What Is Meant By The Phrase “Finance Outsourcing”?
Outsourcing is seen by some as the ultimate solution to all their business problems whereas, to others, it can be seen as the cause of their ruin – it all depends on which side of the fence you happen to be on. Some business can do everything in house but, for most, things like raw materials and other supplies have to be obtained from outside their own business. Plus, of course, employees have to be brought in to most businesses from the outside.
In the strictest sense of the word, anything that is obtained from an outside supplier can be said to have been outsourced. But then some savvy businessmen started to take this considerably further and actually contracted work out to a separate party. Take, for example, a company making metal saucepans. They would purchase metal and other materials; hire labor and use it to turn the raw metal and other materials into their finished product – saucepans. Then, one day, the boss has the idea that if, instead of buying raw materials and hiring labor, he might make more profit if he laid off the labor and purchased fully manufactured saucepans to sell under his brand name. If these saucepans were made in a cheap labor country his profits could be excellent. Unfortunately, all his original labor force will have lost their jobs in the process.
In fact, most business activities can be outsourced – outsourced office labor being an obvious option. In some ways, outsourcing is not all that different from sub-contracting although, these days, outsourcing usually relies on computer systems and internet based communications.
So, Why Not Financial Outsourcing?
If we ignore companies that use the owners’ personal savings and/or the company profits to finance their activities, then, logically, all financing comes from outside – such as obtaining bank or other loans or floating shares on the stock market. You could contract a broker to raise financing for you but that is not what is really meant by Finance Outsourcing.
Many firms employ a chief financial officer (CFO) to supervise their financial accounting. With the scope of online outsourcing available these days, it is fairly easy to engage the services of a virtual CFO (i.e. a VCFO) who might be one person or could actually be several people working at a Finance Outsourcing firm possibly located on the other side of the world. This is how those in the know understand the phrase these days. In fact, much of a company’s accounting work can be eligible for such Finance Outsourcing.
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