Recruitment Process Outsourcing (RPO) is growing, with its market size valued at USD 6.71 billion in 2021, and projected to reach USD 19.96 billion by 2028, at a CAGR of 18.2% over the forecast period. Meanwhile, the global markets are seeing high inflation rates, at 7.7% in the US and 11.1% in the UK, as of October 2022. As a result, many Chief Financial Officers (CFOs) anticipate economic recession amid the rising prices. The International Workplace Group (IWG) Annual CFO Survey reveals that 91% among a sample group of 250 senior financial executives believe it is inevitable, and 36% foresee its occurrence within 2023. These views are supported by the Deloitte CFO Signals 3Q 2022 Survey, which had nearly half (46%) of its respondents express their expectations of a recession in the US economy by 2023. (Fig. 1)
Source: Deloitte CFO Signals 3Q 2022 Survey
CFOs who believe a recession is approaching are taking a proactive stance towards preparation. As the CFO Signals Survey elaborates, “the most-often cited step is reducing or closely managing operating expenses. Most CFOs’ actions to prepare for a possible recession revolve around talent - controlling headcount, limiting hiring, and increasing productivity, for example. Several CFOs are revising their capital expenditures to determine whether any areas of spending could be reprioritised, deferred, or reduced.” This widespread push towards cutting costs positions offshore accounting and back support services as an astute alternative to having an in-house finance and accounting (F&A) function. Read on to explore the current challenges faced by CFOs, their response, and how offshore accounting and back support services can help cut costs for companies in today's economy.
While the primary motivation behind the current cost reduction trend is preparation for an anticipated recession, CFOs are also under pressure to elevate their businesses’ finance operations, particularly in light of lessons learnt during the Great Resignation. The CFO Signals Survey explains:
“The challenge has not necessarily been doing more with less, but rather, doing higher-value work in a smarter way.”
The need for greater productivity at lower costs has prompted most of the CFOs surveyed by Deloitte to increase investment into two key categories:
Over half the respondents are looking closely at bolstering their company’s financial planning and analysis. Considering a possible recession, this would provide the following benefits:
Many CFOs are also leveraging digital technology to “streamline - and even redesign - the work their teams perform,” as the Deloitte Survey tells us. They cite the following benefits of undertaking this process:
While financial planning and analysis fall under the purview of F&A functions, retaining an in-house F&A team is a cost-intensive process that can also include several overhead expenditures, such as lodging, transportation, and systems maintenance. Additionally, F&A teams will require significant training time and spending to leverage digital technology and automate business operations. These present substantial challenges to the viability of in-house F&A teams, and prompt CFOs to look elsewhere for suitable financial solutions. Partnering with offshore accounting and back support services firms removes these challenges, while improving the efficiency of business financial operations and reducing expenditure.
Investing in offshore accounting and back support services present various advantages for CFOs focused on cost management, making these services a valuable investment opportunity in the current economic landscape. At a basic level, these offshore firms handle all the functions of an in-house F&A team, such as pay & bill and payroll management, bookkeeping, and credit control & collection. Such firms also undertake management and accounting reporting, which includes documenting business transactions, preparing financial statements, and filing tax returns on behalf of partner companies. Additionally, they typically facilitate consultation with financial experts when needed. This helps ensure their partners emerge favourably from periods of economic inflation or recession, and steer them towards profitability.
Offshore accounting and back support services firms perform the abovementioned functions efficiently, and at prices, lower than the cost of an in-house F&A team. Availing of such services also bypasses the overhead expenses of housing, transportation, and systems maintenance. However, the biggest game-changer these offshore services bring to the table for CFOs is providing trained resources to use special software for financial and accounting operations. This removes the need to invest in process transformation and automation, as well as resource training, effectively combining investment areas that CFOs are currently prioritising. As a result, companies availing these offshore services gain access to the threefold benefits of financial planning & analysis, process transformation, and automation, with technically trained resources at lowered prices, without needing to make separate investments.
Most CFOs anticipate an oncoming recession, and are preparing for it by cost-cutting, and investing in the aforementioned strategies. They can directly cut down on these costs by availing of offshore accounting and back support services.
In addition to their lower price point, offshore accounting and back support services firms provide CFOs with the following advantages:
Partnering with offshore accounting and back support services firms also brings with it the financial insight needed to become recession-proof. The CFOs can power their company’s profitability by identifying investment opportunities, along with an increase in company capital for activities such as business growth and an improvement in overall business efficiency by leveraging technology.
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