Advantages Of BPO In Finance

Top 5 Advantages of BPO in finance

A massive amount of time is spent on managing company finances. It is a tedious, complex and costly process. Financial operations can take up much of a business leader’s time. Business Process Outsourcing (BPO) takes finances and places them in the capable hands of others. Here are the top advantages of BPO and how it boosts company productivity and assists growth.

What is BPO?

Business process outsourcing (BPO) refers to the practice of hiring an external service provider to handle specific business tasks and operations. It is a service by which the most tedious, complex and costly processes are delegated to an experienced, and efficient second party. BPO has become increasingly popular in recent years, as companies seek to streamline their operations and reduce costs.

The advantages of BPO

There are many upsides to adopting BPO in any business. Here are the top five advantages of BPO:

  1. Cost savings: Outsourcing certain business processes can help reduce labour costs, as well as the costs associated with maintaining infrastructure and equipment. It is more cost-effective to use BPO than hiring dedicated staff to perform the same functions.
  2. Access to specialised skills: BPO providers often have expertise in specific areas, such as finance, human resources, or IT. By outsourcing to these providers, companies can gain access to specialised skills and knowledge that they may not have in-house.
  3. Improved efficiency: BPO providers are often able to handle tasks more efficiently than in-house teams, as they have experience and expertise in specific processes. This means work gets done faster and more immediately available, important business data.
  4. Focus on core business activities: By outsourcing non-core activities, companies can focus their resources on their core competencies and strategic goals, allowing them to better compete in their industry.
  5. Flexibility and scalability: BPO providers can often be scaled up or down quickly to meet changing business needs, making it easier for companies to adapt to changing market conditions or growth opportunities.

Overall, BPO can provide numerous benefits for companies looking to optimise their operations and reduce costs, while also gaining access to specialised skills and expertise.

Using KPIs

Key performance indicators (KPIs) are a great way to establish the success of a business. These give valuable feedback on the efficiency of a company’s processes. KPIs can measure a number of things such as:

  1. Gross Profit Margin: Measures profit after deducting cost of goods sold from product sales.
  2. Operating Profit Margin: Shows profit percentage from operations before taxes and interest. Increasing margins can indicate better management and cost control.
  3. Operating Cash Flow: Shows cash generated through operations. Reveals immediate cash availability and payment issues with customers.
  4. Working Capital Ratio: Measures liquidity to meet financial obligations.
  5. Quick Ratio: Evaluates if a business can meet short-term financial obligations by measuring assets against current liabilities.
  6. Return on Assets (ROA): Measures profitability relative to total assets. A higher ROA indicates more efficient asset use.
  7. Days Payable Outstanding (DPO): Measures time to pay creditors and suppliers. Helps manage cash flow and take advantage of discounts.
  8. Days Sales Outstanding (DSO): Shows average time for customers to pay. Higher DSO can lead to cash flow problems.
  9. Cash Runway/Burn Rate: Shows time until a company runs out of cash based on available funds and monthly spending. Helps manage spending and funding needs.

The information from KPIs is invaluable in informing business decisions. Tracking these  financial metrics manually with spreadsheets can become cumbersome, especially as a company grows and transaction volumes increase. Manually calculating more complex metrics is even more challenging and prone to errors.

Business Process Outsourcing and KPIs

Financial management systems, such as NetSuite, can automatically calculate these numbers and send regular reports to stakeholders. Similarly, solutions for inventory management and order management can track and distribute critical operational metrics. With BPO and automated software, it becomes easy to collect, process and use this data.

Setting clear KPIs and tracking a wide variety of metrics is crucial for growing businesses to excel in today’s environment. Back-end business systems with integrated reporting and analytics capabilities can help companies track these numbers and spot changes that will have a positive or negative impact on their financial health. Businesses must make it a priority to pinpoint the KPIs that matter most to their business, monitor them and continually adjust based on what the data tells them. BPO can take care of the most tedious and time-consuming of these processes. It provides this valuable data without the hassle.

BPO assists companies in taking care of the processes that distract them from their core focus. By providing feedback on important metrics BPO allows businesses to focus on the important decisions that will determine success. Contact LinkedERP and take advantage of the expertise they offer.