Is the Global Healthcare Outsourcing Space Witnessing a Black Swan Moment?
Has the ongoing pandemic inadvertently created a “black swan” moment for the global healthcare outsourcing space? It wouldn’t be a surprise, given the swift and irreversible changes the industry itself has witnessed!
Without trying to sound too ironic (or obvious), the pandemic has had profound and far-reaching implications. When it first struck, the global healthcare domain was ill-equipped, at best, to handle such an emergency. Lack (or absence) of policies, infrastructure, risk management, etc., were just the tip of the iceberg. The lack of knowledge on how to address the crisis from the business standpoint was, by far, the most worrisome.
Interestingly enough, though, industry experts are of the opinion that the crisis afforded the industry an opportunity to focus on innovation and reinvention. From (re)building agile supply chains, addressing shifting customer preferences to adapting evolving digital health technologies, the space has, truly, risen to the challenge.
That being said, the biggest lessons are, and will remain, stay prepared; stay nimble. No longer are merely controlling costs and maintaining exceptional levels of service the priority. Stakeholders’ must now examine and implement innovative business models to stay ahead of the game. And therein lies the crux of this situation and why outsourcing is no longer just confined to the boardroom.
The In’s and Outs of Business Process Outsourcing in the Healthcare Industry
Before diving in, let’s look at the larger picture. Outsourcing in the healthcare industry has always been a multi-dimensional concept, each aimed at delivering value and reshaping and scaling the way business is executed.
A Healthy Trajectory: The Global Healthcare Outsourcing Space
$370.94 Billion Projected Value by 2027, up from
$232.33 Billion in 2022
9.81% CAGR between 2022-2027
Source: Market Data Forecast
The Nuts and Bolts of Finance and Accounting Outsourcing in Healthcare
For the scope of this blog, the aim is to turn the spotlight onto a very specific facet, finance and accounting outsourcing. It has been picking up more interest in the healthcare industry as a way to address a myriad of challenges.
What Ails the Finance and Accounting Function in Healthcare
Short Timelines to Manage Accounting
Challenges Pertaining to Compliance and Regulation
Multiple, and Geographically Disparate, Clinics and Accounting Systems
Absence of Visibility into Financial Processes
Significant Backlogs of Deliverables
Inability to Address Complex and Specialized Projects Due to Absence of Expertise
Source: Datamatics and Moss Adams
Why Finance and Accounting Outsourcing is a Viable Tool in a Company’s Arsenal
Simply put, finance and accounting outsourcing offers a very viable balance between what healthcare finance teams need and what they actually have. The idea, of course, is to ensure these teams are flexible, agile, and prepared for change.
Addressing the Unknown
Equally critical is insulating the accounting processes and resources from disruption and uncertainty. Pairing up with an external partner can bring calm amidst chaos, armed with cutting-edge technology and end-to-end data visibility.
Tackling Data Silos
And, no more data silos! Outsourcing ensures that fragmented financial reports sourced from multiple data silos are consolidated and highlight the critical aspects of the business. Simplified and informed business decisions naturally become the bottom-line.
Assured Data Privacy
With data privacy and security being the rule today, especially in the healthcare space, outsourcing firms are taking the necessary step to ensure their clients’ data stays secure and backed up.
A Varied Services Portfolio
For growing outsource service provider partners, the buck doesn’t stop at merely ensuring the financial side of the business remains streamlined. Rather they are looking at ways to support their client’s entire back office functions including bookkeeping and accounting, human capital resource management, business process advisory services, and also providing much needed support across their technology infrastructure, which is growing more and more complex everyday.
Staying Atop the Game
Outsourcing of back office business processes also ensures business leaders are able to focus on the larger picture – the strategic growth and direction of the business. An external partner is not just proactive, but will spot and help you address red flags in time before they become major issues.
With outsourced accounting services, transactional processing and reports are scrutinized multiple times over, which provides increased internal controls over most in-house teams. While it is too simplistic to assume that all instances of errors can be eliminated altogether, a dedicated team with the right technology and expertise in accounting is more likely to spot an anomaly much quicker!
Access to Financially Intelligent Insights
Actionable insights lead to better business decisions. Outsourcing ensures questions pertaining to the overall strategic direction of the business, such as hiring more resources, investing in marketing, adequate cash flow, etc., are all addressed intelligently and backed by data.
Key Questions to Ponder Before Opting to Outsource Finance and Accounting Functions
Overall, healthcare organizations are finding that outsourcing a once-traditional in-house aspect of the business is clearly becoming a rule for success, and not an exception. Clearly, this is a black swan moment for the healthcare industry, but the great thing is that it appears to be a force of positive change and not negative disruption in the space!
The Why and How of Accounts Payable Automation
Accounts Payable Challenges in the Absence of Automation
In the absence of accounts payable automation, your AP staff will spend most of their productive time performing manual, repetitive tasks such as chasing invoices and PO’s, validating prices, scanning invoices, responding to supplier inquiries, cutting paper checks, reconciling payments, and creating reports for top management. Manual execution of AP tasks, which can be easily automated, is underutilization of enterprise resources, who could otherwise be employed for higher level strategic insights and analytics. Staff who perform highly repetitive and manual tasks are unlikely to be particularly satisfied or motivated employees that will stay with the organization long-term.
