Mid-market companies operate in a challenging environment. They expect growth while needing to control costs. Compliance requirements are increasing. Finance leaders must provide timely reporting, accurate forecasts, and tighter oversight, all with a limited number of staff. Finance and accounting outsourcing offers a practical solution to meet these challenges. It transfers specific finance processes to a specialized external partner while leadership maintains strategic control.
This guide outlines what finance and accounting outsourcing is, its functions, its benefits for mid-sized businesses, the risks involved, and how to choose a provider.
What is finance and accounting outsourcing or F&A outsourcing?
Finance and accounting outsourcing (FAO) is the practice of assigning specific finance processes to a third-party provider to improve efficiency, strengthen controls, and lower operating costs. The external team handles agreed functions according to documented service levels and reporting standards.
Many companies start with a limited scope, such as bookkeeping or accounts payable. Strategic F&A outsourcing can go further and include full ownership of finance cycles.
The scope of FAO often includes:
- Procure-to-Pay
- Order-to-Cash
- Record-to-Report
- Tax compliance
- Financial planning support
Staff augmentation places individuals under internal supervision. In contrast, accounting outsourcing operates under structured delivery models with clear accountability and measurable outcomes.
Key Takeaway
Finance and accounting outsourcing shifts defined processes to a structured external delivery model while leadership retains oversight.
Why mid-market companies are turning to F&A outsourcing
Finance leaders in mid-sized firms face structural pressure. Internal teams must support expansion, maintain audit readiness, and improve reporting accuracy without expanding fixed costs.
1. Rising cost of in-house finance teams
Hiring experienced accountants takes time and capital. Compensation levels continue to rise across markets. Outsourcing introduces a variable cost structure and reduces recruitment dependence.
2. Increasing compliance and reporting complexity
Multi-entity structures require consistent consolidation and documentation. Specialized accounting outsourcing services provide trained resources who work within established compliance frameworks.
3. Growth without operational bloat
Revenue growth often leads to higher transaction volumes. Internal teams struggle when manual work increases. F&A outsourcing allows companies to scale transaction processing without expanding permanent staff.
Key Takeaway
Mid-market companies benefit when transactional workload begins to limit reporting quality and close timelines.
You can also read: 5 Startup Accounting Mistakes That Can Kill Your Growth
Select an element to maximize. Press ESC to cancel.3 Core finance functions you can outsource to offshore accounting firms
The scope of finance and accounting outsourcing varies according to organizational maturity and control preferences.
1. Core transactional functions
Transactional processes are the most common starting point. These include:
Accounts payable processing
- Accounts receivable management
- Bank reconciliations
- General ledger entries
- Payroll processing
These functions follow standardized workflows and are suitable for structured outsourcing models.
2. Mid-level accounting functions
Once trust and governance are established, companies expand their scope. Common mid-level functions include:
- Financial statement preparation
- Month-end and year-end close support
- Fixed asset accounting
- Corporate tax return preparation
Structured documentation supports consistent output and audit readiness.
3. Strategic finance functions
Some providers extend into higher-level support:
- Budget preparation
- Cash flow forecasting
- Management reporting
- Virtual CFO support
These services supplement internal leadership rather than replace it.
What are the top benefits of outsourcing finance and accounting functions for mid-market companies?
Mid-market finance teams often face increasing workload without proportional headcount growth. Reporting expectations tighten, transaction volumes rise, and compliance requirements expand. In that context, the benefits of finance and accounting outsourcing are best understood through clear operational impact rather than broad claims.
The key advantages are outlined below.
1. Cost optimization
Running an internal finance function results in certain fixed costs, which include salaries, benefits, infrastructure, and training, and when the workload goes up, extra hiring is required, thereby increasing the fixed costs.
Outsourcing transforms these fixed costs into a defined service cost. Staffing continuity, training, and labor management are partially assumed by the service provider, which reduces personnel pressures and enhances cost predictability.
2. Process efficiency
Almost all month-end closing and reporting periods are affected by manual processes and lack of consistent documentation. In addition, delays are compounded when the reconciliation/approval process lacks clearly defined deadlines.
Outsourced accounting services use standardized workflow processes with defined delivery schedules to correct these deficiencies. Standardizing the documentation and reviewing processes will significantly reduce rework, which shortens the closing cycle while ensuring the accuracy of the reporting process.
3. Improved controls and compliance
Typically, the demand for increased compliance and control becomes more significant as an organization grows or expands geographically. This could present difficulties in achieving segregation of duties or providing audit documentation for smaller organizations or businesses where they may not have sufficient internal resources.
Structured outsourcing models utilize service level agreements (SLAs) and clearly-defined controls. Additionally, structured outsourcing models contain clearly-defined approval matrices to assist in providing increased transparency, as well as reduced risk.
