In brief:
- Demand for finance and accounting outsourcing remains on the rise as talent shortages, advancing technology, and persistent macroeconomic uncertainty force CFOs to rethink their operating models.
- In a still red-hot labor market, U.S. F&A salary increases outpaced inflation by an average of 10% over the last four years – and an average of 48% in larger markets.
- 92% of CFOs plan to increase investment in finance technology, but only 30% of technology projects succeed.
- CFOs are increasingly turning to nearshore outsourcing in Latin America to solve their operational challenges without the headaches of Asian-based solutions.
Outsourcing has been part of many companies’ operating models for more than 20 years, but the latest finance and accounting outsourcing (FAO) trends show a surge in interest. Even businesses that never considered outsourcing before are now taking the plunge.
Consider these recent statistics:
- The finance and accounting outsourcing market is booming, with steady 11-13% growth expected to continue over the next three years (Everest Group).
- Mature buyers are now open to leveraging third-party support across more complex, judgment-intensive processes, with 65% of successful organizations including outsourcers in their delivery models (Deloitte).
- 51% of enterprises outsource finance functions (Deloitte).
But what is driving accelerating demand?
- Cost pressures intensify focus on efficiency and performance. Amid persistent macroeconomic uncertainty, finance leaders are laser-focused on increasing operational efficiency to improve cash flow management and reduce operating costs. Strategic cost reduction is a top priority for 59% of CFOs in 2024 – a significant jump from only two years ago, when 38% considered it a top agenda item (2023 PwC Pulse Survey).
- The scarcity of talent (and rising labor costs) to support finance & accounting (F&A) initiatives. More than half of financial-related jobs remain unfilled — the highest of any industry, according to a 2023 U.S. Chamber of Commerce analysis.
- The broader availability of digital technologies. Leading transformation efforts is the top objective for 79% of CFOs in 2024, according to Gartner, and enterprises are turning to outsourcers to quickly access advancing capabilities like analytics, automation, and generative AI.
- Offshore operational challenges. As service demand becomes more complex, CFOs are rethinking the time zone, language, and cultural mismatches of outsourcing processes to the other end of the world.
Let’s take a deeper dive into the factors driving finance and accounting outsourcing trends in 2024. And let’s examine why nearshoring to Latin America has emerged as a leading strategy for CFOs – providing the top-tier talent, cost savings, digital capabilities, real-time collaboration, and cultural alignment to mitigate modern challenges, reinvent outdated operating models, and achieve operational excellence.
Finance Transformation Trends: Why Hybrid & Nearshoring Are The New Normal
The F&A talent war is still raging
Virtually every conversation with business executives about their main challenges starts with a common refrain: I can’t hire enough people to get the work done. And they are talking about all job functions and levels. We have all seen the “Help Wanted” signs when you walk into restaurants and retail stores, but the “Virtual Help Wanted” signs in corporate offices are just as visible.
In the finance world, that’s translating to financial reporting issues – and alarming turnover as short-staffed teams burn out.
More than 300,000 U.S. accountants and auditors left their jobs within two years – a sharp 17% decline from the profession’s peak in 2019. But CFOs’ talent gaps yawn wider, with F&A unemployment levels historically low across the board.
In-demand roles like financial analysts and billing clerks report staggering unemployment rates of 0.2% and 0.5%, respectively. And there’s no sign of improvement, as 90% of employers report difficulty hiring skilled talent and more than 3 million U.S. workers continue to quit their jobs every month, states Robert Half’s Employment Trends in 2024 Report.
Planning is feeling the pinch, as finance executives worry about having sufficient, knowledgeable staff to execute strategies. Forty-three percent of finance managers are hiring for new positions in 2024, while 51% need to fill vacated roles, states Robert Half’s 2024 In-Demand Finance and Accounting Roles and Hiring Trends report.
F&A labor costs outpace inflation
Despite mixed macroeconomic signals, labor costs continue to skyrocket in the red-hot F&A labor market. Comparing salaries from pre-pandemic 2019 to post-pandemic 2023, the changes are dramatic: outpacing inflation by an average of 10% across the board – and an average of 48% in larger markets.
