City of Hurst Finds Success, Savings in Outsourcing
See how some agency accounting departments are saving money and increasing transparency in a few simple steps
Accounting practices, by nature, are complicated tasks. For one, accounting is repetitive and often manual and routine, taking precious resources and personnel away from the core business of local governments.
This was a dilemma faced by the city of Hurst. Officials there wanted to find a low-cost, low-maintenance solution to time-consuming accounting tasks. They found the answer in outsourcing. The city of Hurst contracted with a private, third-party vendor to relieve the strain of day-to-day accounting chores.
The company that took in these functions for the city used a software database designed by Oracle that could handle large amounts of transactions more efficiently.
“Small or mid-size cities that can’t afford to have dedicated personnel or buy new finance computer software can benefit greatly from outsourcing this function,” says Anita Thetford, director of finances for the city of Hurst.
The initiative, which outsourced not only the city’s accounts payable duties, but also accounts receivable and payroll functions, eliminated a staff position at the city level, resulting in cost savings. Additionally, the plan freed staff to perform other, more essential and strategic government duties and allowed for tighter controls on the local budget.
Increased Transparency, Reduced Fraud
Using a vendor to manage transactions also increases transparency and reduces the possibility of fraudulent activities by improving process documentation, electronic audit trails, IT vulnerability, and real-time fraud detection. Local governments can often maintain safe control of cash flow cycles by retaining one or more knowledgeable staff to act as vendor liaison, which adds a layer of accountability.
Generally, savings earned from outsourcing range from 20 percent to 70 percent of the costs of in-house services.
Once a local government decides to further examine the implementation of a third-party vendor to oversee accounts payable duties and other financial management responsibilities, they should follow a plan of action to ensure a thorough evaluation, execution, and smooth transition of responsibilities to the service provider.
Use the steps below to get started on a path to creating a more efficient and safe financial management structure in your organization:
- Identify who will examine the possibility of outsourcing
- Review current functions to identify processes, staffing, risks and costs.
- Identify potential vendors
- Obtain approval from upper management or the governing body.
- Develop a request for proposals with detailed specifications of what is expected of a vendor, and an impartial system of rating submitted proposals based on specifications
- Follow the procurement process to solicit several potential vendors and select the top rated proposal
- Request approval to begin contract negotiations.
- Negotiate a contract using the competitive process.
Keep in mind that if the top-rated vendor isn’t willing to provide the best value, there are usually other qualified entities eager for the opportunity.
What appears at first to be a highly complex, specialized function is rarely more than routine processing that can result in expanded savings and transparency.