Extensive reliance on paper-based invoice processing opens the door to manual errors and delays in invoice processing, late payment penalties by vendors, and the risk of non-compliance. Improper validation of invoices prior to payment could mean that you end up paying for services that are not in your contract or at rates higher than was agreed. The lack of visibility of your cash-balance position can also affect the quality of decision-making by other functional teams.
Advantages of Accounts Payable Automation
Accounts payable automation is the processing of supplier invoices little, to no, human intervention. The entire AP workflow is executed digitally, starting from the capture of data from paper invoices using techniques such as OCR or optical character recognition. The invoices are then stored in the cloud for anytime, anywhere access. The recorded data is either matched with purchase orders and receipts or routed to the applicable team for review. More advanced AP systems also allow for the approver to review vendor contracts alongside the e-invoice to ensure there are no overcharges or unexpected fees, and also to create approval workflows to route invoices to appropriate management team members for electronic approval. Once approved, the invoices automatically flow into the ERP (the accounting system) for payment.
Accounts payable automation creates faster, leaner, and more cost-effective AP processing. Implementation of AP automation eliminates the need for paper receipts and paper checks. You no longer need to print and save invoices. It also creates greater visibility on business expenses and improves cost controls.
Accounts payable automation reduces errors and duplication that inherently come with manual data entry. It offers data insights for informed decision-making and increased compliance. An efficient AP process also strengthens relationships with vendors which can lead to better terms or discount rates.
Assume that a single manual invoice costs you somewhere between $10 to $23 to process. Using that average, calculate the current total cost of processing invoices in your business and then reduce that number by 80% – that’s the potential cost savings financial benefit you could see from implementing accounts payable automation! Not to mention the improved productivity and job satisfaction of your existing AP team, who can be utilized for more significant initiatives.
Overall, accounts payable automation makes life easier for everyone – business owners and CEOs, CFOs, CIOs, IT leaders, business heads, and AP professionals. It is an investment that can often pay for itself, whether you manage the payables process in-house or through an outsourced accounts payable service.
Implementing Accounts Payable Automation
Automation is going to be a pervasive force in much of the finance function for any organization. Yet across most organizations, AP teams continue to spend most of their time handling transactions rather than analyzing the numbers to deliver AP efficiencies. Implementing the right mix of accounts payable automation and change management will allow you to buck this trend in your business. But before you choose accounts payable automation software, you must be sure to outline what your business really needs – just implementing a new software without also considering any needed change management will surely keep you from seeing the ROI you expect.
What are the strengths and weaknesses of your existing app processes? Rather than simply choosing the most popular AP software or the least expensive one, assess whether the software offers a customizable solution for the current weaknesses in your AP processes. Also, evaluate which AP solution best integrates with your existing systems, such as your financial system/ERP.
Some of the other questions that you need to be asking are:
Implementing accounts payable automation will affect everyone across your business in one way or another, and so you should be sure tosecure buy-in from all the impacted areas, especially procurement, IT, functional managers, and the CEO. Help them understand how automation will benefit their area of the business and address any potential concerns they may have.
To quote Bill Gates, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” Therefore, accounts payable automation cannot be viewed as a panacea for all that ails the accounts payable function in your business. You will need to pair the technology with implementing industry best practices.
Working with a business process outsourcing partner that uses the latest financial and accounting technologies can help you circumvent the risks involved in identifying and implementing accounts payable automation. The added advantage of outsourcing your accounts payable is that you minimize the onboarding time as they will already have the technology and best practice process in place for you to leverage right away. Contact us to find out more about implementing an automated AP solution that’s right for your business.
Labor Shortages Strengthen the Case for Business Process Outsourcing
Businesses in the US are seeing a shortage of labor across industries, the likes of which has not been seen for more than a decade. An estimated 4 million fewer Americans are in the job market now compared to pre-pandemic levels. In addition, according to data released by the U.S. Chamber of Commerce, ’employee quit rates’ are touching highs of 3% and above, with some states such as Hawaii, Louisiana, and West Virginia seeing much higher quit rates. The difficulty in retaining employees, and the associated rising cost of hiring new staff, come at a time when businesses need to hire workers to continue their economic recovery.
What’s Causing the Labor Shortage?
Let’s begin by taking a look at the ‘Great Resignation’ trend. Over the last two years, Baby Boomers have found themselves tossed into a surreal world of remote-working, using a plethora of new software apps to stay connected and productive, all while trying to manage their personal vulnerability to COVID-19. Frustrated with the ‘new normal’ at work, many older employees, who have now been productive for the last forty years of their lives, have realized that they would rather live life more on their terms and have been leaving their jobs. Data shows that more middle-aged employees are planning to retire earlier. According to a Pew Research Center analysis in the third quarter of 2021, 50.3% of U.S. adults 55 and older said they were out of the labor force due to retirement.
As older employees quit in more significant numbers, younger employees with less experience have had to take on more responsibilities. While that may be an opportunity for shining and rising through the ranks, it has also resulted in those younger employees facing greater work pressures much earlier in their career, often without corresponding increases in their salary. The burnout faced by employees, who were also home-schooling kids during the pandemic, only added to the stresses of remote working. This, in turn, increased the instances of ‘job hopping’ that were happening. Consequently, employers now have to pay significantly higher than expected salaries to retain current employees or to hire new ones.
