Business product outsourcing, or BPO, is a process of removing certain parts of a company and having those functions performed by an outside vendor. Financial BPO is a specific type of back office outsourcing where a third party handles some or all of the money aspects of the company. This type of BPO is very common in smaller businesses and is becoming much more common in larger ones. The overall goal of a financial BPO is reducing the cost of performing certain business tasks to allow more money for other parts of the firm.
Outsourcing is the process of taking something a business could do on its own and having a different company do it instead — this is generally a cost-saving measure. The third-party companies specialize in a process and, therefore, do it more efficiently and cheaply. For example, if a company only builds screws, it can assemble a wide range of types and sizes of screws faster than a company that makes desks. So, the desk company buys the screws for less than if it chose to make them.
Most companies use some amount of BPO. It is very uncommon for a company to produce every little bit of its final product and provide every aspect of its sales, service and marketing. Even if a company uses a call center to route customer complaints, tech support, sales or other common call types, that is a type of outsourcing.
The above types of BPO relate to the manufacture and sale of products and are commonly called front-office BPO. Financial BPO is a back-office process, meaning it is a section of the company that is separate from the consumer part. The back office covers internal matters like computer networks, human resources and accounting.
Financial BPO is the outsourcing of departments like accounting or payroll. Smaller companies often use outside accounting and payroll companies simply because they do not possess the money to hire people specifically for those positions. Larger companies will use financial BPO as a method of cutting costs since the payment for these services is generally based on the use of the services.
When a company needs financial services, specific tasks are relayed to the financial BPO vendor. These tasks are performed and paid for as they are needed. When the company doesn’t need anything, it doesn’t pay for services. This is in contrast to a typical business model where the company maintains a department and a staff that it needs to pay all the time.