• Especially for web
• Brief news
• Main
• Law digest
• In our opinion
• From problem to solution
• Our nearest neighbors
• Market breakdown
• RS poll
• Q & A
• Oh, how spacious is my native country
• Culture & customs
• Winter Olympics in Sochi

How to choose a financial outsourcer

June 2011

Tatyana Vinokurova
Head of Subscription service
department ICLC

- Tatyana, what advice would give companies thinking about which outsourcer to choose? What kind of companies do you think can benefit from these services?

- Well, strictly speaking a carefully selected package of financial outsourcing services can benefit any kind of company; especially if the management want to cut down on the cost of hiring in-house financial experts. However, some companies can’t adequately assess the pros and cons of outsourcing their financial function. It may be the case that if a company has to conduct a large number of financial transactions on a daily basis it won’t make much sense for it to get rid of its financial department and outsource all of its financial services.

I often come across people who believe that financial outsourcing is not an option for companies that have complicated industry-specific financial accounting systems as they need experienced experts with specialised competencies. However, from what I’ve seen, it would appear that this conclusion doesn’t always hold true; a good financial outsourcing company will often employ experts with highly specialised skills. For instance, construction companies often buy financial outsourcing services even though they have rather complicated and highly specialised accounting systems.

- It really does sound surprising that companies with highly specialised accounting systems do not shy away from shedding their in-house financial staff.

- In actuality it’s probably the complexity of specialised accounting that prompts managers of these companies to outsource their financial function. The main benefit of a good financial outsourcing firm is flexibility; in the event of a controversial situation a good financial outsourcing firm can always find the right expert for the job, while a company employing staff financial specialists may need significantly more time to find the right person. Furthermore, a good outsourcing firm will usually have an entire team of experts and not just people well-versed in the technicalities of book-keeping and accounting. Such a team will include legal experts, tax consultants and many other specialists who can come to the rescue if the team runs into difficulties in its work. My advice is that when negotiating with a financial outsourcer you should find out whether the services of such specialists are included in the fee.

- In other words, financial outsourcers may charge extra for the services of such specialists?

- Yes they can, especially when more in-depth analysis is needed, for example in situations where there is lack of applicable regulations or legal precedent, or in which past court decisions lack consistency, in other words whenever the work that is called for exceeds the standard services.

- What does a potential customer need to look for in the draft financial outsourcing contract offered by an outsourcer?

- First of all it’s important to understand that a financial outsourcer cannot insist that the customer sign the standard contract. If the outsourcer keeps insisting on the standard contract it’s usually a sure sign that something is off. Financial outsourcing is a very complicated service that by definition has to be customised to meet the specific needs of each client. Secondly, the contract must clearly define the amount of responsibility assumed by the outsourcer. The contract must list the services that the outsourcer will be providing. Naturally, every single job may not be spelled out in detail but the obligations of the outsourcer must be clear from the contract. It’s no good if the contract is filled with overgeneralised phrases like ‘the responsibility of the Contractor is defined by the current law’. The customer must have a clear understanding of what they’ll be paying for and what procedure must be followed to resolve conflicts.

- Would you say that how well an outsourcer is known in the market is a good indicator that they would make a good choice?

- Not necessarily. You can’t really say if a company is constantly giving interviews for the mass media or is putting advertisements in every possible outlet that it would be a good predictor of the quality of their services. However, on the other hand, this sort of activity probably indicates that the company has a good position in the market and that when they’re making comments for the mass media they are confident about their professional opinion.

- How can a company decide if they should outsource all of their financial services or just some of them?

- As a rule in the case of a large company the best course of action is to keep rank and file book keepers on staff while outsourcing the functions of the chief accountant. Nine times out of ten small issues will be better dealt with by in-house staff.

- Can a high price be regarded as a guarantee of good quality?

- Naturally high prices don’t always translate into good quality. Nevertheless, large companies that strive to provide better services usually tend to charge higher fees because better services mean that they have to hire not only accountants but also tax consultants and legal experts, which inevitably drives up the bill.