There are lots of benefits to outsourcing your financial control processes to a professional financial services specialist. Financial management is one of the most technically demanding aspects of running any business, yet it is critical to achieving sustainable growth and success.
Maintaining adequate control over bookkeeping, reporting, data analysis, forecasting, risk management and more can be laborious and resource-intensive. And that’s when mistakes creep in.
By outsourcing, you get access to proven experience and expertise, as and when you need it. You get results guaranteed by an SLA while your internal teams are free to focus on core competencies. And you can reduce your costs, too, by not having to invest so much in things like financial software. That all comes as part of the service.
But where and how, exactly, can financial control outsourcing unlock value in your business? Here are three key areas.
There’s a simple formula in business – the less you spend, the more profit you get from a fixed amount of revenue. Cost control is therefore a cornerstone of any business strategy. But while its benefits are simple and obvious, keeping a lid on outgoings can be more challenging in practice.
Part of that is because a typical business can have so many points of expenditure. Rent and rates, staff wages, purchasing stock, business services, equipment and other capital expenses – cost control is not just about keeping track of all of these outgoings, but identifying where money is not being spent efficiently, and where cuts can be made with the least impact on the performance of the business.
Doing this effectively requires the ability to track robust financial data from across the business, and beyond that knowing what to look for. These are skills every outsourced financial controller brings to the table.
Financial Key Performance Indicators (KPIs) are measurable values (metrics) that businesses can use to monitor and evaluate financial performance. The most well known financial KPIs are gross and net profit margin, which tell you how much profit (or loss) you have made after a) subtracting the cost of goods sold from your revenues and b) subtracting all business expenses.
While profit is the ultimate measure of business success, it doesn’t tell you anything about other essential aspects of financial health, such as cash flow/liquidity, solvency and the financial efficiency of a business (see cost controls again).
To keep appropriate tabs on all of these areas, you need a lot more metrics to measure performance against. This HBR article recommends 13 ‘essential’ KPIs, but the numbers may vary from business to business. The key point is, that’s a lot of data points to monitor, assess and evaluate. Again, outsourcing to an experienced specialist with expertise in financial analytics can help your business get insights that are more regular, in-depth and accurate, along with guidance on how to act on them to improve performance.
Improving control systems
The level and quality of control you are able to exert over your financial processes ultimately depends on the quality of the control systems you have in place. Improving control systems at the very least lays the foundations for better financial performance, if not leading to it directly.
Like all areas of systems thinking, this is a technically demanding area that nonetheless can bring huge benefits. Your financial control systems cover everything from how financial roles are assigned and delegated and what the chain of command looks like, to how you track and account for money moving in and out of the business, to risk mitigation processes and governance. It takes very particular expertise and skillsets to be able to review control systems and then suggest and implement positive changes that impact on wider performance. Employing people with such expertise comes at a premium, which makes outsourcing both more accessible and financially attractive.