Another explanation of worker shortages is the record trend towards business ownership. Americans applied for 5.4 million business I.D. numbers in 2021. People are choosing to start a business even though the economy is plagued by low unemployment numbers. Millennials, just like the Baby Boomers, are assessing what they want out of life; working for themselves seems to be the preferred route. Accessible business technologies (Zenefits, GoDaddy, PocketSuite, QuickBooks, among many others) and mature online marketplaces have made it that much simpler for small businesses to get started.
Finally, temporary stimulus checks and increased unemployment benefits gave many blue-collar American workers the flexibility to re-evaluate their work situation, with many deciding that they were unwilling to return to low-paying jobs.
Staying Afloat Amid Rising Wage Costs
Companies with deep pockets are likely to invest in AI powered automation and labour-saving technologies to reduce their dependence on a human workforce. But where does that leave medium-sized companies who don’t possess the same financial muscle power? As a business owner, some of the immediate strategies you could consider for staying profitable as wages rise are the following-Unfortunately, most of these steps are short-term or ad-hoc measures at best. For instance, how many cost increases can you afford to pass on to the consumer? And how long can you reduce business hours or lay-off staff without impacting customer service? For business owners struggling to find the right talent or resources to counteract their rising wage costs, business process outsourcing can prove to be a sustainable growth strategy.
Business Process Outsourcing to Enhance Business Agility
Whether you are looking to outsource repetitive work or tasks that involve highly skilled decision-making, business process outsourcing will help reduce operational costs, improve efficiencies, boost compliance, and improve profit margins.
There is nothing ground-breaking in recommending business process outsourcing as a strategy. According to the latest reports, US companies have, by far, the highest business process outsourcing rates, with 68% delegating their services. However, the difference now is how quickly you make the change.
In normal circumstances, companies that decided to move their operating model towards business process outsourcing usually did so in a very drawn-out manner, often taking months, if not years, to evaluate every nuance of the transformation. However, the current dynamic business environment demands that leaders make decisions that are well-informed and well-timed.
The COVID-19 impact has made it clear that such disruptions can happen quickly and repeatedly, and therefore business leaders need to accelerate decision-making in every aspect of functioning. How will you digitize your business? How will you stay relevant in a competitive and fragmented market? How do you access people with the best skills and technology? How can you adapt your processes to be more agile at every level in the organization? Failure to make these strategic decisions simultaneously will put the very survival of your organization at risk. Working with a business process outsourcing service provider will help you overcome the challenges of implementing the best-in-class automation, adhering to stringent industry standards, and ensuring that you recruit people with the right expertise.
For organizations in the early stages of the decision-making process about outsourcing, the most effortless functions to outsource are accounts receivables and payables, bookkeeping, and financial data reporting. Outsourcing these non-core functions of your business can yield cost savings of up to 25% with improved quality and revenue outcomes within the first quarter.
As your business circumstances change (be it a merger, seasonal volumes, or a shift in market focus), an agile outsourced service provider can quickly make the transition to ramp up the team to meet your increased needs. The right outsourced service team can also leverage their expertise, research, and analytics to help ensure that you are prepared to respond proactively to changes in market conditions. Outsourcing also eliminates guesswork about how much it will cost you to ramp up in those support areas to meet the growth of your business.
The business process outsourcing industry has grown well beyond just volume-based transactional work to highly evolved aspects that now include financial planning and analysis, customer analytics, and compliance. Therefore, it’s no longer a question whether business process outsourcing is right for you. The question you should ask now is – what areas can you outsource and how quickly.
How Secure Are You When It Comes to Cloud Technology?
Cloud technology has grown exponentially in recent years, becoming one of the foremost powerful forces within the business world. The growing importance of cloud technology, particularly during the COVID-19 pandemic, has not only resulted in a rise in employees working outside of the physical office, but has also made us more technology-reliant than ever before.
Because we rely so heavily on the cloud nowadays, the question of cloud security arises. What level of security does my business data currently have, and what security policies does my organization need to protect us in the future?
To respond, data stored within the cloud is nearly always encrypted, meaning that an intruder would have to crack the code before having the ability to read it. As a result, information stored within the cloud is more likely to be secure than files, images, information, or videos that are stored on individual personal devices. Data security policies have evolved aggressively over the last few years to include a policies that restricts employee data storage to only cloud locations, i.e.: OneDrive, Box, Dropbox, etc.
Don’t fear privacy within the cloud
The cloud has demonstrated that it’s safer than on-premise data centers. A study by Gartner states that by the end of 2022, up to 60% of organizations will use an external service provider’s cloud-managed service offering, which is double the number of organizations doing so in 2018.
Let’s take a look at a few of the explanations why the cloud is safer than other options.
Geo-independent with redundancy
Once you move to the cloud, your data is replicated in multiple data centers instead of being stored in a single data center. As a result, if one location goes down, your data will automatically fail over to another location.
Additionally, virtualization technology is utilized by large cloud providers to confirm availability. When servers are virtualized within the cloud, providers can quickly move them from one data center to a different one in the event of a failure. Most on-premises redundancy is built from just two physical servers that fail over to the other. If there is a fire or a significant network outage, this is not very helpful.
Companies may find it difficult to implement encryption across their entire environment, but cloud providers typically provide encryption out of the box. Big cloud providers can even utilize military-grade AES 256 encryption to help prevent data exposure – this is a level of security most businesses could never implement on their own.
