Outsourcing Finance and Accounting with Arnold San Miguel

Hi and welcome to another episode of Outsource Accelerator podcast. My name’s Derek Gallimore And I’m joined by Arnold San Miguel again today where we discuss finance and accounting outsourcing. I hope you enjoy this episode. It’s a great episode introducing you to finance and accounting outsourcing which is probably one of the go-to outsourcing start points especially if you’re starting out with outsourcing. So, enjoy.

Derek: Hi and welcome back everyone. My name’s Derek Gallimore with Outsource Accelerator. And today I’m joined with Arnold San Miguel again Hi Arnold. How are you?

Arnold: Hi Derek, doing good.

Derek: Good, good, good. And today we are going to talk about finance and accounting outsourcing. If you wanna abbreviate that that’s FAO. So, finance and accounting is actually one of the biggest and most accessible outsourcing opportunities out there. Every business needs a finance and accounting. Every business needs their books maintained. And also, it’s actually something that every business would prefer to ignore I think it isn’t one of your core activities and it’s supremely expensive to get qualified accountants typically in your own home turf. So, there are a hell of a lot of arguments for finance and accounting outsourcing and there’s a lot of arguments for trying outsourcing using the finance and accounting function first. Because it’s you know really a very common one and it’s one that plugs in easily to your business.

So, let’s just look at you know some of the stats that there are a huge amount. So, I’m obviously a big supporter of outsourcing to the Philippines. There are over 500,000 university graduates in the Philippines per year and of that number, there are 85,000 accounting graduates per year coming out of Philippine universities. So that includes some master’s programs and undergraduate degrees. So, there’s a huge amount of labor supply there so let’s look at reasons why Arnold maybe you can help me with this. Let’s look at reasons why companies would choose to outsource their finance and accounting.

Arnold: Yeah, I think the first obvious reason would be to lower costs especially coming from a finance department. This is a very good metric to make them decide to outsource.

Derek: Yeah absolutely. And I mean that’s one really significant thing and there’s a bit of a you know supply and demand aspect that the there’s a lot of accounting graduates in the Philippines so as a result. You know salaries do come down and also cost of living is cheaper in the Philippines. So, you know it’s not unusual that you could get a pretty qualified accountant for you know somewhere between 500 and 1000 U.S. per month. So really a significant cost saving potential there. So what else do we have? and

Arnold: Yeah, the next one is increased scalability and flexibility. Basically, the benefit here is if you start to outsource to the Philippines if your company grows or if you want to introduce this to your business partner then definitely the provider can scale up with you at a very reasonable cost.

Derek: Absolutely. Yeah that’s very relevant. And then the next one then is standardizing your finance and accounting functions. And you know I found this when I came over to the Philippines and outsourced functions first. Many businesses are growing and when you come to a cheaper cost center it actually enables you to do those jobs that you might be putting off for their aspirational jobs. None of it is particularly fun in terms of finance and accounting. But when things are cheaper you can really take the opportunity to get all of your books in order, get fantastic metrics in place get KPI visibility and of course standardize all of your finance, finance and accounting functions. Great. And what’s next.

Arnold: Yeah, the next one is improved processes. Now I think this is very important to finance and accounting wherein we are very process oriented in terms of the flow of the, you know the money in and out of the company. So, the good thing with this one is if you outsource to another agency they really have this management to help them out you know improve your accounting business or the flow of your finance and that is included in what you’re paying them to have the definite advantage.

Derek: Absolutely. Absolutely. And you know so if it is a small business considering outsourcing finance then I think actually you can gain a lot of value by the process because it actually pulls you to a new level of maturity because when you’re a younger company things are done a little bit on the fly whereas if you engage with quite an experienced finance and accounting outsourcer then they can actually bring far more mature processes into your company which is of huge value. And then what’s the next one.

Arnold: Yeah, the last one is access to talent and technology. From what Derek, you mentioned earlier we do have hundreds of thousands of graduates yearly in the Philippines and a lot of them took up accounting as their major. And in terms of technology, the good thing nowadays is that in the digital age there are the very popular accounting softwares out there that people are commonly using. So, these softwares are accessible very user friendly in terms of training. They have their own training documents or videos set up in their website and it only takes a couple of days for your outsourcing staff to master them.

Derek: Yeah absolutely. That’s very critical. These softwares now are becoming ubiquitous, aren’t they? So, there’s Xero, and quick books and fresh books. The good thing is that it’s then a common language regardless of where you’re sitting. Also, they’re all in the cloud now. So accessible from anywhere. And so, there’s really no reason why someone needs to be sitting in your office to do your accounts. And yeah, the software has really enabled that also. I think it’s worth mentioning that you know people might have apprehensions regarding the localized knowledge required for accounts. So obviously depending on what country you’re sitting in there are very significant differences in text management and things like that. You would need to check with your finance and accounting and outsourcer that your specific accountant knows the regionalized tax aspects and you might also want to get it checked off by a local accountant afterwards. Just do the final sign off. But generally, for all of the major tax jurisdictions now you would have accounting specialists in the Philippines that would be reasonably familiar or very familiar with each of these tax jurisdictions especially if you’re talking about the major you know the U.S. and U.K. Australia and things like that.

Okay and then quickly we’re going to let you go soon we’re just going to run over what are companies outsourcing okay so what aspects of finance and accounting. What if, what have we got there.

Arnold: Yeah, the most popular ones to start off with which is payroll which is about a third of all finance companies are outsourcing to. So, the reason for this is payroll isn’t a day-to-day transaction it’s very scheduled. So, it’s something that you don’t really need an in-house person to manage but rather outsourcing makes sense.

Derek: Yeah, fantastic and that can take a lot of time and highly repetitive as well which is one of the ideal things to outsource. The next one then and apparently that is 33 percent of the finance and accounting outsourcing. So, the next one then at 23 percent is accounts payable. And so again it’s highly repetitive work, takes a lot of processing. And this is an ideal process that that can be outsourced.

Arnold: The next one is about 19 percent goes to transactional purchasing. This would actually depend on the business model that you have. But if you have an online shopping business then definitely these are the things that you would want to pass on to a third party that could cover you 24 by 7 so you can then focus on other stuff.

Derek: Yeah, right. And that’s 19 percent, I’m not sure if you’ve mentioned that. And then the next one also at 19 percent is accounts receivable which is the opposite to accounts payable, pretty highly repetitive and is a great outsourcing task to be done.

Arnold: Yeah and then the last one is basically General Accounting and the good thing with this one is again if you’re a small business then this is perfect for you. So, you then get to smoothen things out build out the foundations with an expert company to back you up. If you’re a big company then definitely outsourcing an entire department might need you to set a key person to handle everything. But once that is done then it is going to be a smooth sailing afterwards.

Derek: Absolutely. And then I just want to add the final two actually sitting below General Accounting at 10 percent. Is management reporting. And then below that that 9 percent is analytics.

Now I wanna suggest that these should be utilized more. Okay. Both management reporting and analytics and they mean that you as management and the organization have better orientation and guidance and I believe that is invaluable information especially if you enjoy a bit of number crunching and analytics. But this is this can add incredible value to your organization. And actually, these are things which can be done very, very affordably within an outsourcing environment. So, do consider those and I think that’s it for today and thank you very much for joining us. And as ever please refer to our show notes this week we have mentioned a lot of stuff here. And thanks for joining me again. We’ll see you next time.

Arnold: Thanks, Derek

Okay. Hope you got good value out of that episode. If you want any of the show notes go to outsourceacceleratpr.com/podcast/episode34. And if you have any questions about this episode or outsourcing, in general, please just drop us an email. E-mail us at [email protected].