Finance & Accounting Globalization

This blog will deal with globalization of the Finance & Accounting function.

Well if you are running a company and made a decision about staying away from handling finances, I wouldn’t blame you. There are a whole bunch of activities in that function with varying levels of complexity and dependencies. On a very broad level they can be classified into Procure to Pay, Order to Cash, General Accounting, Closing & Reporting, Treasury & Tax, Financial Planning & Analysis and Compliance. The activities are mentioned in their decreasing order of offshoring/ globalization propensity.

For most of the transactional activities globalization makes a pronounced impact since it does not require any high levels of intellect. These activities are typically offshored and are carried out by fresh graduates with minimal work experience. Then there are other activities which cannot be globalized since the laws in the head quarter country forbid certain types of data from being taken out of the geographical boundary.

Based on my experience in the past couple of years a trend that I have noticed is that small sized companies (Revenue < USD 5 Bn) and mid-sized companies (Revenue: USD 5 – 20 Bn) have typically globalized F&A activities to 3 locations, while large sized companies (Revenue > USD 20Bn) have globalized across 6 locations. 

(The trends are limited to technology product companies)

The locations are closely co-related to where the company has its customers (Since the company is bound to have significant operations to either cater to the customers or target them for potential sales). Another interesting trend is that there is at least one location to cater to each geographic theatre – APAC, EMEA, Americas. Typically the APAC region is catered to from India, China, Singapore, Australia or Malaysia; EMEA region from Ireland or UK; Americas from the HQ itself.

The Asian locations have matured significantly to handle global F&A activities. This trend can also be explained by large pools of talent available in these locations which makes them attractive for companies to set-up shop, F&A wise. I think this trend would continue to take place until most offshore locations become the F&A hubs for companies.

Author: Anand Tatambhotla, Consultant, Zinnov LLC

Blog: http://tatambhotla.wordpress.com/

LinkedIn: http://www.linkedin.com/in/tatambhotla