Aussie firms outsourcing finance functions to South Africa amid COVID-19 disruptions

As Australian companies wrestle with the economic and social fallout of the COVID-19 pandemic, many are realising that old ways of operating are no longer a practical approach.

Buffeted by disrupted supply chains, shifts in customer demand, and with staff forced to work remotely, companies are reviewing workflows and processes in an attempt to cope with what has become a new normality.

The bottom line is that most organisations need to reduce operational costs quickly. With revenues significantly down, any failure to dial down expenses will hit the bottom line and even spell the end of the business.

Many of the shared service functions can be consolidated, centralised and outsourced, with a particular focus on the many aspects of the core finance and early-stage collection functions. Traditionally undertaken by a dedicated team within head office, this function is being reviewed and increasingly outsourced to an external service provider.

Finding a partner

When the decision is taken to outsource the core finance function, focus shifts to finding an appropriate partner. This must be an organisation with the right mix of skills in place to ensure work is completed to a standard comparable with that delivered by the internal team.

In the past, many organisations have been unwilling to have such activities conducted by teams located outside Australia based on fears associated with the quality of service that would be experienced. The idea of lower costs may attract them, but they're not prepared to place responsibility for the activities in the hands of untested, external staff.

Making use of an offshore partner has proven prudent in ensuring business continuity by managing risk through diversification of geographic locations where finance and collection processes are undertaken. If disruption affects a team in one location – as was the case for many in 2020 – the workload shifts elsewhere.

The benefits of South Africa

Historically, outsourcing of business functions such as shared service finance and accounting have tended to be associated with countries such as India and the Philippines. Their lower cost structures and ability to quickly scale to meet demand make them attractive for high-volume work.

Yet Australian organisations have tended to hold back when considering outsourcing more complex financial processes to these markets. Many are concerned that training, language and cultural differences will result in lower standards than can be achieved in Australia.

In recent years, however, growing numbers of Australian firms have considered outsourcing of these tasks to the numerous highly skilled, culturally and legally aligned business process outsourcing (BPO) resources that are available in South Africa.

This market boasts a depth of highly skilled financial and legal talent across a range of established providers that can deliver world-class levels of service to organisations operating across a wide variety of business sectors.

South African outsourcing partners share a similar work ethic and approach to Australian firms. Additional factors such as language skills and educational standards also ensure the quality of work completed is first class.

Compliance by South African outsourcing partners with numerous robust financial and international ISO standards is another important factor and one that makes the country attractive to Australian firms. It means potential customers can be assured that service quality data and security-focused regulatory guidelines will always be followed.

This demonstrable commitment to quality is made even more attractive when considering the cost advantage of operating in South Africa. The exchange rate between the South African rand and the Australian dollar, along with lucrative government incentives, means services can be delivered far more cost-effectively than similar services provided onshore. Industry estimates point to South African operations being at least 50% lower cost than an equivalent operation in Australia.

With the struggle against pandemic and natural disaster-related disruptions set to continue into the foreseeable future, those organisations that opt to outsource many of their services including finance and accounting and collection processes to South African partners are likely to be much better placed to continue operations in the future.