Businesses that seek ways to streamline their accounting and finance processes may have come across service providers offering shared or outsourced accounting services. Naturally, it makes one wonder about the differences between the two and their respective advantages or disadvantages. Most importantly, are they as effective as they claim to be in streamlining the accounts payable (AP) processes? Let’s take a look.
Shared Accounting Services vs. Outsourced Accounting Services: What are they?
Manual back-office tasks can be a considerable drain on your business resources. They disrupt the business’ finance function and decrease the accounts payable efficiency. And while shared accounting services and outsourced accounting services differ from each other, they share a common goal - to expedite these tasks and eliminate redundancy.
Resultantly, both the shared and outsourced accounting models offer the following basic advantages:
- Higher cost saving
- Greater efficiency
- Better AP productivity
- Improved resource utilization
That being said, let us individually take a look at shared and outsourced accounting services:
Shared Accounting Services
Shared accounting : Definition
As the name indicates, shared accounting services acts as an internal business operation or function that serves throughout the organization. It operates on a shared delivery model wherein the shared services (finance and accounting, in this case) get distributed across business units. Apart from the service, the responsibilities and accountabilities are also shared amongst the teams and/or beneficiaries.
- Higher alignment with business objectives.
- Greater reliability and availability.
- Uses systems, economies of scale, and technologies that are compatible with the legacy systems within the organization.
- Custom and cross-functional support.
- Granular control over all the business processes.
- Cultivating a dedicated team that is in tune with business requirements.
- Decreased external spending.
- Room for automation and scalability.
- Involves training, management, and retention of AP teams.
- Inefficiencies can accrue into greater losses.
- It may take a long while to strike the perfect balance of team members.
Outsourced Accounting Services
Outsourced accounting : Definition
Unlike shared accounting services, where a service provider is an internal unit, outsourced accounting services deal with external vendors. In this model, all the finance and accounting tasks are handed over to an external organization.
- Act as a “plug and play” solution to meet instant requirements.
- Service providers may possess greater expertise and experience.
- Utilize best-in-class technologies to tackle routine and repetitive tasks.
- It may be more cost-effective as businesses pay by subscription rates and plans.
- Reduces the capital cost of setting up and maintaining dedicated shared services, finance, and accounting teams and infrastructure.
- It may take a while for the business and vendor to find common grounds.
- Tuning the business goals of both organizations may be an issue.
- Shifting the administrative and transactional processes can incur high costs.
- Competition and conflict of interest may present as an issue.
- Poor integration could lead to fragmented organizational silos.
Potential of Shared Accounting Services
In the long run, shared accounting services are a worthy investment. Since we have highlighted how shared accounting services possess a marginal advantage over outsource accounting, let’s examine the various opportunities offered by shared services accounting.
- Having a dedicated AP team allows experts to focus on finance and accounting, while other team members can focus on their core competencies.
- In continuation with the above point, it also frees up resources and cuts costs.
- Automation of invoicing and settlement allows the organization to pay the suppliers on time.
- As a result of the above point, businesses and vendors can enjoy strong relations.
- Standardization of the invoice and transaction processes introduce uniformity, which can streamline operations.
- Greater control over AP team performance and improved and periodic reporting.
- Centralization of the shared services (finance and accounting) ensures higher data availability, reliability, and in real-time.
- Shared services accounting grants higher scalability and agility to business.
Smarter Shared Accounting Services - How can Docsumo help?
As per the popular advice on CFO.com, reliable shared accounting services must possess the following characteristics:
- First contact resolution with the help of financial experts.
- Quick and easy reporting to the CFO or any other finance executives.
- Increased and improved handling of end-to-end tasks.
- Greater ownership, accountability, and governance of pan-business processes.
- Centralized models for high value shared services, finance, and accounting delivery.
- Integration of the latest technologies, such as RPA (robotic process automation), AI (artificial intelligence), cloud computing, etc.
Docsumo offers all of the above and more! We provide AI-powered, cognitive, end-to-end automated shared services accounting that takes shared accounting to a whole new level. Our shared accounting services can eliminate inefficiencies in your finance and accounting processes in no time.
The centralized data processing center utilizes RPA to collect invoice data and make this information readily available in real-time. Resultantly, your AP teams are no longer caught in copy-pasting and manual data entering jobs. At the same time, the AI machinery processes these invoices, thereby reducing any human or clerical errors. The human component in the process is primarily for validating financial transactions.
It becomes apparent from the functioning explained above that such shared services accounting systems ensure higher data fidelity. Resultantly, all your accounting and finance operations are less prone to errors and miscalculations. The human intervention through the system of checks and balances also ensures that no errors creep into the system.
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