It’s indeed a tough affair to compare shared services and outsourcing for accounting and select the best one for your business requirements. Finance teams are constantly under pressure to perform at a desired speed in an organization.
Whether it’s invoice processing, bookkeeping, accounting, and a lot more, back-office tasks are tedious and time-consuming. That said, the business owners are consistently looking for opportunities to make their finance departments productive and efficient.
In a way to offload repetitive back-office activities, most of the industry leaders are now stuck between two possible options – shared service centers (SSC) and business process outsourcing (BPO) services.
But, there’s nothing to worry! We have done the homework for you.
This post highlights the primary factors to compare shared services and outsourcing and implement what works for your business. However, before you go ahead with differences, let us clear what are shared services and outsourcing models and what are the similarities between them.
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What is Shared Services Accounting?
A shared service center or shared services are an organization’s internal functional model that allows centralized delivery of shared processes and functions across all the business units. That said, a shared services accounting model if implemented in accounting functions, can help with accounts payable processes of all the departments that come under a particular business. It shares all the responsibilities of the shared services organization and its customers and is accountable for all the undergoing tasks.
What is Outsourcing accounting model?
Unlike the accounting shared services model, outsourced accounting involves third-party, external vendors to handle back-office tasks such as invoice processing, payment approvals, supplier payments, and more. All the accounts payable processes will be outsourced to an external organization, freeing up the AP team to focus on their core competencies.
Factors to Compare shared services and accounting
Even though the approach to offloading accounting tasks is different in shared services and BPO models, they are equally effective in reducing manual back-office tasks and improving workforce productivity.
Therefore, you need to carefully examine the following factors to compare shared services and outsourcing.
1. Business objectives
If your business objectives are something that you cannot explain to anyone else outside your organization, the shared services model is a go-to solution for your business. Being an internal functional unit, shared service can better understand your business objectives and delivery results accordingly.
In contrast, you would have to significantly invest your time and probably resources while shifting your back-office tasks to an external organization, while making them understand how your business works.
2. Implementation needs
In case you are under pressure with highly time-consuming and unproductive AP workflows, outsourcing accounting can be a good fit for your business. Top BPOs employ advanced technologies, organized workflows and systems, and scalable strategies that tend to manage mundane back-office and accounts payable processes like invoice processing.
An accounting shared service model, on the other hand, may not cater to rigorous environments when required.
3. Time and Budget Constraints
It’s a clear win for the outsourced accounting model when it comes to saving on expenses. External organizations charge only for managing back-office activities. They employ their own resources, workforce, and infrastructure to deliver high-quality results. Moreover, their pricing structure is variable. It adjusts itself as the processes keep improving in the organization.
A shared services model would instead rely on internal resources and even more from your side to work. Moreover, all your resources will be committed to the shared unit for a limited amount of time so that it can make improvements in the AP processes. It is possible that you need to invest more in the shared services model so you can get work done on time.
However, if time is a critical constraint in your business model, outsourced accounting may hamper your AP processes. Since the model takes time to improve and involves a higher initial investment, the results can be a little delayed. In such cases, the shared services accounting model fits perfectly into the big picture as you get your processes done in the said time frame. Further, the returns are visible after a fixed duration.
To compare shared services and outsourcing accounting , both the models have their own advantages, most of the businesses prefer employing smart shared service centers in their organizations. The reason being custom business requirements, complete control over processes, and highly competitive spirits that help them stay ahead of their competitors.
Employ Cognitive Shared Services Model with KlearStack
KlearStack is an intelligent document processing software that integrates cognitive data capture capabilities with AI-enabled decision making support to ensure fast and accurate data extraction from the documents. The ability to learn and get precise with use makes KlearStack capable of contextually understanding and interpreting documents (invoices), freeing up the AP teams’ task of cross-verification and validation.
The AI text recognition feature in shared services model, therefore, enables faster invoice processing, timely supplier payments, and a consistent business reputation.
To know more about how KlearStack can help you scale with shared services, book a free consultation call with us.