A Snapshot of 2022 First Half – US and UK Outsourcing Finance and Accounting Industry

Benefits of Outsourcing your Finance Function

July 15, 2022

Benefitting Break-Even Point (BEP) in Payroll Services

August 31, 2022

In a bid to thrive post-pandemic, since the beginning of 2022, outsourced Finance and Accounting companies are positioning themselves for a new growth opportunity - by curtailing expenses, accelerating digital and advanced technology solutions, and leveraging a sustainable environment.

However, operating in the same way with different market conditions and trends isn’t viable for the intended growth. In this scenario, the change within the US and UK Finance industries is inevitable.

US

Finance and Accounting Outsourcing is estimated at USD 43.1 billion in the year 2022, and is projected to reach a size of USD 53.4 billion by 2026. The US holds the largest market share of 45.7% in the global market, growing at a CAGR of 5.9% over the analysis period.

Amid the Covid-19 crisis, the US government focused on privacy and security, and enforced protection laws that directly applied to outsourcing agreements by Federal Trade Commission (FTC), including Fair Credit Reporting Act implying on customers, and in some cases, suppliers too. For example, the New York State Department of Financial Services enacted cybersecurity requirements for financial services companies via the State of New York Cybersecurity Regulation (that is, 23 NYCRR 500); and the State of California has implemented privacy protections for consumers in California Financial Information Privacy Act.

From a worker’s viewpoint, every employee endears their payday, but what if when you wake up and you find it disappeared from your bank account? In July 2022, an identical incident of payroll error occurred by an accounting firm’s payroll provider, ADP, affecting 55,000 employees of the giant, EY. The rare error highlighted the reliance of large companies on technology and the impact on customers and employees when systems fail.

Today, businesses are optimising huge transactions and cash flows to reduce reconciliation and revenue leakages. Over the forecast period of 2022-2027, artificial intelligence in the Accounting market size is expected to peak at 30% of CAGR , and is slated to reach USD 53,893 million by 2030. To work smarter, there is a rise in the need for artificial intelligence to improve accuracy, with a decrease in human inaccuracies, like spending less time discovering, tracking down, and correcting errors.

UK

According to the Office for National Statistics, Brexit resulted in a steep ascent of UK inflation to 9.4% in May 2022, creating a huge job vacancy crisis in the UK. “Staff and operational moves across European financial markets will continue as firms navigate ongoing geopolitical uncertainty, post-pandemic dynamics, and regulatory requirements,” commented Omar Ali, EMEIA Financial Services leader at EY, on the economic consequences. The Big Four firms have confirmed that more than 12,500 jobs in the finance service sector alone have moved from London to the European Unit (EU), which also led the EU to face negative consequences, such as losing one-sixth of its economic power, and a huge share of foreign and security policies.

Every business seeks out additional resources to increase profits when it touches the point of growth. The case here: one of the UK’s largest software firms, IRIS Software Group. The Group acquired Ireland’s premier payroll services provider, Paycheck Plus, to expand its Irish Footprint. David Lockie, Chief Operating Officer at IRIS says, “Paycheck Plus joining the IRIS group adds further scale and growth to the IRIS managed payroll offerings in Ireland. As the premier payroll provider in Ireland, Paycheck Plus has an unrivalled market reputation, and its significant achievements in the last 17 years reinforce a strong synergy between our cultures.”

The financial services industry is regularly changing its ‘engagement model’ after the revamped IR35 avoidance rules, helping organisations to follow and confirm the off-payroll services working rules. To avoid the misuse practised by the contractors in the interests of minimising their employment tax liabilities, HM Revenue and Customs’ off-payroll services commenced sending their teams to the firms to seek information on IR35 compliance procedures, confirms the Institute of Chartered Accountants in England and Wales (ICAEW).

The Russia-Ukraine conflict made a huge impact on financial sector’s outlook, and brought high inflation on the cards. The oil and gas, metals and mining, and construction sectors’ growth is majorly hobbled, but the financial services sector is way far from losing its immunity. However, the long-term implications are never predictable. The financial reporting, digital payments, and accounting-related activities of the financial services sector can experience a severe economic downturn.

The global financial advisory services market was valued at USD 79.4 billion in 2020, and is projected to reach USD 135.6 billion by 2030, growing at a CAGR of 5.8%. The specific segment that plays a major role in the growth is the corporate finance services segment, where many firms are optimising their business operations and strategies. To strengthen their position in the global financial advisory services market, companies including Accenture Inc., Bank of America Corporation, Citigroup Inc., Credit Suisse Group AG, Goldman Sachs, JP Morgan Chase & Co., Morgan Stanley, Northern Trust Corporation, PwC, and Wells Fargo introduced various business strategies.

Conclusion

In the coming years, Outsourcing Finance and Accounting Services will move ahead from the old pricing patterns and practices to dominantly adopting automation initiatives. The future is unpredictable, however, the new chapter for the financial services sector is already underway with improved competitive strategic plans and prudential outcomes.

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