“FINANCIAL OUTSOURCING IN

INDIA: EMERGING TRENDS IN

ACCOUNTING PRACTICES ”
SUDESH KUMAR
Research Scholar, IKG Punjab technical university,
Kapurthala
DR.BIMAL ANJUM
Dept. of commerce, DAV college, Chandigarh
ISHAN BAKSHI
Asst. Professor, Swami Satyanand college of Management
& Technology, Amritsar
 OUTSOURCING

It is purchasing services from an

outside vendor rather than using
internal resources to achieve
better service at lower cost and
improve the performance.
 RESEARCH AND
METHODOLOGY
 This study is exploratory based on the
secondary information about the growth and
development of Outsourcing practices in India.

 It is carried out through analytical approach

and states the various cost and benefits of
outsourcing process for Indian firms.
OBJECTIVES OF THE STUDY

 To study the derivers of Financial

Outsourcing and its emergence in the Indian
Business.

 To analyze the various costs and Benefits of

Financial Outsourcing to the Business Firms.

 To Study the various Ethical issues of

Financial Outsourcing Process.
 REVIEW OF LITERATURE

Brannemo,2006: It is crucial for company to

understand and have a clear conceptual framework of the
outsource decision.

Ellram,Tate and Billington, (2007):

outsourcing has implications for day-to-day management
and performance, as well as strategic implications.

Suhaimi,2007: Outsourcing decisions may affect

company’s cost structures, long-term competitive situation
and can also alter the nature of risks that the company must
manage.
 Krell,(2007): Finance and accounting outsourcing
covers a wide variety of highly transactional
activities such as accounts payable, accounts
receivable and payroll, treasury, tax strategy,
financial planning and analysis.

 Nicholson and Aman, 2006: Accounting

outsourcing means transferring part of accounting
functions to a third party provider or a fully owned
subsidiary in order to cut cost, gain access to
scarce skills or obtain competitiveness
EMERGENCE OF FINANCIAL OUTSOURCING IN INDIA

 Outsourcing of finance and accounting (FAO) in

India is among one of the fastest growing sectors
of the BPO market.

 According to an Everest Research Institute Study,

the global Finance and Account Outsource (FAO)
sector has grown by 30% in 2007 alone.

 The growth in the FAO market is primarily due

to a larger trend of offshore BPO.
The global offshore BPO market has grow n to $24
billion by 2007, of which India had capitalize on $13.8
billion.

India is currently the world leader in offshore

destinations, with 46 per cent of the world market for
offshore business processes .

India’s offshore IT and BPO industries employ

approximately 1.5 million people in India and account
for 7 per cent of the country’s GDP.

 India-based big players of Outsourcing include Infosys,

Wipro BPO, WNS Holdings, HCL Tech (BPO) and
MSOURCE.
COST AND BENEFIT ANALYSIS OF FINANCIAL OUTSOURCING IN
INDIA

Cost of out sourcing:


Long time to implement – it takes much time to make the
process simple, standardized and centralized.


Poor performance –the outsourcing process does not
perform its duties more efficiently as it can be performed
through the internal sources back into the office.


Flexibility–the outsourcing process may not be prepared
to deal with the change in working style of the firm due to
technological development.
 Talent Lost –due to more and more services
outsourced, the talent of employees get lost,
because they get free and may not get the work
according to their skill.

 DataDisclosure to third parties - reluctant nature

of managers to share finance data with third parties
due to the fear that information might somehow
reach to competitors.

 Lack of Performance measures – No performance

measures can be employed for the outsourced
activities because they perform their task according
to their standardized rules.
 BENEFITS OF OUTSOURCING
 Core competency focus – the employees get
free from their routine task and can focus on more
value added activities to increase their
competitiveness.

 Leading knowledge and track record –

Most of the mangers feel comfortable with the
successful track record of outsourcing providers
and have the opinions that outsourced partners
should have the detailed knowledge about the
regulatory and reporting requirements.
 Increased transparency- Outsourcing
results in more transparent and accurate
reporting, as they are totally unbiased &
independent from the control of internal
authority of the firm.

 Cost Saving- Outsourcing process become

less costly in the long run as with the continue
use of third party service the firm’s labor charges
get reduced in the future.
 ETHICAL ISSUES OF FINANCIAL OUTSOURCING IN INDIA
 Exercising due care in the performance of services
outsourced to another country.

 Problem in determining planning and supervision when the

work is done on another continent.

 Chances of providing incomplete, incorrect or inconsistent

information to the external service provider.

 Unauthorized release of confidential information to

competitors.
 CONCLUSION
 Leading finance executives in organizations around the world
also are using outsourcing to lower costs and improve quality.

 Outsourcing is done to transform business operations,

generate better decision support information and create higher
shareholder returns.

 In spite of various ethical issues, India is uniquely placed to

offer a wide range of quality, cost-effective outsourced
services, such as IT and IT-enabled services in finance and
accounting.

 The functional expertise available in India is very high due to

availability of highly skilled personnel from esteemed
professional institutions.
 REFFERENCES
 Brannemo, A. (2006). How does the industry work with sourcing
decisions?

 Gartner Group (2005) Outsourcing Worldwide: Forecast Database.

 Krell,(2007). Finance and accounting outsourcing: making an informed

decision, CMA Management, Nov. Management, 17(5), pp. 547-560.

 Nicholson,B. And Aman, A. (2006). Offshore accounting outsourcing,

ICAEW Draft Report, The Institute of Chartered Accountants in England
and Wales.

 Off shoring: Not everybody’s doing it. (2004, June 1). CFO Magazine.

 Research & Markets (2006) Off shoring Tax Returns Preparation to

India
THANKS