Learn All About Recent Financial Outsourcing Trends In Detail

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September 12, 2023 Anuja Maniyala Financial Modeling, Knowledge

Have you heard of Financial Outsourcing Trends in recent times? If yes, that’s because of the growing need for outsourcing facilities in the financial sector. Many companies chose and have started availing services of outsourcing firms. Outsourcing allows companies to focus on key areas other than the finance department. Not just that, they get the opportunity to explore the latest technological facilities through the picked third party. Today, you will learn about the different kinds of financial services outsourcing in this article.

Let’s first understand why organizations outsource financial services. Some of the common reasons to outsource financial responsibilities are mentioned below.

An outsourcing partner has the latest and advanced technology to carry out the financial services of their clients. So clients get access to benefit from state-of-the-art infrastructure when they sign up for outsourcing facilities.
In-house teams have limited knowledge and experience in handling financial duties. Whereas the employees from an outsourcing firm are experts in the industry. They have a lot of knowledge about the changing trends and rules as they continually acquire skills and information to offer the best services to their clients.
Outsourcing firms have experts from the industry. This means they have employees who work efficiently and quickly. They complete the projects within the deadline. An in-house team may not be able to finish the tasks on time due to having additional responsibilities.
The companies can use the saved time to focus on other areas and improve the weak spots for their growth. They can dive into other departments or dedicate their time on new projects like the introduction of innovative products into the market or enter a new geographical space to establish their mark.
The employees of the in-house team experience relief from financial services as it encourages them to dedicate their complete focus to other crucial areas. In simple words, their workbasket becomes lighter with the interference of outsourcing staff members.
Organizations can save money on training and other recruitment-related tasks. The team members of the outsourcing firm are well-trained and experienced. They don’t require any kind of training sessions to start working. The costs related to training, hiring, and screening can be utilized for investing or other beneficial aspects for the company.
Most importantly, the operations will be performed as per the rules and regulations set by the authoritative bodies. Thus, eliminating the scope for negative legal consequences and promoting adherence to standards.

Types of Outsourced Financial Services

Before we learn about the Financial Outsourcing Trends, it is crucial to gain knowledge about the varieties of financial operations that are outsourced. Some of the most common outsourced financial services are listed below:

Accounting services
Sector-Wise Financial Service Outsourcing for
- Insurance companies
- Real Estate
- Banks and Lending Institutions
Investment Management
Unit Pricing and Custody
Claims Payment and Underwriting
Financial Controller Services
Financial Analysis

Accounting Services:

These services are availed by almost every company without an accounting department. This kind of service involves the recording of business transactions. Subdivisions of this category are as below:

Bookkeeping: The recording of financial transactions of the business in ledgers is called bookkeeping. This function requires the employees to prepare various reports such as financial statements and source documents.
Management Accounting: The process that is introduced to let the management make informed decisions through analyzing and measuring accounting data is management accounting. The management accountant has the responsibility to monitor sales, budgets, and costs to meet the future goals and needs of the company.
Tax Accounting: This function is related to the preparation of tax payments and returns. Its purpose is to find out the utilization of business funds and its eligibility for tax deductions.
Accounting Audit: It is nothing but checking if the company’s accounting procedures are carried out as per the laws and regulations laid out by the regulatory departments. The primary duty of the auditors is to investigate the records to find errors and fix them.
Forensic Accounting: This form of accounting is to conduct an investigation in the finance department to assess their nature. In simple words, it is to identify financial crimes and take action accordingly.
Payroll Services: This operation is not outsourced by all companies. However, a few organizations reach out to outsourcing entities to perform payroll services. The individuals from the payroll department deal with employee tax, salary computations, and other linked functions to check if they comply with labor laws.
Statutory Compliance and Reporting: Government bodies get involved in this kind of operation. The staff members handling statutory reporting and compliance must submit financial documents to regulatory authorities like the state, regional, or federal agencies. The ultimate goal is to ensure that every financial activity of the business is in compliance with laws and regulations.

