Outsourcing Bookkeeping Solutions for the Banking and Financial Industry 3 Jul 2024

Outsourced Bookkeeping for banking and Finance

Table of Contents

  • Introduction
  • Understanding Financial Outsourcing
  • Tailored Financial Services that BFSI can outsource
  • 5 Advantages of Outsourcing Financial Services
  • Takeaway

Introduction

Against the backdrop of an increasingly dynamic BFSI (banking, financial services, and insurance) landscape, accurate bookkeeping is a starting point for sustainable growth and efficiency. Financial statements are not just wealth and compliance records; they act as the compass that navigates an organization through scattered pathways of resource allocation, budgeting or a complete review of its business performance.

We understand that the BFSI industry works in a dynamic environment with multiple touchpoints for business transactions and customer interaction. Bookkeeping is at the heart of this complexity. Accurate documentation of all financial transactions: this is no longer a mere procedural necessity but an element that bears strategic significance. For example, industry research recently found that organizations with solid bookkeeping systems have fewer financial inconsistencies—15% less than the other group(s) they studied (gasp!)—and can even result in smarter decision-making by management due to effective fiscal responsibility.

Among the complexities of financial administration in the BFSI sector, outsourcing stands out as a source of efficiency. The strategic decision to outsource bookkeeping services enables businesses to use specialized skills while maintaining smooth operations. Information from the preceding financial year indicates that BFSI corporations that had outsourced operations managed to deliver a useful resource pool of as much as 20%, making them prepared for strategic investments and technological advancements.

While we journey through the future landscape of BFSI nimble bookkeeping, there is a macro view: strategic outsourcing—not just any other trend. Still, as it turns out, financial management is changing.

So much for this basic understanding, let’s go iteratively into a few parts of outsourced financial services and how well they may un-complicate things in the windings of the BFSI muddle, paving the way to benefits arising out of economies on offer from given firms intending to leverage them.

Optimize your BFSI processes using Velan’s effective bookkeeping solutions. Increase organizational sustainability and attain operational excellence.

Understanding Financial Outsourcing

Financial outsourcing is a strategy method in which firms, particularly those in the Banking, Financial Services, and Insurance (BFSI) sector, outsource their financial and accounting responsibilities to external service providers. This outsourcing approach incorporates specialized specialists who handle critical functions, including bookkeeping, management accounting, tax accounting, and auditing. In the BFSI industry, where precision and compliance are critical, outsourcing financial services assures precise and regulatory-compliant financial records.

Financial outsourcing’s collaborative nature enables firms to leverage external expertise while focusing on their core capabilities and delegating complex financial work to committed individuals.
This sector deals with complex financial operations and strict regulatory frameworks. The solution to the problem of outsourcing this function within your financial services is partly by providing you with expertise in risk management and compliance. Such a strategic approach is essential for BFSI businesses to be able to adapt to market changes and survive competition.

According to recent industry research, BFSI organizations that embrace outsourcing experience a 25% gain in productivity. Outsourcing provides significant cost savings, with reports estimating a 30% reduction in operational expenditures. This financial assistance enables firms to allocate resources wisely, thereby encouraging innovation and technical growth. In addition, the high level of integration provided by outsourced finance software ensures that business as usual continues stably on a day-to-day basis, which in turn promotes robust longevity within the ever-changing world of BFSI.

Study what effective back-office administration does to your financials. Learn more in our recent blog post: Boost Your Bottom Line with Effective Back Office Management.

Let us understand the types of Outsourced Financial Services in BFSI.

Outsourced Financial Services Types: Bookkeeping – One of the main aspects of Outsourced financial services for the BFSI sector This includes keeping detailed records of all financial transactions; among the most important tasks is maintaining accurate and transparent books. It is based on source papers, financial accounts as well as many of the other reports. BFSI firms can outsource bookkeeping to ensure that those tasks are done quickly & accurately, avoiding these problems and saving time.

Accounting for management:

BFSI business success largely depends on management accounting which assists in making crucial decisions.

Outsourced solutions are carried out by professionals who scrutinize accounting data, and keep track of expenditures, gross sales and budgets. This methodical approach enables to recognize of future requirements and goals, benefiting its financial control.

Accounting for taxes:

Tax accounting is a commonly outsourced function in BFSI, which operates under complex regulatory norms. This service is concentrated on the meticulous completion of income tax preparation and payment. The focus remains on understanding the way resources in a firm are allocated, ensuring tax compliance, and rationalizing tax operations.

Accounting audit:

To sum it up, financial scrutiny in BFSI is of utmost importance, and by outsourcing accounting audits, you not only ensure that all rules are complied with but also financier trust. External auditors find information that helps them assess the accuracy of financial statements, uncovering errors or material misstatements that may translate into legal sanctions.

Accounting for forensics:

Financial crimes are very sensitive; hence, forensic services outsourcing is common among BFSI businesses. It is a topic that professionals explore in their profession to address concerns about embezzlement or fraud.

Payroll Services:

Besides payroll processing, the scope of hiring outsourced services in BFSI also extends to computing salaries and observing mandatory tax compliance as well as labor law adherence. This enables the very precise and smooth payroll processing that companies need to bring their financial objectives into focus.

Statutory Reporting & Compliance

Accurate financial information must be submitted to governing bodies for BFSI compliance. Outsourced solutions simplify this process, allowing the firm to adhere to different laws and rules while also providing transparency and building trust.

Insurance Companies:

The need for outsourcing in the insurance industry is very critical. Outsource claims, policy management and data services to enable external personnel to efficiently handle them. Outsourcing also benefits annuity services, software/tooling use, IT uphold and call focus tasks to build general efficiency.

