Technology infused disruption has been rapidly rising in many industries over the past several years with Uber and Netflix providing solid examples in full view. While the back office has never been in “full view”, we are seeing evidence of technology disrupting the controller’s office (lower end of the middle market) in the form of total business process outsourcing of all work done by the controller and the direct reports to the controller – in summary, if you don’t want to build and maintain a finance department – outsource it! Why is this happening now?
- Fear Abated – Cloud hosted financial package and reporting solutions are now accepted as “safe” and offer better security and system back-up solutions.
- Headache Eliminated – Recent studies have shown that CFO’s have expanding, cross functional responsibilities causing bandwidth conflicts with the time spent building processes, managing teams and addressing issues within the internal finance department. While the outsourced solution does not eliminate these issues, it limits them, creating more mind share CFO focus on customer, vendor and employee facing value added initiatives.
- Talent Shortage – Shortage in the market for A-player talent at the controller and senior accountant levels and the lack of a definitive career track for finance professionals within middle market companies makes it difficult and/or expensive to hire and retain the talent.
- Internal Control Issues – Control and segregation of duties limitations are mitigated with outsourced solutions.
- Speed – For acquisition oriented buyers of carved-out entities or acquirers’ of family businesses with limited finance infrastructure, the outsourced solution offers a faster path to PE standards – our estimate is a time savings of 9 months.
Controllership and reporting process outsource providers specializing in vertical industry niches are the most successful as they leverage industry expertise to provide real value to their customers.