Sector-Wise Financial Service Outsourcing

Lending institutions, banks, real estate businesses, and insurance companies also contact outsourcing firms for delegating a range of financial services. Some of them are listed as per the industry they operate.

Insurance Companies

Policy management: The insurance industry mainly deals with policy management which involves a variety of tasks like policy issuance, renewals, and checking. All these tasks are time-consuming which is why a few insurance companies outsource these services. Delegating the policy-linked responsibilities to experts in the industry will save money, time, and effort alongside reducing risks for the insurance companies.
Claims administration: Claims processing is not an easy task. It revolves around handling appropriate settlement releases and reporting claims. Insurance entities choose to outsource these services to reduce their overhead costs.
Insurance Data Services: Data processing and entry work are two main functions in the insurance industry. Outsourcing these services allows the insurance employees to breathe, letting them handle only the core functions.
Annuity Services; Annuities are those financial products that transform customers’ purchase agreements into regular payments to provide them protection during their retirement. These are customized vehicles driven as per the requirement of the client; legacy planning, spousal protection, etc.,
Insurance Productivity Tools and Software: Just like any company, an insurance entity runs with the help of certain productivity tools and software. Insurance companies usually outsource these operations to streamline them with the help of third parties that use advanced technologies.
IT Support: Technical support is the heart of any company’s operations. It allows organizations to adapt to the evolving marketplace and its ever-expanding pools of data. An efficient and dynamic outsourcing partner will have an eye on the amendments to the regulations and practices to create IT strategies to assist insurance companies to meet their objectives.
Call Center Support: An insurance company depends on call center support to market their products, share information on insurance renewal dates, and in some cases, offer health advice to their clients.
Consulting: Insurance covers different areas like auto, life, and health. Their main reason for existence is to help potential and existing clients recognize their insurance needs, offer required suggestions and information about premiums and policies alongside preparing quotes.
Operations Management: Smooth running of insurance operations is only possible when the insurance company has the best operations manager to assist them. Outsourcing operations will allow the entity to avail efficient manager’s assistance.

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Real Estate

Virtual Assistants: Handling crucial real estate activities like calendar management, appointment scheduling, and data entry is very important in the real estate sector and is done by remote workers. A few of them also deal with social media accounts.
Property Management: The responsibilities of a project manager include overseeing commercial, retail, and residential properties along with collection of rent and organization of advertising, repairs, and maintenance.
Sales Support: Sales teams virtually help the real estate agents with the work related to the road. They also get involved in booking inspections, delivering proposals, arranging meetings, and everything required for the agent to complete the assigned tasks.

Banks and Lending Institutions

Fresh Customer Acquisition: Some lending institutions including banks contact third parties to take over customer acquisition. Such decisions result in the creation of sustainable acquisition strategies and processes alongside keeping up with the industry standards to gradually grow and acquire new clients in an easier way.
Account Servicing: Banks and lending entities seek the help of outsourcing firms to resolve customer problems, manage client accounts, and act as a link between clients and organizations in this outsourcing venture.
Commercial and Consumer Lending: A few financial institutions avail of commercial and consumer loan-linked services from third parties to promote compliance of debt-based funding with laws and regulations.
Back Office Process Management: This is one of the common services outsourced by banks and similar financial institutions. Administrative tasks are assigned to outsourcing entities to allow management to shift its focus from administrative roles to core roles for the improvement of the organization’s efficiency.
Higher-Value Functions: Capital management, regulatory returns, forecasts, and budgets are categorized under higher-value functions but these are rarely outsourced.

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Investment Management

Businesses and individuals can outsource investment-linked services to avail of personalized strategies for the effective management of financial investments and assets. The duties of the professional are dependent on the investment needs and requirements of the clients. Investment managers usually assist their clients with stock selection, asset allocation, and portfolio management.

In the business sense, investment management is an activity to ensure that the company’s assets are well maintained and maximized. Majority of the insurers and fund managers outsource this kind of service to outsourcing partners to attain the best results from their portfolios without wasting too much time and money.