One of the foremost significant security advantages of the cloud over on-premises infrastructure is user workstation segmentation. Phishing and email focused threats are the most common methods for attackers to achieve network access. In the majority of cases, attacks infiltrate user workstations. They rarely acquire contact directly with the server environment itself. When you’re hosted within the cloud, all of your workstations are completely segmented adding another layer of protection for your business.
Now that we understand why the cloud is safer than other options, let’s take a look at the methods and techniques that ensure the security of data stored within the cloud.
Encryption techniques employ a mix of complex algorithms to safeguard data stored within the cloud. Attackers need access to an encryption key in order to open and view encrypted files. While it’s possible to look at encrypted data, decrypting it takes not only a prolonged amount of time, but also a major amount of computing power.
Artificial Intelligence (AI) is leveraged to analyze massive amounts of network traffic and malicious activity and look for attackers’ patterns. With that information, the AI tool can then decipher how to prevent future attacks based on those patterns. This has commonly become known as proactive threat hunting and is based on the analysis of past patterns to try and predict future threat events.
A cloud firewall not only prevents malicious traffic but also acts as a virtual barrier and protects cloud-based assets.
Third-party security testing
Third-party security testing allows cloud service providers to identify potential vulnerabilities before hackers exploit them.
Defining password policies and enabling multi-factor authentication (MFA) are two of the MUST HAVE’s within an organization. The development of training about password best practices paired with a two-step verification process can help to enhance the protection of the user and hence the organizations assets. As a result, redundancy has been created. If one security step fails, the information is still protected by the other.
Cloud technology has advanced beyond simply keeping up with on-premise storage. In many ways, data stored at a public cloud provider is safer than data stored within your own infrastructure. The required and compliance driven physical and digital security mandated to these cloud providers ensures that an environment has been created to securely store and interact with your data without the threats associated with not maintaining the systems in your own infrastructure.
Unlock the power of cloud in your business transformation journey
The driving forces that encourage a move to the cloud often include the following:
AnalyticsEvery cloud adoption initiative is motivated by a strategic need to keep up with the rapidly changing business environment. Most cloud providers support data weaving tools that make it easier to integrate Business Intelligence (BI) and analytics workflows and take advantage of richer data which helps an organization to make real-time, agile business decisions.
Cost SavingsWhen you move to the cloud, you no longer have to invest in equipment maintenance, updates, or upgrades; instead, the cloud service provider (CSP) takes care of it. As a result, this decision not only saves you money, but it also allows you to invest more in other aspects of your business.
Business ContinuityCompanies can’t afford downtime due to unforeseen disruptions such as a cyber-attack or other catastrophic event, so storing your data in the cloud ensures it’s securely backed up and protected in a safe location. When there has been a breach, every organization’s goal is to resume normal operations as soon as access to the infrastructure, applications and data has been restored. By reducing downtime and lost productivity, an organization is able to minimize the negative impact it will feel due to lost revenue.
AgilityFor businesses all over the world, it is critical to enable an agile IT environment because it allows for proactive responses to rapidly changing business needs. Moving to the cloud makes this possible because SaaS technology eliminates the need for traditional application management. As a result, it’s easier to evolve your cloud strategy as business requirements change. However, it is critical to recognize that managing these products in a cloud environment necessitates a new set of IT skills. Furthermore, by enabling real-time responses, organizations experience increased agility, thereby improving both the internal and external customer experience.
Business GrowthOne of the most important outcomes of cloud adoption is business growth. If you see business growth as a strategic driver for your company, you’ll need to figure out how you’ll define it. The answer will be determined by the level of maturity within your company and the amount of risk you are willing to take. Based on those responses, you can map out your strategy for achieving that goal (or work with a trusted partner to help you map it out), as well as how you expect cloud technology will support those efforts.
Before you embark on any new cloud initiative, it is important to first determine which of these five drivers is motivating your decision to migrate to the cloud. Understanding this will be key to helping you prioritize initiatives within your cloud strategy. Doing so will be critical to your success because it constantly focuses activities that satisfy the end goals while creating a framework to better resolve conflicting initiative that might arise.
5 Benefits of Outsourcing Accounts Receivables in 2022
Has the pandemic affected revenues and margins in your business? Outsourcing accounts receivables could be the answer to your cash flow concerns.
Over the last two years, the pandemic has dealt a severe blow to the revenues and margins of businesses, irrespective of size and industry. A 2020 study (of 5800 US businesses) on the economic impact of COVID-19 on the small business ecosystem concluded that the financials of most were precarious, with only 75% having the funds to meet operating expenses for the next two months. To quote US Vice President Kamala Harris, “Sadly during the course of the pandemic, one-third of our small businesses have closed.”
Running a profitable enterprise is difficult even in a flourishing economy. Businesses that have weathered the pandemic-inflicted market conditions are likely to be those that had a strategic approach to accounts receivables (AR) management.
What is Accounts Receivables (AR)
The primary goal of the AR department of a company is to monitor collection against billed invoices and make efforts to collect those payments as timely as possible. An AR team can generate customer invoices, issue customer refunds, and reconcile AR accounts.
The right AR management strategy adds a layer of protection against future non-payments. Granting credit is, for many businesses, a vital customer retention strategy. Some customers may themselves be awaiting AR collections so they can pay their bills. A critical task performed by the AR team is to assess which customer is worthy of being extended credit.
