teams can ensure that the organisation is able to optimise payments to maximise early discounts and supplier rebates – without hurting the cash flow. In addition, the ability to pay on time, every time, helps the organisation negotiate better credit terms with the suppliers.
Not only is it difficult to find experienced accounting staff in the UK and US, it is notoriously difficult to retain them. The fact of the matter is simple: most accounting professionals in developed countries want to grow fast and they are not happy performing repetitive, laborious tasks day in and day out. This is where outsourced manufacturing accounting can provide a way forward. By using an offshore team or automation for laborious tasks that need attention to detail, the on-shore staff can be retrained and promoted into a more strategic, analytical and fulfilling role.
At the end of the day, F&A is a secondary back-office task for manufacturing companies. For the finance & accounting outsourcing company though, it is the primary activity. This means that they invest in the technology, people and processes to do it really well.
With an established F&A services partner, you sign SLAs that clearly define the tasks that need to be done, the timeframe within which they must be done, and the level of quality that is expected from the team. This naturally leads to an improvement in services quality and injects certainty into the process.
This is the age-old reason for outsourcing – reducing the cost of back-office operations. Qualified and experienced resources in countries like India work for a lot less than their counterparts in the developed nations. This allows manufacturing companies to hire more experienced resources at a lesser cost. In addition, when resources are moved from on-shore to offshore locations, all the other costs associated with an employee are also saved.
Outsourced manufacturing accounting services may not be the right solution for all manufactures out there, but can definitely play a pivotal role in the finance transformation journey of many organisations. Just remember that outsourcing just for the sake of reducing operations costs is seldom a good strategy – it is best to choose a partner that can deliver more than just labour-arbitrage.
Originally published Oct 05, 2018 03:10:53, updated Dec 08 2021