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Financial Management: Finding a usually reliable source

Every Issue

Cite as: November 2011 85(11) LIJ, p.76

Outsourcing financial operations can benefit firms, but it needs to be done with care.

The advantages of outsourcing, and the proliferation of service organisations that have become experts in offering this type of service, make it prudent for a business owner or management team to consider outsourcing a variety of business processes.

A major challenge, particularly for smaller legal practices, is attracting and retaining appropriately qualified and experienced financial controllers who are also prepared to “get their hands dirty” – a prerequisite for any small business where resources get stretched.

Assessing whether to outsource the role of financial controller in your practice should involve identifying the advantages and disadvantages, and weighting the issues identified in terms of priority, relevance and alignment with the “cultural fit” of your practice.

The process of identifying issues may best be discussed with your financial adviser because issues of cost and, importantly, the specific identification of your firm’s financial requirements, may require their input and knowledge. The adage “you don’t know what you don’t know” is very appropriate for small businesses when making significant strategic decisions.

It should be clearly identified what the business wants and needs from its financial resources. Identification of the output often makes it easier to identify how, or by whom, the output is to be prepared.

A logical starting point following identification of financial output is to determine a salary estimate for a potential employee. This can then provide a point of reference when assessing outsourcing from a financial perspective.

In addition, for the salary and experience level required of an appropriately skilled employee, you should consider if the practice will provide necessary career progression opportunities such that the role is initially attractive to a high-quality candidate who will then be retained as a long-term employee.

By using a skilled outsourcing firm your practice will access significant financial expertise on which a business can draw. Those providing outsourcing services often have a variety of experience and can apply lessons learned from dealing with other clients and businesses.

In particular, the knowledge base accessed by using a skilled outsourced financial controller is most beneficial when a business requires high level strategic analysis such as KPI reporting, benchmarking and process improvement identification.

Using a firm that provides an outsourced financial controller resource should also give access to the broader resources of the firm should your business require them. This offering should be seamless because of the service provider’s knowledge of your organisation.

The experience of an outsourced financial controller should bring an additional level of discipline to your financial systems. With greater independence than an employee, the outsourced financial controller is better placed to challenge current practices and ensure consistency and regularity of reporting.

Depending on the sophistication of information ultimately required to be drawn from your financial system, a less qualified employee could be used or hired to produce satisfactory output if structured reporting procedures are developed.

An external adviser could be used to develop the above procedures, and thereafter be used for more strategic and advisory services. This limits the amount of financial accounting work for which your business pays consulting rates.

A review of the financial accounting requirements of an organisation and the related decision to outsource all or part of this work is a significant one for any practice.

Unfortunately, there is no automatic way to ensure the best outcome. In practice, an efficient and effective finance structure for most small businesses blends internal resources with outsourced expertise.

If, in conjunction with your financial adviser, you are able to outline a structure for the production and analysis of financial information, it becomes easier to identify the most appropriate resource and can lead to the most beneficial outcome and sustainable long-term solution.



MARCO MARRONE is a director in Pitcher Partners’ Private Clients division in Melbourne. He can be contacted at marco.marrone@pitcher.com.au.

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