Three myths about outsourcing financeEmma
Your company outsources its IT services, its legal services, and probably outsources its annual HR reporting requirements too. You outsource these non-core functions so that you can focus on what you do best: selling your product and growing your business. But for some reason you are dead set on keeping your finance in-house. You’ve heard some of your peers talk about outsourcing finance management, but there’s something about it that holds you back. Perhaps it’s just because it’s not the traditional way of going about things, or maybe you’ve heard a few things about outsourcing finance that put you off. Let’s take a look at separating the myths from the truth surrounding this practice.
1. Outsourcing finance myth one:
You can’t trust someone external with sensitive financial information.
“Keeping it in the family” is one of the big reasons that companies steer away from outsourcing finance. After all, information about salaries, profit and debt is sensitive material. In non-listed companies, this information is often withheld from most of the employees of the company, let alone outsiders. And if competitors got hold of that information they’d have a field day. So why trust this with someone you don’t know?
The answer is that your information may well be safer with an external source than with a fulltime employee of the company. A permanent in-house employee, by nature of their role, develops close relationships with other people in the company. They are more likely to have the motive to divulge sensitive information to others in the company than someone who has an outsource relationship. Third party (outsourced) finance executives are bound to rigorous confidentiality agreements. They are fully aware that leaking sensitive information will put their reputation and livelihood at stake. And if company information is leaked, third party executives know that they will be the first suspects. For this reason, an outsourced finance executive is often more likely to guard the information they are privy to than an employee who might casually mention a thing or two to his colleagues over a beer after work.
2. Outsourcing finance myth two:
An external finance manager does not fully understand your company’s operations and systems.
Your rationale is logical: he or she hasn’t spent years with the company; how can they fully appreciate the way things work there? While such a concern is understandable, remember that interim finance executives specialize in adapting to new environments. They may not have worked for your company for years, but they’ve likely worked in companies like yours several times prior.
3. Outsourcing finance myth three:
If they’re not there for the day-to-day operations of the business, can they give useful insight on the board or management committee? The answer is yes. Outsourcing finance management will allow someone with a fresh perspective to sit on your senior management team. They’ve got a broader focus and have more insight into competitors and the industry at large. While your perspective might be limited by the sights and goals of the business, they have a broader view that will help to inform strategic decision making. It’s almost like getting insights from a member of the competition, minus the conflict of interest!
Outsourcing finance takes a paradigm shift and a willingness to try something new. But many companies attest to the fact that this new way is often more effective, more efficient and yields more powerful results. If you are considering outsourcing finance in your company, speak to The Finance Team. We have an impressive team of highly qualified finance executives who can provide advisory or ongoing financial leadership for your organisation according to your needs.
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