I've had many conversations with people about business process outsourcing (BPO) and finance and accounting outsourcing (FAO), and whether a company is either too big or too small for outsourcing to make sense. Some people take the position that smaller companies should outsource, but will get to a certain point where they should really bring their accounting function in-house.
I've seen other cases where new companies have said they can handle their back office needs internally while they are small, but when they get bigger and more complex they will look to outsource the function. I'm here to tell you both are wrong. Because in my experience company size doesn't play a role in whether or not they should outsource.
FAO started in the early 90's with Fortune 100-sized companies. In 1991, BP Exploration (a division of British Petroleum) outsourced all of the division's accounting functions for Europe to Accenture. In 1996, BP outsourced the accounting and IT functions for its U.S. upstream, downstream and chemicals businesses. In 1999, after its merger with Amoco, BP outsourced its U.S. upstream business to PwC and its U.S. downstream and European upstream business to Accenture. Microsoft began outsourcing multiple FAO functions across 90 countries to Accenture in 2007. This evolving contract, worth over $300 million, has been extended until 2018. Given FAO's roots, and the size of these deals, you clearly can't say a company can be "too big to outsource".
On the other side of the coin, companies across the size spectrum, from one employee to tens of thousands of employees, outsource their payroll processing (a form of FAO) to payroll outsourcing firms like ADP, Paychex, or Ceridian. Some payroll providers may tell you they have a minimum number of employees they will sign a contract for (such as 5 - still a tiny company), but many payroll providers have no minimum number. Payroll outsourcing providers have many, many client companies that have less than 10 employees. These are very small companies, and they engage in FAO outsourcing.
So clearly size is not really a determinant of whether or not you should outsource your accounting and back office functions. The notion that a smaller company might outgrow its outsourcing provider has arisen because most smaller companies' experience with "outsourced accounting" has been with bookkeepers or accounting firms doing "write-up" work (see my other blog post about the difference between outsourcing and bookkeeping). The traditional bookkeeping model is clearly not scalable as companies grow. However, a true BPO provider with more sophisticated systems and processes will be able to handle any size company, and be able to scale as its clients grow.
So if you are considering whether or not to outsource your accounting and back office functions, don't get hung up on how big your company is. Focus on what the potential benefits may be, and ensure you evaluate the outsourcing provider to determine if they are a good fit for your company and can handle your specific requirements over time.
Marcus is the founder and CEO of AcctTwo, a services and technology company delivering the Future of Finance and Accounting to nearly 1,000 organizations throughout the country. Marcus and his team have firsthand experience implementing the processes, controls, and technology needed to optimize financial resources, no...
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