The global market for Finance and Accounting Outsourcing estimated at US$43.1 Billion in the year 2022, is projected to reach a revised size of US$68.8 Billion by 2030, growing at a CAGR of 6% over the analysis period 2022-2030.
The Finance and Accounting Outsourcing market in the U.S. is estimated at US$19.4 Billion in the year 2022. China, the world’s second largest economy, is forecast to reach a projected market size of US$2.7 Billion by the year 2030 trailing a CAGR of 7.5% over the analysis period 2022 to 2030. Among the other noteworthy geographic markets are Japan and Canada, each forecast to grow at 5.1% and 5.4% respectively over the 2022-2030 period. Within Europe, Germany is forecast to grow at approximately 5.4% CAGR
— Finance and Accounting Outsourcing: Global Strategic Business Report by Research and Markets
Accounting outsourcing is clearly on the rise!
Playing a pivotal role in the business landscape across industries, accounting outsourcing has come a long way since its beginning in the late 1980s. Starting with basic, low-end tasks in accounts payable and accounts receivable, it has grown to a full-fledged industry now involving the outsourcing of high-end, decision-making processes including book closure, financial analysis and planning, tax planning, management reporting etc. Outsourcing considerations have also evolved — cost reduction used to be the primary reason for the outsourcing of accounting services. Evolving to meet the changing demands of businesses across industries, accounting outsourcing today meets business demands of real-time technological upgradations, international expertise, real-time reporting, compliance management, and of data security and privacy concerns. Accounting firms and companies offer process transformation and optimization, global reach, and agility in an increasingly disruptive world.
In this blog, we will delve into the current trends, challenges, and way forward for the accounting outsourcing industry. It will talk about how to mitigate those challenges and prepare for a fast-evolving world.
Accounting outsourcing – current trends
Let us first evaluate where the accounting outsourcing industry stands today:
- Global complexities such as cross-border financial transactions, currency fluctuations, diverse financial and tax regulations for businesses with international operations are making bigger demands of compliance and risk mitigation from accounting outsourcing providers
- Advanced technology such as AI, ML, cloud-based accounting solutions are fast becoming the norm in every accounting support requested by companies
- The biggest fallout of advancements in technology is increased data security threats. Outsourcing of accounting in the modern day is necessitating investments in high-end cybersecurity measures and compliance frameworks
- Accounting outsourcing firms have been offering tailor-made solutions to meet industry-specific needs clients across healthcare, real estate, e-commerce, manufacturing, shipping and logistics businesses
- Growing environmental and social responsibility concerns are leading to an increased focus on sustainability reporting. Outsourced accounting experts are assisting businesses in incorporating sustainability metrics into their financial reporting
Factors and benefits that have contributed to the growth of accounting outsourcing
- Cost arbitrage from lower staff costs, infrastructure spending, tech investments
- Increase in productivity and efficiency from optimized operating models plugged with digital and automation levers
- Easy availability of qualified and skilled resources across domains, technology, and international operations
- Expertise in fraud prevention and compliance, and changing financial laws
- Robust cybersecurity mechanisms to protect data
- Informed decision-making with up-to-date, real-time insights
- Business continuity in the event to disruptions whether natural or political
Challenges and risks in accounting outsourcing
Accounting outsourcing offers numerous benefits, but it also comes with its fair share of challenges and risks:
- Sharing sensitive financial data with a third-party provider pose security and privacy risks
- Maintaining consistent quality in accounting processes can be a worry
- Outsourcing to offshore providers may lead to language and cultural barriers, which can result in miscommunication or misunderstandings
- When accounting functions are outsourced, businesses may have less control over their financial processes
- Businesses can become overly dependent on their outsourcing providers
- Ensuring compliance with financial regulations and tax laws is complex, and outsourcing providers may not always be fully aware of the specific requirements of a client’s industry or location
- Over time, the in-house accounting team may lose institutional knowledge about the company’s financial history, which can be challenging when making strategic financial decisions
- Internal staff may resist outsourcing, fearing job insecurity or disruptions to established workflows
The above challenges can be easily mitigated with the help of a comprehensive strategy that includes:
- Selecting a good accounting outsourcing partner with a strong and credible reputation
- A thorough due-diligence process that takes into accounts process requirements, and maps resources and deliverables accordingly
- Clearly defined service level agreements with respect to delivery timelines and quality, governance framework
- Well-defined change management roadmap
- Planned and phased transition to protect process health, with thorough process documentation and process maps
Which companies have been acing the world of accounting outsourcing?
Genpact, EXL, Capgemini, Accenture, Wipro, TCS, Infosys, HCLTech, WNS, Datamatics, CES, IBM, Deloitte, Conduent, Sutherland, Exela Technologies etc are some of the key players in the accounting outsourcing industry.
As per the Finance And Accounting Business Process Outsourcing Market Size, Share & Trends Analysis Report By Service, By Enterprise-size, By Vertical, By Region, And Segment Forecasts, 2023 – 2030, by Grand View Research, “The Order-to-Cash (O2C) segment accounted for a market share of 54.5% in 2022”, and “The Procure-to-Pay (P2P) segment is anticipated to grow at a CAGR of 9.2%.”
Take a look at the graph showing the market segmentation predictions until 2030.
Next leap for accounting outsourcing providers
Market disruptions are an everyday occurrence now!
Innovation driven by tech advancements are constantly pouring in. In the ever-evolving frenzy, several promising areas of growth and innovation are emerging. The integration of artificial intelligence and machine learning is redefining how organizations are working with their processes and looking at their data. Further, the tech tools are empowering them to build focused products and solutions for their customers. Accounting outsourcing services, for such organizations have to keep pace with scalability, regulation changes, governance considerations, and sustainability commitments.
Outsourced accountants, firms and companies, therefore, have to gear up and stay ahead across all these parameters. This will enable them to feel the pulse of their client’s accounting processes, and help them redesign operating models that are agile, flexible, and futuristic.
About the Author:
Stacey Howard is an accomplished blogger with over decade of experience in the field of accounting and bookkeeping. With her extensive knowledge and expertise, she has been working as an accountant at a leading outsourced accounting firm Cogneesol. Throughout her career, she has developed a passion for sharing valuable insights and information on various accounting industries through her engaging and informative write-ups. Her contributions to the accounting community have been widely recognized, making her a sought-after expert in the field.