Consider these eight core F&A roles where salaries increased almost 21% – from an average of $48,326 to $58,438, according to Robert Half salary survey data for 2019 and 2023.
The numbers get starker when considering larger markets like New York, San Francisco, Los Angeles, Miami, and Dallas, where acquiring and retaining finance talent proves to be an even bigger challenge. According to Robert Half data for the same period, salaries for these positions increased by almost 31%, from an average of $54,248 to $70,807.
For certain roles, the competition is even more fierce. Financial analyst salaries increased almost 40%, and salaries for collections agents rose an astounding 61% as companies recognized the need to actively manage their outstanding cash positions with inflation on the rise.
While inflation is a factor in these salary increases as well, they are really about the war for talent.
Where are all the workers going?
A record 50.6 million U.S. workers quit their jobs in 2022 – the highest level in the history of the U.S. Bureau of Labor Statistics’ (BLS) Job Openings and Labor Turnover (JOLT) Survey, which started in 2001.
But while the labor force participation rate (LFPR) plummeted during COVID, it returned to pre-pandemic levels in Q2-23. And a new concept entered our lexicon as “The Great Resignation” morphed into “The Great Reshuffle.”
Instead of resigning from work altogether, workers are leaving in search of something better. Most often, that means better paid, more flexible employment in the competitive job market or something more fulfilling or better suited to their life choices like career changes, contract work, or starting their own business.
Nearly 40% of workers said they were looking or planned to look for a new job in the first half of 2024, states Robert Half’s employment trends report.
Unfortunately, such trends have far-reaching implications for the finance and accounting industry, where some F&A roles are experiencing a “branding” problem among young adults. The number of people seeking accounting degrees recently dropped by the largest single-year percentage since 1995 as the profession’s reputation for long hours, mundane tasks, less meaningful work, and high academic hurdles has the CFOs of tomorrow opting for other careers.
Many Millennial/Gen Z workers also consider transactional F&A tasks beneath them, which impacts retention and the quality of work they provide.
The path to digital transformation isn’t easy
But the talent challenge is only one storyline driving finance and accounting outsourcing trends. In a recent blog, I highlighted how many organizations are seeing productivity gains of more than 20%, likely due to new digital technologies in financial operations.
Digital transformation like automation, AI, and analytics is ushering in a new era of productivity, efficiency, visibility, collaboration, and strategic decision-making in finance departments. Yet the path to digital success isn’t easy:
- 92% of CFOs plan to increase investment in finance technology, but only 30% of technology projects succeed (Gartner).
- Only 16% of finance leaders view their department as best-in-class in terms of key finance transformation priorities like technology and operating model (EY).
- 88%of CFOs say they struggle to capture value from their technology investments (PwC).
- Finance executives express a low degree of confidence in their ability to meet business objectives in key transformation areas, including retaining the right skills and talent (60% low confidence), using advanced analytics to turn data into actionable insights (57%), improving finance agility (50%), and driving cost reduction (50%) (Hackett Group).
With companies projected to spend nearly $2.8 trillion annually worldwide by 2025 on digital transformation initiatives, continued failures and delays represent significant waste and frustration.
Outsourcing to the rescue
Some 65% of new F&A jobs are remote, according to Robert Half’s employment trends survey. And as talent searches go global, businesses are turning to quality outsourcing providers to overcome hiring challenges and accelerate the digital agenda.
But the perspective on outsourcing is changing.
Cost reduction is now a “given.” Broader access to talent and the ability to improve productivity and performance are key drivers for considering outsourcing as a whole – and service providers in particular.
By 2025, Gartner expects 60% of F&A organizations won’t renew existing outsourcing contracts because of outdated pricing models that fail to drive digitization and process improvement.
Top-notch business process outsourcing services are more than FTE-based transaction processors. They serve as full lifecycle partners – delivering higher levels of productivity and business insights than their clients’ existing operations.
The best partners are also experts at optimizing business processes through the implementation of digital technologies, removing risk and creating strategic finance operations. And they will guarantee outcomes, assuring expected cost savings and ROI.