Unit Pricing and Custody

Comparison of prices is essential for customers as it facilitates easier decision-making. Merchants take up the responsibility to offer unit prices to customers for the same. Many times, custody arrangements and setting unit prices are outsourced to reliable and established third parties

Claims Payment and Underwriting

Underwriting and Claims payments are services that are commonly outsourced by businesses. Underwriting is a concept in which an organization or individual takes up financial risk through a loan or an investment. Insurance entities give the freedom of processing insurance claims to outsourcing providers. In some cases, they also request third parties to handle underwriting risks on their behalf

Financial Controller Services

It is one of the most outsourced functions. Financial controllers supervise the accounting activities of a company to ensure all financial transactions are correctly loaded in the form of ledgers. They also handle tax reporting and insurance.

Financial institutions prefer outsourcing financial controller services instead of hiring a group of people. By doing so, they can pay attention to their core competencies without worrying about tax reporting and record-keeping functions.

Financial Analysis

Believe it or not, many companies conduct financial analysis before taking off their businesses. Most companies outsource financial analysis to third parties to assess economic trends, make financial policies, identify new investments or projects, and then direct the business toward success.

The financial analysis benefits investment finance and Corporate finance settings. Analysts take up the duty to review a company’s financial statements to assist fund managers curate business strategies or help investors in picking the most fruitful investment opportunities.

Famous Financial Outsourcing Trends

There are many Financial Outsourcing Trends that showed up in the financial industry. However, only a few Financial Outsourcing Trends helped companies achieve the desired outcomes. They are explained for your reference.

Real-time accounting and finance
Secure audit preparation
Advanced financial modeling
Highly-sophisticated automation
Personalized accounting and finance service packages

Real-time Accounting and Finance:

The finance and accounting industry keeps moving into the digital world to maintain financial reports and record all transactions. Fully integrated accounting platforms allow accountants to easily update company books with the latest transactions. The availability of the latest financial information promotes quick decision-making for the management.

Secure Audit Preparation:

Monitoring audit trails is important. Accounting software or document management programs can replace paper-based financial databases. This kind of advancement makes the performance of financial statement audits easy for the company.

Advanced Financial Modeling:

The advancement in technology has made the lives of financial and accounting experts easier to create reliable financial models. The absence of accurate and timely cash flow forecasts can attract problems for your company in the future, which is why financial modeling methods have to be adopted. Financial models take a range of inputs to produce estimations about future opportunities and outcomes. Thus, facilitating the management to plan accordingly.

Highly-sophisticated Automation:

It is a fact that companies that are resistant to the adoption of automation will encounter disorganization, miscommunications, increased employee involvement, and slow processes which will ultimately attract burnout. It means your company may have to incur increased operational costs and deviation from core functions. Artificial intelligence and machine learning are some of the latest concepts in the Financial Outsourcing Trends. For example, availing of an AI’s help to perform data analysis may result in the identification of market threats and derive insights for the improvement of the company’s performance. Replacing traditional accounting methods with Financial Outsourcing Trends will eliminate the dependency on manual financial processing.

Personalized Accounting and Finance Service Packages:

Previously, there were firms that only offered complete or no finance and accounting services packages at all. But now, the scenario has changed, the outsourcing firms are understanding and flexible to create customized packages for all. This kind of service encourages companies to come forward and choose the required services only. This approach is beneficial to companies as they can avoid overpayment and maximize their accounting department’s value. A few organizations may require the assistance of a CPA to deal with their taxes while the rest may require long-term financial forecasting and financial leadership.

Things were different in the past, companies hired familiar faces to do their accounting jobs; people who visited the office regularly. But now, the advancement in technology has made businesses trust third parties for outsourcing. Companies are availing of the services of professionals even if they have not interacted with them in person. Globalization has paved the way for many Financial Outsourcing Trends allowing every company to select experts as per their finance and accounting needs.