All banks and financial institutions:

New customer acquisition, account maintenance, consumer and commercial lending or loan processing, and back office processes – all being outsourced by banks as well as other lending institutions. These strategic solutions aid BFSI companies in streamlining operations, enhancing customer service and maintaining administrative effectiveness.

Investment Management:

BFSI firms hire investment managers, who design the best methods to manage financial assets. This means deciding on assets, stock selection and overall portfolio management. By outsourcing investment management, firms can do more with their investments while saving time and resources.

Unit Pricing and Custody:

Unit pricing is also one of the many repetitive operations that merchants mostly outsource for customer convenience. This will include various products and funds in the BFSI sector such as Unit funds where a third party manages unit prices, and custody arrangements, which would help consumers enable a fair comparison.

Underwrite and Claim payment:

Outsourcing underwriting and claims payment tasks in the BFSI industry is useful as paying imposes an extra layer of risk that needs to be managed efficiently. They mitigate the financial risks on loans or investments via external suppliers that also ensure law-abiding and simplify the claim settlement process.

Services of a Financial Controller :

Hence, they mostly prefer BFSI organisations to outsource their financial controllers and not in-house. Professionals are responsible for all accounting duties keeping well-ordered ledgers and preparing insurance & tax paperwork because all these things have always been their main anxiety. When organizations outsource financial controller services, they can mainly focus on their core activities.

Financial Analysis:

Financial Analysis BFSI companies outsource financial analysis to analyze economic trends, create policies and plan future business events. This strategic initiative facilitates informed investment decisions, leading fund managers and their investors through the perilous landscape of corporate finance with precision.

One of the back office functions that you could profit from strategic outsourcing to make more efficient is payroll. Find out how to select the best partner–download your free guide “Choosing the Right Back Office Outsourcing Partner: Key Considerations.”

Advantages of Outsourcing Financial Services

Here are some benefits of financial services outsourcing in BFSI, when it comes to bookkeeping. Here is a list of benefits that BFSI companies need to consider when trying to increase operational efficiency and streamline strategic financial management.

Comprehensive audit

Meticulously curated and organized books are a recipe for an extensive audit. As a result, financial audits can be completed much more easily and quickly with assured accuracy in recording transactions that offer an effective picture of the financial state of the organization. It helps lift stakeholder confidence and also makes audits simpler, which saves a lot of time. The Association of Certified Fraud Examiners (ACFE) reported that companies with enhanced internal controls and proper financial statements experience 40 per cent fewer fraud cases.

Banking Advantages

Good financials pay well in banking partnerships. When books are well-kept, investors know that their financial picture is accurate and transparent. An accurate, well-organized set of financial records promotes more efficient loan applications because lenders value the reliability and clarity that come with businesses that have their finances in order.

Detailed Recording

This is something that often happens and standardized accounting processes provide a firm foundation when it comes to financial advisory activities.

By keeping a documented record routinely and accurately, firms are assured that they have correctly accounted for a comprehensive listing of all relevant financial transactions, which ultimately gives them unprecedented visibility into their finances. A proactive approach to immediately identifying patterns, mismatches and areas requiring attention. Daily Bookkeeping practice helps to reduce 25% of the errors than those companies who do not have daily bookkeeping updated information – A survey conducted by the American Institute of Professional Bookkeepers (AIPB).

Savior in Adverse Situations

The challenges can be daunting and lead to grey areas when it comes to the financial stability of companies.

Useful bookkeeping is worth its weight in gold under these difficult conditions. Correct Recording of Financial Data Helps Firms Overcome Challenges, Reconcile Anomalies and Achieve Stability During Tough Periods A peer-reviewed study published in the journal Financial Economics found that firms with accurate, up-to-date financials were able to recover 30% faster during economic downturns.

Makes planning easier

Accurate data and transactions start with effective bookkeeping so that strategic planning becomes easier. Businesses with accurate financial records can make informed decisions, and plan for current and future growth trends. This insight is essential for reacting to market shifts, identifying investment opportunities, and steering the organization toward long-term success. According to a Small Business Administration (SBA) survey, organizations that use precise financial data for planning get a 15% greater success rate in meeting their strategic objectives.

Optimal financial management can propel your BFSI firm to new heights. Partner with Velan to achieve operational excellence and long-term success.

Takeaway

In conclusion, this essay has shed light on the critical function of efficient accounting in the BFSI sector, demonstrating how exact financial records drive resource management, budgeting, and performance evaluation. The investigation of outsourcing possibilities has revealed a wide range of advantages, including cost savings, increased efficiency, and access to cutting-edge skills and technologies. Outsourcing bookkeeping appears as a transformational strategy for BFSI companies negotiating the complexities of the financial world.

Accept outsourcing for more efficient bookkeeping. By cutting costs and having access to specialized knowledge, outsourcing allows organizations to concentrate on their core skills. The paper advocates that meticulous partner selection is crucial and discusses how such a strategic move can yield long-lasting benefits. With outsourced financial solutions, BFSI businesses can effectively manage their finances and help them reap the following rewards besides immediate gains

No more waiting; reach out to us to start the journey of intelligence and efficient financial management for BFSI. Learn how to utilize outsourcing to help advance the essential financial procedures of your enterprise for more sustainable success.

Pramod

Manager

About the Author:

Pramod has over 11 years of experience relating to finance and accounts in diversified industries. He is an expert in resource and process optimisation resulting in greater operational efficiencies. He can be reached at pramod.fs@velaninfo.com

Credentials

Quick Connect With Us


    captcha
    reload