Importance of Outsourcing Accounts Receivables
If the pandemic has taught us anything, it’s to have a consistent invoice collection process focusing on your cash flow. By neglecting to establish a professionally managed AR function, a business will suffer from missing customer payments, errors in accounts reconciliation, negative cash flows, delays in funding expansion plans, and defaults on business debt.
Outsourcing accounts receivables is a powerful strategy for businesses that lack the expertise or the resources to construct a robust, full-time AR team. An outsourced accounts receivables service will help you optimize working capital management, improve collections on invoices, and improve client relationships. In addition, the outsourced accounts receivables partner will work with you to tactically implement AR processes and systems to automate and speed up the collection process.
Benefits of Outsourcing Accounts Receivables
Businesses that have survived and even thrived during the pandemic are the ones that were able to realign their service delivery and payment collection models to the new normal. Although many industries have shown signs of growth by the latter half of 2021, a return of economic shut-down never seems far from being a real possibility. The bottom line is that businesses need to continue strengthening their accounts receivables approach to get paid faster and more efficiently.
Improving even a medium-sized organization’s AR processes requires a hefty investment of resources (technology, staffing, and training). Given the precarious state of both the US and global economy, that’s a risk most CFOs and CEOs are unwilling to take. In such a scenario, outsourcing accounts receivables is one of the most viable and effective strategies for reducing Day Sales Outstanding (DSO) metrics and securing payments sooner. AR providers have the tools, skills, and technologies to revamp an existing AR flow and provide new capabilities to streamline the entire process of billing and collections.
Here are five significant benefits of outsourcing accounts receivables for your company:
Faster payment collection
Getting paid in business goes beyond raising invoices and sending automated reminders. Consistent, friendly contact with clients will help your invoices be prioritized for payment. However, most credit departments don’t have the bandwidth for effective follow-up. Accounts receivables outsourcing providers ensure that your overdue customers are contacted regularly for payments. In case of a customer concern about an invoice, early contact and resolution will improve chances of timely payment collection. In short, with accounts receivables outsourcing, you drastically increase the chances that all your invoices will get paid more quickly.
AR professionals are adept at dealing with late-paying customers without damaging the relationship. Consistent customer communication will improve the customer’s understanding of your billing and payment collection processes and improve the likelihood of timely payments in the future.
Access AR best practices
There is no one-size-fits-all optimum AR workflow. But there are AR best practices that a company of your size and industry can adopt to free up working capital. A professional AR partner can be of immense value by identifying the gaps in your AR workflow compared to industry peers and giving you the information you need for improved decision-making. Here are some of the immediate benefits that you can access:
Streamline invoicing through automation
The apparently straight-through process of invoicing can have errors and discrepancies affecting your cash flow. Delays in the generation of invoicing, inaccuracies in recording customer data, and billing the customer outside the system are common issues that can be addressed by (a) centralizing AR and (b) automating most AR processes using electronic billing systems and customer portals. Outsourcing accounts receivables allows you to access the latest automation innovations without investing in them directly.
Automating your collection management processes will break down the silos between business units. It will improve transparency in financial reporting, which will enhance your ability to make timely strategic decisions.
Lower employee costs
Since an outsourced service takes care of all your accounts receivables processes and automation needs, it reduces/eliminates the requirement for having an in-house AR team. That means you have lower overhead expenses while enjoying improved cash inflows. You can also quickly scale your AR collections processes as your business grows without worrying about hiring and training additional staff in time to meet the growing demand.
Targeted approach to reducing DSO
Once you have hired an outsourced accounts receivables partner, you can negotiate the reduction of 10, 20, 30+ days of DSO as a business deliverable in the business contract. Lower DSO will mean more cash at your disposal for funding core business functions.
As any diligent business leader knows, you must, however, evaluate the benefits of accounts receivables outsourcing in tandem with the associated risks of AR outsourcing. The most obvious one is the risk of handing over such a key function to your enterprise to a third party, and one that will directly impact your company’s cash flow. Then there is the risk of a data privacy breach.
These risks can be circumvented when you work with a premium, experienced outsourcing partner. Therefore look for an AR service provider that offers the right mix of AR technology, skills, credentials, and experience to achieve your company’s specific goals.
Outsourced Accounting 101 – A Guide for Businesses
Business process outsourcing is a popular strategy to improve functional efficiencies while reducing employee overhead. Research shows that at the start of 2021, 80% of small businesses planned to outsource some part of their business. One of the first functions to be commonly outsourced is accounting. The US accounting standards for financial reporting and processes (for cash statements and ledgers) make it easy to get an outsider to perform the job without compromising quality of work. But what does “outsourced accounting” cover, and is it the right strategy for your business?
Outsourced Accounting Explained
Outsourced accounting is when you hire an external firm/accounting professional to handle your business’ accounting and finance functions. You generally have two options – offshore or onshore outsourced accounting. Onshore outsourced accounting is when you choose a vendor based in your country of operation. Native language competency and domestic business acumen make onshore outsourced accounting the preferred choice for most small and medium-sized businesses. As the term suggests, offshore is when your outsourced accounting partner is located in another country. Some firms, if they have a global presence, are also able to offer a hybrid model for their outsourced accounting services which allows you to take advantage of lower rates for the transactional work and then still speak with someone in your own geography for day-to-day interactions.
