Finance and accounting outsourcing benefits for biopharma companies
INSIGHT ARTICLE |
Biopharma companies have outsourced key operational, research and production functions for decades. However, now many growing organizations are increasingly implementing finance and accounting outsourcing (FAO) strategies to access more effective tools and experienced resources than they may have access to internally. The strategy helps biopharma organizations strengthen the finance function, while allowing company employees to focus on their core competencies: innovation, drug development and brand management.
Few sectors are more accustomed to outsourcing than biopharma as these companies have outsourced clinical trials management for more than 20 years, and drugs are rarely developed without input from an outsourced provider. Typically, early-stage companies are more aggressive with outsourcing, developing relationships with third parties to manage functions, such as contract manufacturing, sales, technology infrastructure, and most recently, the finance and accounting function.
The FAO framework is a very flexible approach, with services designed to fit a wide range of finance and accounting needs for biopharma companies. Often, organizations retain a senior-level finance executive or chief financial officer in-house to focus on investor relations, raise capital and manage strategic initiatives, while leveraging an FAO provider for financial accounting and reporting, maintaining books and records, and ensuring compliance. Alternatively, an FAO provider can also provide senior-level support, in addition to more traditional accounting services.
Many midmarket and emerging companies utilize bulky spreadsheets or highly inefficient tools and processes for finance and accounting functions, such as time and expense reporting and closing the books. However, FAO providers give companies access to emerging technology solutions and cloud platforms that increase accuracy, efficiency and security. Outsourcing providers commonly leverage cloud-based bill paying, accounting, time and expense, and reconciliation tools to enhance key functions across the organization; combined, these help ensure compliance and financial reporting capabilities.
Another key benefit outsourcing provides for biopharma companies is solving personnel challenges. Full-time resources are expensive, especially for early-stage companies, where cash flow is a challenge. For example, to attract a top-tier CFO, a company may have to consider an equity and cash combination to attract and retain this type of talent. That may not be a desired framework for company leadership, given the potential for growth.
In addition, finance and accounting issues and challenges change rapidly, as early-stage biopharma companies evolve. The decision about when a company needs full-time talent and when to leverage outsourcing is a key one in the growth of the company. FAO provides fractional employees, such as controllers, accounts receivable clerks, accounts payable clerks or accounting managers, thereby deploying the right resources at the right time and for the appropriate number of hours; this allows a company to scale with growth, without investing in full-time resources before the infrastructure can support them.
Biopharma companies can leverage the talent and resources of FAO providers to help ensure their financial accounting and reporting needs are being handled appropriately. Until they reach a certain size and scale and commercialization, it’s difficult to apply or employ the necessary finance talent in a full-time capacity. Companies will likely move some finance and accounting functions in-house as they commercialize, but there still may be some facets that might make financial and operational sense to keep outsourced.
Management guru Tom Peters famously stated, “Do what you do best, and outsource the rest.” Increasingly, biopharma companies are focusing on their core competencies of developing or identifying drugs to license, innovating, and managing their intellectual property, while outsourcing noncore finance and accounting functions to trusted providers.