4. Access to technology
Upgrading technology can be expensive and labor-intensive for companies in the mid-size segment. Also, a number of the new automated technologies need to be maintained and some require technical skills.
Service providers that have outsourced their F&A operations typically include ERPs as part of the service. The advantages to the business of this type of provider are that they allow better visibility into their processes and there is a standard method for reporting, all without requiring the business to invest in new capital assets.
Well executed and governed, F&A Outsourcing will improve cost discipline, process excellence and financial control for larger mid-market companies.
Debunking 5
Key Takeaway
Governance, technology capability, and documented controls determine outsourcing success.
You can also read: How CFOs Can Drive Growth in 2026 with Smart SaaS Accounting Outsourcing
Debunking 5 common misconceptions and myths about finance and accounting outsourcing
Outsourcing decisions deserve careful evaluation. Many concerns surrounding finance and accounting outsourcing stem from assumptions rather than operational reality. The following misconceptions often surface during internal discussions.
Here are the five common misconceptions around F&A outsourcing, debunked:
Myth/Misconception | Reality Check |
|---|---|
❌Outsourcing exposes sensitive financial data to higher security risk. | ✅ Risk depends on governance standards, not physical location.
Reputable providers operate with encrypted data transfers, role-based access controls, and independent certifications. |
❌Control over reporting and approvals is lost once processes move outside | ✅Clear SLAs and reporting dashboards preserve visibility.
Execution may be external, but financial policy, final approvals, and oversight remain internal. |
❌External teams cannot match in-house quality standards. | ✅Quality is driven by process discipline, not office proximity.
Documented workflows and structured review checkpoints often improve consistency. |
❌Only large enterprises benefit from FAO. | ✅Mid-market companies often see stronger impact because lean teams gain scalable capacity without expanding fixed costs. |
❌Communication gaps make coordination inefficient. | ✅Defined meeting schedules, shared tracking tools, and clear escalation paths reduce friction and support steady collaboration. |
Key Takeaway
A disciplined provider evaluation reduces risk and improves transition outcomes.
Looking for an F&A outsourcing partner? Here’s how you can choose the right fit for your business
Provider selection directly influences the success of finance and accounting outsourcing. A structured evaluation helps separate marketing claims from operational capability. The checklist below highlights the key areas to review before entering into an engagement.
- Does the provider have relevant experience working with mid-market companies similar to yours?
- Can they demonstrate documented workflows and structured review controls?
- Are credible client references available for similar scope and complexity?
- Is the team proficient in your current ERP or accounting platform?
- Do they use workflow systems or automation to manage recurring finance processes?
- Are recognized data security certifications such as SOC reports or ISO standards in place?
- Is there a formal service-level agreement with clearly defined performance metrics?
- Will you receive structured reporting for visibility into task status and timelines?
- Is there a documented escalation process for issue resolution and accountability?
A provider that satisfies these criteria is more likely to deliver consistent performance and maintain governance discipline throughout the engagement.
Compliant and secure F&A outsourcing with Datamatics BPM—outsource your key finance functions today!
Successful finance and accounting outsourcing requires an operational model rather than a cost-cutting strategy. For mid-market companies, clearly defining the scope of service, establishing governance processes, and selecting the appropriate outsourcing partner have been critical in showing consistent reporting discipline and demonstrating the benefits of achieving the desired outcome.
Datamatics BPM finance outsourcing operations employ consistent processes, secure delivery models, and technology-enabled workflows which create a supported framework. Datamatics BPM has many years’ experience working with mid-size and growing companies to develop scalable finance operations for a variety of industries. As a result, Datamatics BPM is dedicated to providing consistent and compliant systems. In addition, if your financial employees are overwhelmed during peak periods or as a result of transaction volume, Datamatics BPM can establish a supported finance outsourcing workflow and processes for you.
Get in touch with Datamatics bpm to check whether finance and accounting outsourcing aligns with your growth plans.
FAQs
1. What is FAO in simple terms?
FAO, or finance and accounting outsourcing, refers to transferring defined finance processes such as accounts payable, reconciliations, and reporting to a specialized external provider under structured service agreements.
2. Is finance and accounting outsourcing suitable for mid-market companies?
Mid-market companies often benefit because they operate with lean teams and limited redundancy. Outsourcing provides scalable support without the need for significant internal hiring.
3. How do companies maintain control when outsourcing finance functions?
Control remains with internal leadership through formal service-level agreements, approval hierarchies, and structured reporting. Outsourcing changes execution ownership, not financial governance authority.
4. What functions are most commonly outsourced first?
Companies typically begin with transactional processes such as accounts payable, accounts receivable, reconciliations, and payroll before expanding into broader accounting support.
Harsh Vardhan