Most outsourced accounting firms are more than willing to take on the entire gamut of your financial processes, including handling your taxes. Here’s a list of five commonly outsourced accounting functions.
Accounts Receivables and Payables
The two most popular outsourced accounting functions are accounts receivables and payables management. Both functions are time-consuming, repetitive, and require meticulous work. Lapses can result in delays in customer invoicing, bill collections, check processing, vendor payments, and supplies management.
Smooth management of accounts receivable (AR) and account payables (AP) is vital to ensure a healthy cash flow situation and ensure that “business as usual” can continue. AR and AP management tasks also include expense reporting, cash forecasting, and reporting, and debt management.
Financial Data Reporting
Although, as a private company, you are not required to publish financial information publicly, you still need to create a monthly profit and loss statement and a balance sheet to monitor the health of your business. Financial reports are also required for routine internal and external company audits, disclosures to stakeholders, filing quarterly/annual tax estimates with the IRS, and are extremely important if you are applying for a loan or looking to raise capital to grow your business. Preparing these financial documents requires the expertise of a team that not only understands the ins and outs of accounting best practices, but also those of your specific industry as well.
As a business owner, you must base strategic business decisions on the financials of the business. For instance, are you pricing correctly or do you have the cash flow to invest in a new product line? Do you know which clients/services are the most profitable and which operational teams need more employees? These are significant decisions that an experienced controller can help you make by analyzing the reports that a bookkeeper or accountant prepares. Specifically, a controller can help you with:
Financial Planning and Analysis
Financial Planning and Analysis (FP&A) teams play a crucial role in supporting significant decisions vital for the growth of your business. FP&A includes the following activities:
The FP&A function involves the study of business and economic trends, the potential challenges a business faces, and how these impact that business’ risks and growth prospects. An outsourced FP&A partner can also help you prepare financial reports for acquisitions, bank loans, board reporting, and investor communications.
An outsourced accounting service can take on the following bookkeeping tasks for your business:
Trends Driving Outsourced Accounting Services
The COVID-19 pandemic, which swept across the globe at the start of 2020, has caused a paradigm shift for businesses. Today, more small and medium-sized companies rely on remote teams that use cloud-based technology to deliver results. There is an emphasis on minimizing a “physical office” infrastructure. The remote-working environment has fostered a new comfort level in outsourcing business functions, and outsourced accounting is usually the first choice. The need for agility in responding to a disruptive business environment has renewed the spotlight on outsourced accounting services such as book keeping and controller services.
The accounting industry by itself is undergoing a shift, as well, driven by automation. Although automation minimizes errors and expedites financial decision-making, it also exposes businesses to heightened risks of data hacking and information leaks. With the infrastructure and technologies in place to safeguard vast amounts of financial data, outsourced accounting partners can help avoid this threat to a great extent.
Although data science and analytics as part of outsourced accounting services is not entirely new, it has become an essential driver of process improvements and efficiencies in business. Likewise, AI (artificial intelligence) has produced positive results in automating accounting tasks and improving efficiencies. While it is difficult and expensive to hire an accounting professional with data science and analytics backgrounds, this service is accessible on-demand with an outsourced accounting partner.
As the accounting industry moves from reactive to proactive, the level of financial skills and technologies that can be accessed via an outsourced accounting service provider makes outsourced accounting the preferred choice for many growing businesses.
Is Outsourced Accounting Right for Your Business?Are you evaluating outsourcing your finance and accounting function? Are you concerned whether it’s the right move for your company? Here are a few factors to consider:
In a nutshell, an outsourced accounting partner can offer you the financial insight you need to grow your business while freeing up your time and resources to better manage every aspect of the core business of your company. The goals and needs of your business will determine the right scope of outsourced accounting services which could start small and then expand as you become more comfortable with the concept.
Big data and the cloud – a match made in heaven
You’ve probably heard the terms “Big Data” and “Cloud Computing,” but did you know they go hand in hand, with many public cloud services actually conducting big data analytics?
Big data and cloud computing have emerged as the most crucial technologies to penetrate the mainstream of the IT industry in recent years, resulting in an ongoing “datafication” of enterprises throughout the world.
We see massive amounts of data accumulation from every imaginable structured and unstructured data source (collected and created), in the most diverse formats, and all of these data points represent revenue for any company. Both big data and cloud computing play a significant role in companies staying ahead of the curve by finding the right way to leverage this wealth of data.
The combined power of big data and cloud computing is beyond comprehension; it not only provides predictive and prescriptive insights but also aids in business processes and decision-making strategies. In fact, the combination of both big data and cloud computing is extremely powerful given that it can positively impact company revenue while reducing the investment cost required to achieve the desired results.
According to Statista, the worldwide big data market will reach $103 billion by 2027, and the global cloud computing market is predicted to rise from $445.3 billion in 2021 to $947.3 billion by 2026, according to Markets and Markets.
