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Will CFOs ever accept: in corporate treasury OUTSOURCING IS OFTEN A BAD IDEA

The latest EY survey on financial reporting showed that “Over the next two years, 54% (of CFOs) expect to see a very significant or significant increase in the use of outsourcing”. CFOs, and the consultants they use, assume that this will automatically reduce their costs, yet the number of horror stories on corporate treasury and accounting outsourcing keep growing:

  • outsourcing to low cost driven centres results in the supplier moving the operation to a new country where they have even lower costs
  • staff turnover is very high, with some staff staying on average less than a year, so consistency and quality of service is very hard to maintain
  • corporate treasury department are finding again and again, if an outsourcing programme is cost driven and not reviewed as to its full impact the cost can be 10 times the so-called £2 million headcount savings
  • outsourcing to a third party means that the corporate treasury department looses control, but still has to manage the outsourcing supplier and take responsibility for their errors

A single error in corporate treasury can cost much more than the annual savings from outsourcing. However, there has been little attempt to pay more for higher quality and consistency of performance from the outsourcing  providers. Everything is cost driven.

Not only this, consultants are reporting that there are few retrospective reviews of outsourcing  programmes and whether, in total, there have been real savings, e.g. $2 million saved but the company’s internal people have had to spend xx hours fixing the issues caused by the outsourcing company and don’t forget how much collateral third party damage has been caused by such errors.

Insourcing 

Shell have outsourced massively, but to their own SSC staffed by Shell people who are part of the team, not a third party. Shell now call their SSC teams Finance Operations to avoid having the SSC mentality of just following processes. The SSC teams are now focused on “what are we trying to achieve together” with their Shell colleagues. They now feel part of the same team. 


CTMfile take: Cost driven outsourcing is a mistake. Shell’s insourcing model is by far the most productive and attractive model. However, if CFOs still need to outsource then at least pay more to try and ensure quality, consistency, and commitment. AND also carry out honest reviews of the true impact of your outsourcing programme.

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