FAO to grow 30% in 2007 - AR outsourcing to drive growth
The $11 billion Accounts Receivable (AR) market makes up two-thirds of the $17 billion global market for managed Finance & Accounting services. A study by the Everest Research Institute in Dallas predicts a 30% growth in Finance and Accounting Outsourcing (FAO). The key driver for business growth in the multi-process FAO market will lie in outsourcing AR processes of order-to-cash.
What is Accounts Receivable?
The Small Business Encyclopedia defines Accounts Receivable as “the amount of cash, goods, or services owed to a business by a client or customer. The manner in which the collection of outstanding bills are handled, especially in a small business, can be a pivotal factor in determining a company's profitability.”
That said, opinions are divided as to the actual definition of Accounts Receivable services. Some service providers refer to AR in terms of collections, others extend it to a wider description that includes order-to-cash, invoice-to-cash, or quote-to-cash. AR outsourcing service providers have come up with an expanded service offering that defines AR as “revenue cycle management outsourcing.” This includes order management, credit, cash application, deduction management, collection, reporting and financial analysis. Indian service providers have the specialized skill sets to undertake these tasks to high standards of performance.
AR outsourcing is a critical factor in the client company’s business growth as efficient receivables management impacts cash flow and customer service.
By including order management (a function traditionally dominated by the sales department) within the accounts receivable function, the entire order-to-cash cycle is integrated into a single outsourced process. This impacts Day Sales Outstanding (DSO), one of the key metrics in measuring performance in an outsourced environment. This puts outsourcing service providers in a position to offer added value. They can also offer services like Electronic Invoice Presentment and Payment, (EIPP), for all those millions of hard copy invoices that must be integrated into the AR function.
India leads the pack as global FAO destination
A NASSCOM study finds that FAO has already saved $6 billion over the last four years, for American Banking and Financial Services companies offshoring to India.
Small wonder then that almost 50% of the world’s leading banks in terms of asset size are outsourcing F&A to India.
India is the world’s fastest-growing FAO destination and total business volumes are projected to touch $100 billion by 2020.
India has proved itself adept at delivering FAO services for the world’s largest companies in business verticals like telecommunications, BFSI, telecommunications, pharmaceuticals, retail, packaged consumer goods and transport.
Of the third-party service providers offering F&A outsourcing services, some have concentrated on offering standalone AR services while others offer multi-process FAO, in answer to the strong market demand for bundled FAO services. While hybrid or blended outsourcing business models are preferred, the market has been moving towards a multiple-vendor, multiple-vendor, multiple-model approach.
According to a study by the Hackett Group, a single Fortune 500 company could cut costs by as much as $40 million in one year, by sending finance and procurement jobs offshore. Outsourcing Finance & Accounting services to India has the potential to save billions of dollars for global companies. They stand to gain 30-50% in savings through FAO – money that can profitably be invested in their core competencies.
What is Accounts Receivable?
The Small Business Encyclopedia defines Accounts Receivable as “the amount of cash, goods, or services owed to a business by a client or customer. The manner in which the collection of outstanding bills are handled, especially in a small business, can be a pivotal factor in determining a company's profitability.”
That said, opinions are divided as to the actual definition of Accounts Receivable services. Some service providers refer to AR in terms of collections, others extend it to a wider description that includes order-to-cash, invoice-to-cash, or quote-to-cash. AR outsourcing service providers have come up with an expanded service offering that defines AR as “revenue cycle management outsourcing.” This includes order management, credit, cash application, deduction management, collection, reporting and financial analysis. Indian service providers have the specialized skill sets to undertake these tasks to high standards of performance.
AR outsourcing is a critical factor in the client company’s business growth as efficient receivables management impacts cash flow and customer service.
By including order management (a function traditionally dominated by the sales department) within the accounts receivable function, the entire order-to-cash cycle is integrated into a single outsourced process. This impacts Day Sales Outstanding (DSO), one of the key metrics in measuring performance in an outsourced environment. This puts outsourcing service providers in a position to offer added value. They can also offer services like Electronic Invoice Presentment and Payment, (EIPP), for all those millions of hard copy invoices that must be integrated into the AR function.
India leads the pack as global FAO destination
A NASSCOM study finds that FAO has already saved $6 billion over the last four years, for American Banking and Financial Services companies offshoring to India.
Small wonder then that almost 50% of the world’s leading banks in terms of asset size are outsourcing F&A to India.
India is the world’s fastest-growing FAO destination and total business volumes are projected to touch $100 billion by 2020.
India has proved itself adept at delivering FAO services for the world’s largest companies in business verticals like telecommunications, BFSI, telecommunications, pharmaceuticals, retail, packaged consumer goods and transport.
Of the third-party service providers offering F&A outsourcing services, some have concentrated on offering standalone AR services while others offer multi-process FAO, in answer to the strong market demand for bundled FAO services. While hybrid or blended outsourcing business models are preferred, the market has been moving towards a multiple-vendor, multiple-vendor, multiple-model approach.
According to a study by the Hackett Group, a single Fortune 500 company could cut costs by as much as $40 million in one year, by sending finance and procurement jobs offshore. Outsourcing Finance & Accounting services to India has the potential to save billions of dollars for global companies. They stand to gain 30-50% in savings through FAO – money that can profitably be invested in their core competencies.
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