Let’s start with the characteristics of both big data and cloud computing, and then we will focus on the benefits –Characteristics
|Big Data||Cloud Computing|
|Brings Cost Saving||On-Demand Availability|
|Promotes Decision Making||Accessible Through a Network|
|Provides Data Insight||Elastic Scalability|
|Increases Productivity||Pay-as-you-go Model|
|Enhances Customer Service||Multi-tenancy and Resource Pooling|
Source – GeeksforGeeks
Benefits of Big Data and Cloud Computing
The move to big data in the cloud is unsurprising given the numerous benefits that the powerful combination of the two can provide, ranging from internal insights to direct customer interactions. Here are the main advantages to consider:
- Cost Optimization – Investing in and managing data centers for big data analysis can be costly, time-consuming and requires a significant security framework to be put in place to protect both your physical and digital assets. By storing big data in the cloud, organizations only have to pay for storage space, which reduces infrastructure costs and adds value to the enterprise. This allows you to shift the responsibility of infrastructure management to another organization while you focus on achieving your business goals.
- Scalability – Data growth is already reaching 25-30% YoY, so not having a scalability plan in place does not make good business sense. By shifting out of a traditional data center and into the cloud, organizations are able to be agile and flexible while improving overall efficiency and productivity. Also, because the rate of data collection is unpredictable, storing it in the cloud assists in the management of large traffic spikes and usage.
- Security and Privacy – When it comes to dealing with and analyzing big data, security and privacy are critical. Failing to do so could damage not just the company’s future and reputation, but also its financial wellbeing by tying it up in litigation. To avoid such catastrophic disruptions, many organizations are employing big data analytics by integrating scalable cloud solutions that detect dangerous hackers and threats in order to safeguard their valuable data.
- Ease Complexity – Any big data solution implementation necessitates a number of components and integrations. Cloud computing allows for the automation of these components, reducing complexity and increasing the productivity of the big data analytics team.
In the current digital culture, no one will deny that big data and cloud computing are extremely important, even if only one of them is part of your strategy. But, when the two are combined, organizations and their employees’ imaginations are not limited by inadequate resources. Creativity and competing in markets never thought possible in the past becomes the enablement path to analyzing, interpreting and making data business actionable.
How the Education Industry Can ‘Level Up’ with Technology?
“Technology will not replace great teachers but technology in the hands of great teachers can be transformational” – George Couros
We live in a world where technology plays a larger role in many aspects of our day-to-day lives and education is no exception. Advancements in technology has changed nearly every facet of the educational system; it has not just transformed the way education is delivered and received but also promotes outside-the-box thinking and innovation. Massive open online courses, interactive whiteboards, virtual classrooms, augmented reality, and 3D printing, all of which support blended learning methods, are testaments to these changing dynamics of education.
As trends like big data, machine learning, and the Internet of Things (IoT) have come into the picture, many educational institutions have been focusing on how they can adopt it. According to Holon IQ, in 2020, the digital spending on education was $227 billion, and it is forecasted to be $404 billion by 2025.
In this blog, we’ve listed some of the most important educational technology trends and benefits to help aspiring education leaders gain the information, skills, and experience they need to succeed.
Must-Know Educational Technology Trends
Our tech capabilities are increasing continuously, empowering educators to impart creative and remarkable learning experiences for their students, while relieving them of the load of repeated chores.
A recent study by Gallup reveals that 81% of teachers strongly agree that adopting digital learning tools in the classroom has great value. Furthermore, 57% say that digital learning tools are more successful for personalizing education, with a vast majority believing that they are more effective for engaging students with school and learning. Here are some of the current educational technology trends changing the education landscape:
- Virtual Reality (VR) and Augmented Reality (AR) – The incorporation of VR and AR into the classroom will create an interactive and immersive experience for students, as well as enhance real-life experiences through the use of images, videos, or interactive data. Students in many schools are already using VR headsets to embark on virtual field trips allowing them to explore places they may not have been able to physically go otherwise. Instructional AI and virtual reality are expected to become multibillion-dollar industries in the near future.
- Gamification – When it comes to the most innovative trends in educational technology, gamification may be at the top of the list. The gamification approach in the classroom not only deploys knowledge through fun activities, but it also employs various strategies, diverse activities, and rewards that encourage student engagement.
- Blockchain Technology – Adopting blockchain technology as part of any educational system will help prevent system hacking which, of course, is a key concern among educators. Blockchain technology is also utilized to authenticate skills and knowledge and is employed in Massive Open Online Courses (MOOCs) and ePortfolios. For eLearning agencies, DLT (Distributed Ledger Technology) systems will solve the challenges of authentication, scale, and affordability. Furthermore, it can assist student applicants in publicizing their achievements during their job-seeking.
- Virtual Learning – In the midst of this global pandemic, virtual learning environments have proven to be beneficial. This approach not only provides learners with convenience and flexibility, but it also allows for live online interaction between instructors and students, mirroring the traditional classroom experience when the in-person experience was not available. Per a report published in Scientific & Academic Publishing, video presentations are extremely effective for student learning, and video-assisted learning enhances the lessons and has a direct impact on student performance.
- Cloud Technology – The use of cloud technology has made education more accessible than ever before. Cloud technology eliminates the barriers that students used to face with the accessibility of textbooks or resources outside the classroom. Students can now always access assignments and textbooks through the cloud from any device with an internet connection. This also helps to address the challenges, and costs, that educators used to face. Particularly, not having enough resources in the classroom so every student is able to access and utilize them when needed
Benefits Of Using Technology in Learning
Technology has greatly transformed the education system; from gamifying teaching to bringing students on virtual field trips, technology has brought about significant changes in the way the teaching process is carried out in schools. These changes have also led to significant advantages such as:
- Leads to a better interactive experience – Students can shift from static learning to more dynamic, interactive learning with the use of videos, simulations, digital books, and numerous applications and tools. Furthermore, it promotes the opportunity for a student to go deeper into any area that fascinates them promoting the exploration of their own interests and talents, as well as, possibly, their future vocation.
