Outsourced Accounting

1. Outsourced Accounting

2. What is Outsourcing? Traditional Outsourcing Arrangements In a traditional, functional outsourcing arrangement, an outsourcing supplier provides very specific functions that fit within an overall scheme of intricate business processes. For instance, many organizations outsource their Payroll Processing functions. They enter into an arrangement with a Payroll Service Provider to process payroll checks, make required tax payments and deposits, and prepare and file required payroll tax forms.

3. What is Business Process Outsourcing? Business Process Outsourcing (BPO) In BPO, the supplier not only takes on the responsibility to take over the function or business process, but it also reengineers the way it is done. That will include either putting in new technology to accomplish the process, or applying the existing technology in a new way to improve the process. A BPO solution typically combines computer infrastructure, and software, IT management services, functional operations people/labor, defined process workflows, best-practice service disciplines and related infrastructure on a contractual outsourced basis.

4. What Can Be Outsourced? • Virtually any “non-core” process or responsibility • Facility Management • Food Service • Legal • Human Resources • Security • Information Technology • Payroll • ERP & Accounting

5. BPO Market Finance and accounting alone was $31 Billion in 1999 and will grow to $77 Billion in 2005. Total IT BPO market was $184 Billion in 2003, and will grow to $256 Billion by 2008. Gartner Group Dataquest 2005.

6. BPO Market Recent Survey of 500 Executives • 80% said BPO’s importance is growing. • 93% said there is a strong correlation between BPO and shareholder value. Conclusions: • In the near future, ½ of typical executive’s budget will be outsourced. • Outsourcing is one of the most important trends in our time • Organizational success will depend on management’s ability to leverage outsourcing relationships effectively

7. The BPO Value Proposition • Desire to gain process improvement • Focus on core operations • Reduced costs • Single point of accountability • Improved business agility • Improved quality – latest technology; expertise • Shortage of labor • Companies face challenge of hiring and retaining qualified staff. • Virtually all internal accounting personnel are considered “cost centers.” In contract, BPO vendors back-office support staff are revenue-generating employees.

8. Why Outsource? • Competitive and financial pressures are forcing organizations to narrowly define their strategic core competencies; • Outsourcing can be an effective way to gain competitive advantage, lower costs and increase efficiency; • Outsourcing can be a cost-effective way to take advantage of new ideas, new solutions and best-in-class processes and technology; • Outsourcing to firms regarded as experts in the field can help organizations gain needed credibility with external parties; • Limited availability of qualified labor.

9. Why BPO is catching on • Not a new concept • Improvements in technology (i.e. ASP model and internet) have made model less expensive • Technology advances have facilitated the outsourcing of certain business processes, however it remains the processes themselves that are most important • Technology outsourcing is more prevalent and accepted in our economy

10. The Role of Technology The continuing technology evolution is a key driver of the BPO Model • Use of technology not new in outsourcing arrangements – service bureaus, ADP • Along came the Internet • Broadband connectivity • ASP Model • Web-based apps • BSP Model

11. BPO Models • Customer Site • BPO provider and software reside onsite at customer’s location • Centralized • Customer may have some remote access to software

12. Flexible Client-Specific Solutions HB&P’s BPO model recognizes that each client’s needs are unique. • Extensive needs assessment process • Solutions are not “system-specific” • Designed to meet specific needs of our clients • Work with client’s existing accounting staff, or become its virtual accounting department

13. How it Works Think of HB&P as the Accounting Department Down the Hall • Management retains overall responsibility for accuracy and integrity of financial records. • HB&P assumes the role of Management’s Accounting Department, working under Management’s direction. • HB&P can implement its virtual accounting system at a fraction of the cost of the client purchasing its own system • State of the art technology • Anytime/Anywhere access to information

14. How it Works A Typical HB&P Arrangement • Cash Disbursements Cycle: • Management approves and codes vendor invoices for payment • HB&P enters properly-approved invoices into accounting system • Data entry is reviewed for accuracy • Reports are generated providing Management with relevant cash flow information • Checks are prepared for Management review and signature

15. How it Works A Typical HB&P Arrangement • Cash Disbursements Cycle (Continued): • Vendor files are maintained for ease of research • Vendor database is maintained to ensure accuracy of vendor transaction and payment history • Accounts Payable sub-ledgers are reconciled to General Ledger to ensure accuracy of financial reporting • Bank accounts are reconciled and agreed to relevant General Ledger account balances

16. How it Works A Typical HB&P Arrangement • Cash Receipts Cycle: • Management prepares and approves customer invoices based on established billing procedures • HB&P enters properly-approved invoices into accounting system • This can be “after-the-fact” entry of client-prepare invoices, or invoices can be physically generated by HB&P • Data entry is reviewed for accuracy • Reports are generated providing Management with relevant cash flow information • Customer checks are received and coded by Management

17. How it Works A Typical HB&P Arrangement • Cash Receipts Cycle (Continued): • Deposits are made by the client and relevant information is provided to HB&P for entry in Accounting System • Customer files are maintained for ease of research • Customer database is maintained to ensure accuracy of vendor transaction and payment history • Accounts Receivable sub-ledgers are reconciled to General Ledger to ensure accuracy of financial reporting • Bank accounts are reconciled and agreed to relevant General Ledger account balances

18. How it Works A Typical HB&P Arrangement • Financial Reporting Cycle: • Management retains responsibility for accuracy and completeness of financial statements • HB&P prepares monthly financial statements that are reconciled to appropriate source documents and well-supported by meaningful workpapers • Other management and financial reports are designed to meet specific needs of client management • Financial and management reports can be printed, emailed, viewed online, etc... • HB&P meets with client management to present financials and help interpret results • Client feedback is incorporated into financial reports to ensure that reporting meets the ever-changing needs of the client.

19. Benefits of a HB&P Solution What’s in it for you? • A team of accounting and financial experts working on your behalf to provide best-in-class accounting and business processes • Ability to implement state-of-the-art Microsoft Great Plains eEnterprise software at a fraction of the cost of purchase • Anytime/Anywhere access to meaningful decision-driving information • Latest technology, continually updated and improved

20. Benefits of a HB&P Solution What’s in it for you? • Higher level of internal control • Efficient coordination with year-end audit and tax firms • Overall cost savings vs. traditional accounting department models • You and your team can focus on your organization’s core functions

21. Presented by W. Andrew Powell Audit Partner, Halt, Buzas & Powell, Ltd. March 16, 2005