Forward-thinking F&A executives are folding these value-add solutions into hybrid operating models, recognizing that operational control is more about knowledge management and efficiency than where people are sitting and who pays them. The term “extension of your team” has become part of the operating vocabulary, with outsourcing partners seamlessly working alongside internal staff.
Nearshoring tops finance and accounting outsourcing trends
Even before the pandemic, many organizations were struggling with the complexities of Asian-based outsourcing models, including time zone and travel challenges and language and cultural mismatches that combine to make collaboration and communication difficult.
Then, add telecommunications and power infrastructure to the list of issues many companies experienced when workers shifted from corporate parks to a work-from-home model in these markets.
And guess what? These regions are not immune to the talent challenges that every other part of the world is experiencing, with workers reluctant to forgo the flexibility of the work-from-home scenario seeking “greener pastures.”
India’s BPO industry is chipping away at offshore cost savings with 10% median salary increases in 2023 to combat alarming 24% attrition – the highest of any industry, according to WTW’s 2023 Salary Budget Planning report.
We have seen many new clients seeking nearshore partners as they shift their focus from offshore markets to one that is closer to home. Top Latin American markets have emerged as a major destination for multinational organizations over the past 10+ years, but the past four saw this trend accelerate.
Global businesses are also increasingly opting for nearshore services for F&A functions at the higher end of the value chain, like financial planning & analysis. When finance and accounting processes are more complex, the easier communication and collaboration of nearshore markets with highly educated populations makes the most sense.
Costa Rica and Mexico currently rank among the 10 most preferred shared services destinations globally (Deloitte’s 2023 Global Shared Services & Outsourcing Survey). Colombia is a leader on the Offshore BPO Confidence Index.
Kearney’s 2023 Global Services Location Index reinforces the value of Latin America for CFOs. While Asian locations continue to show the highest scores for financial attractiveness, Costa Rica had a 22% higher score than India for business environment, measuring cultural, political, economic, and regulatory factors that impact the ease of doing business.
And the cost competitiveness of Colombia, ranked the most financially attractive of Latin America’s top markets, scored close to the most popular Asian destinations. For example, showing only about a tenth of a point difference from the Philippines.
LATAM: top-tier talent for executing complex finance and accounting processes
But it is Latin America’s ability to deliver significant cost savings without sacrificing quality that is making it the strategic destination of choice for CFOs – offering high-level talent with the critical-thinking skills and strong English proficiency needed to deliver finance processes across the value chain. That includes deep pools of certified accountants trained to U.S. GAAP and IFRS standards, with government-sponsored educational programs ensuring steady pipelines.
Colombia ranked #1 in Latin America for skilled talent availability on the 2023 IMD World Talent Ranking. The number of graduates earning finance-related bachelor’s, master’s, or other degrees expands by an average 13% annually — more than any educational area, according to Invest in Bogotá data.
Costa Rica offers finance teams the most mature shared services destination in Latin America. It provides one of the highest English proficiencies in the region and deep familiarity with North American business practices stemming from 350 multinational organizations with business services operations in the country.
Exceptional FAO providers in these markets also offer instant access to digital talent that can be expensive and hard to find at home, like intelligent automation and analytics.
Businesses are increasingly turning to outsourcing to address their operational challenges. The whole outsourcing paradigm has shifted, and companies are looking for the “right” partner: a firm that can not only provide the talent but also bring the expertise to optimize business operations and speed up digital transformation journeys.
Providing this range of capabilities and offering a nearshore location to solve the complexities of the offshore operating model is the real finance and accounting outsourcing trend of the year.
Ready to learn more about the benefits of finance and accounting outsourcing for your organization? Schedule a consultation with our nearshore experts today! You can also visit our resource center for more finance and accounting outsourcing tips, strategies, and success stories. Or, download a complimentary copy of Everest Group’s PEAK Matrix® for Finance & Accounting Outsourcing (FAO) Services 2023 Assessment to learn why Auxis was recognized as a Major Contender and Nearshore Leader.
