The F&A Paradox

A number of Finance and Accounting (F&A) functions are similar from company to company, as are the goals: Most companies want to tackle costs, improve performance, efficiently spend money and manage revenue cycles, in addition to undertaking the required accounting and reporting.

The relatively standard processes imply that technology can lend a big hand as long as the people who perform those F&A functions have a fair degree of functional expertise and conform to common processes.  That said, tax complexities, revenue-recognition policies, industry specific requirements among other factors present challenges, but these issues are almost always under the watchful eye of an executive who is highly motivated to achieve the desired accuracy and compliance.

Now contrast this situation with what you see in most Human Resources departments of organizations where it’s not uncommon to find many nuances relating to the geography, business-unit operating models, and various employee programs. One might think that achieving common ways of doing things in HR would be more problematic.

The difference between the two functions raises the question: Why is it that the predominant sourcing model for F&A is labor arbitrage? We see much more standardization and “managed services” orientation in HR outsourcing than we do for F&A functions. Whether companies are using a captive operation or outsourcing, F&A has become the poster child for effort-based sourcing.

So far, the promise of a vibrant market for F&A outsourcing is unfulfilled. The contracts are labor-oriented and the investments made by many of the leading service providers to standardize offerings aren’t being employed. Which leads one to ask: What will it take to change this? Why aren’t CFOs more receptive to a managed service around accounts payable? Might this be a situation whereby service providers are not providing comprehensive solutions to F&A executives? Perhaps it a case where finance managers cannot relate to “managed services” offerings? Or maybe it’s a relatively higher degree of integration among and between finance processes that is making standardization so elusive?

Whatever the cause, today’s outsourcing landscape offers a much higher degree of maturity for HR services than F&A services. Is the lure of cheap labor so compelling that the promise of a managed service for F&A is just not worth the effort?

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The difference between the two functions raises the question: Why is it that the predominant sourcing model for F&A is labor arbitrage? We see much more standardization and “managed services” orientation in HR outsourcing than we do for F&A functions. Whether companies are using a captive operation or outsourcing, F&A has become the poster child for effort-based sourcing.