- Enhances knowledge retention – Technology can assist in encouraging active involvement in the classroom, which is a key component of increasing knowledge retention. Educators can utilize different types of technologies in various situations to determine what works best for the students in terms of engagement and knowledge retention.
- Promotes individual learning – Every individual has a unique learning style and set of abilities; some are quick learners, while others are a little slower, but each learns at their own pace. Technology provides access to a diverse pool of resources in a variety of formats, which makes learning more effective for everyone with varying needs and encourages individual learning and engagement.
- Encourages collaboration – Students can now collaborate, not only with their fellow students in the same classroom or at the same school, but also with students in classrooms all across the world. They can have the opportunity to express their ideas and opinions while also seeking assistance, and learning more about difficult-to-understand subject matter. Furthermore, they can share materials in their virtual learning environments with others throughout various online communities and forums.
- Improves teacher productivity and efficiency – With so many digital tools available at their fingertips, teachers can enhance their productivity by expanding learning opportunities for students and improving their instruction methods to personalize learning for their students. Additionally, schools can also gain by reducing the prices of physical teaching materials, improving the effectiveness of educational programs, and making the best use of teacher time.
With augmented reality, cloud computing, online social networking, and adaptive learning systems, education is no longer limited to the walls of the traditional classroom, but has now expanded far beyond that. Education powered by technology is becoming an enabler for the best learning and delivery experience of the future and prepares the student for an exciting world that awaits them.
The Top 6 Reasons You Should Start Investing in Cloud
Cloud technology has infiltrated every aspect of businesses and operations, and it has emerged as a key component in companies’ digital transformation journeys. 70% of businesses use some form of cloud service on a daily basis, owing to the obvious benefits, and more and more businesses are beginning to understand how they can harness the technology to their advantage. Cision predicts that the global cloud computing market will grow by $461 billion by the last quarter of 2025. This translates to a compound annual growth rate (CAGR) of 17.5%.
Cloud computing is massive and has enormous potential. It enables businesses to more effectively optimise their costs, giving them an edge to thrive amid intensifying competition. However, that enormous potential can also feel intimidating to some companies and tend to turn them away from investing time and resources into really leveraging it to the fullest.
Why Choose Cloud Technology for Businesses?
The popularity of cloud technology among small and large businesses is continuing to rise. We’ve compiled a list of six main reasons why you should start investing in cloud technology:
- Cost Optimization: Reducing or better aligning costs to actual operational need is always critical, regardless of the size of your business. When it comes to saving and cost optimization, one of the most important areas to consider is the reduction of spending on IT resources, software licenses, hardware network equipment, and in-house technicians. Businesses that migrate to the cloud no longer have to pay for costly infrastructure or licencing fees, and it also helps to reduce the cost of maintaining and managing IT systems.
- Tightens Data Security and Privacy: In today’s global environment, every business requires very tight and defined data security and privacy policies; failing to do so could jeopardise not only the company’s future and reputation, but also threaten its financial viability by tying the organization up in litigation. To avoid such disruptive disasters, many businesses are turning to scalable cloud solutions that can better detect malicious hackers and threats, and protect their valuable data. According to RapidScale research, 94 % of businesses saw an increase in security after moving to the cloud, and 91 % said the cloud makes meeting compliance requirements easier.
- Ensures Business Continuity: Being able to maintain business operations after a breach is not only important to the livelihood of the employees, but also the organization’s financial wellbeing. Having your data stored in the cloud ensures that it is backed up and protected in a secure and safe location in the event of a disaster or other crisis. You can quickly resume normal operations as soon as you regain access to your data, thereby minimising downtime and lost productivity.
- Enables Competitive Advantage and Sustainability: With growing technology, it has become imperative for all businesses to become agile and innovative. Cloud technology offers access to world-class enterprise technology that helps any size business compete in the modern business environment and gain a competitive advantage. One of the advantages of cloud computing for SMB’s is it tears down geographic boundaries and allows innovation and creativity to be the differentiator.
- Reliability: Cloud computing uses a well-managed service platform that is far more reliable and trustworthy than internal infrastructure. Cloud technology ensures that services are available 24/7. As a result, the company avoids the need to hire specialized IT personnel or worry about dealing with a server outage, which helps reduce your downtime and improve your overall productivity. In the case of any issues, a cloud service provider can quickly pivot to other servers to host needed applications and traffic.
- Mobility and Remote Work: Many companies around the world have been forced to shift to a fully remote working model due to COVID-19 precautions and safety guidelines. Office interactions were also reduced as a result of the need for social distancing. Traditional technology-based businesses struggled and were unable to make this transition quickly. Those with cloud solutions, on the other hand, were able to quickly pivot and run their businesses from anywhere.
Given the numerous benefits that cloud technology provides to businesses, it is reasonable to conclude that cloud technology is rapidly becoming the new normal. It assists businesses in dealing with future issues such as big data management, cyber-security, and much more. If you have not yet moved to the cloud, now is a good time to do so in order to benefit from a more simple, secure, and advanced solution for storing, managing, and processing data.