Ways to Choose the Best Financial Services Outsourcing Provider

Finding reliable outsourcing partners is crucial as they affect the outcomes of your company. Here are a few tips to choose a third party that can efficiently follow and implement Financial Outsourcing Trends.

Only experienced professionals can handle any challenges in the finance and accounting department. They can utilize their expertise to identify the root causes of the problems and resolve work on them. Check for references from known people and sign a contract with a service provider who has a good number of experience in the industry.
The chosen service provider’s corporate values must align with those of your company. When an outsourcing party understands your vision and mission, they can create and implement strategies to improve your growth opportunities.
Use LinkedIn to your benefit. Reach out to the potential outsourcing partners’ profiles and interact with them. Read the bios of top leaders of the organization to verify their backgrounds.
Technology plays an important role in carrying out the finance and accounting operations. Ask the service provider about their infrastructure; software, hardware, and systems. Advanced systems are mandatory to efficiently and quickly finish tasks.
Pay a visit to the service provider’s office to review their office premises, culture, and values. Who doesn’t want to associate themselves with highly ambitious and professional entities? None.

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Conclusion:

Many companies have started outsourcing their operations to third parties for various reasons. Delegating the work of finance and accounting services to outsiders has become a new trend in the industry. That’s because of the usage of the latest technologies and strategies to efficiently and quickly complete the assigned tasks. No wonder many Financial Outsourcing Trends are now ruling the market. Some of the common reasons to outsource financial services are cost-savings, reduced time, applicability of the latest technology, availability of expert advice, and compliance auditing

Different companies opt for different financial services as per their requirement from the outsourcing partners. Some of the commonly outsourced services are listed below.

Accounting services
Sector-Wise Financial Service Outsourcing for
- Insurance companies
- Real Estate
- Banks and Lending Institutions
Investment Management
Unit Pricing and Custody
Claims Payment and Underwriting
Financial Controller Services
Financial Analysis

Companies usually choose outsourcing financial services as they get to experience the famous Financial Outsourcing Trends which are

Real-time accounting and finance
Secure audit preparation
Advanced financial modeling
Highly-sophisticated automation
Personalized accounting and finance service packages

Finding an outsourcing partner may seem difficult for new businesses. But it is an easy task; all you have to do is pick companies with good experience in the industry, understand their corporate values, perform a background check, inquire about the technologies used, and visit their office to know their working culture.

FAQs

Q. What are the current Financial Outsourcing Trends in the market?

The trends in financial services outsourcing are real-time accounting and finance, secure audit preparation, advanced financial modeling, highly-sophisticated automation, and personalized accounting and finance service packages. Many more creative solutions and services are on the way to help businesses grow.

Q. What kind of services can I avail of from a financial services outsourcing provider?

The outsourcing parties offer a range of finance and accounting services. All you have to do is pick the services you require. Commonly offered services are shared below.

Accounting services
Sector-Wise Financial Service Outsourcing for
- Insurance companies
- Real Estate
- Banks and Lending Institutions
Investment Management
Unit Pricing and Custody
Claims Payment and Underwriting
Financial Controller Services
Financial Analysis

The outsourcing partners offer personalized packages so that you choose services as per your requirement. You may also pick a single service or a whole finance and accounting services package.

There is no obligation to avail of the complete package from service providers who are flexible in offering assistance to their clients.

Q. Isn’t it a costly affair to seek professional help from a financial services outsourcing provider?

No. That’s because you save money on training, retaining, screening, and other employee hiring process-related activities. You can utilize the same on new projects like introducing innovative products and services into the industry or expanding your business in other parts of the world.

Author: Anuja Maniyala

Anuja Maniyala is a intern at IIM SKILLS. She worked as a creative content writer for AADOX and Quoteslyfe in the past. She has identified her passion for writing after working as a banker in some well-known companies like Wipro and HSBC. Her current target is to become an author of a unique and creative self-help book. Her enthusiasm and curiosity to learn about the human mind and behavior makes her different from the rest of the world.