Strategic Outsourcing of Financial Accounting Function, Case of Virtual CFO Services in Sri Lankan SMEs
Keywords:Accounting, Strategic Outsourcing, Virtual CFO, SMEs, Sri Lanka.
Resilience to dynamic business environment has become prime important in the current pandemic context. Strategies that enable organisations to become cost effective and efficient are decisive factors for survival. Emphasis given in this study for Small and Medium Enterprise (SME) sector. A significant amount to country’s Gross Domestic Production is contributed by SMEs in Sri Lanka. It is vital for SMEs to withstand the short term economic downturn and be financially robust while protecting the revenues. Previous studies have found the importance of strategic vision for SMEs to enhance competitive edge over the competition. Strategic Outsourcing of Financial Accounting has specific advantages for SMEs. Financial Accounting Outsourcing and Virtual Chief Financial Officer (VCFO) services are extensively used in the international context. They are also adopted to some extent by large companies and conglomerates in Sri Lanka. Further it was evident that dynamic capabilities such as cloud accounting, advance management accounting practices, accessibility to financial information and data driven decision capabilities are hard and costly to organically build in-house. Literature evident supports that through strategic outsourcing of financial accounting function, SME’s could improve their performance and become competitive by focusing on their core business. This study includes a review in to the Outsourcing of Financial Accounting as a Service and how strategic ‘fit’ could be achieved in application with specific focus on SME sector in Sri Lanka. The Concept of Shared Service Centers and its development to Business Process Outsourcing services and further extending to Virtual CFO services is discussed in this paper. It was evident that a practice gap exists in adopting strategically motivated financial accounting outsourcing in SMEs sector of Sri Lanka.