Franchise groups are fed up with relying on financial data that is often inaccurate and out-of-date, but unfortunately, many find themselves trapped with limited options to break free from this frustrating cycle. The cost and demand of local accounting talent has made it too expensive for most businesses to solve the problem internally. To remove financial reporting hurdles, get reliable data in the hands of those that need it, and smash through plateaus in business growth, franchises are now looking to outsourcing as a more viable remedy.

There are typically two distinct models of external accounting provision that operate here in Australia – outsourcing and offshoring. There has been a significant jump in the adoption of outsourcing and offshore labour over the past decade, as Australian businesses are realising the huge upside in charging trusted third parties with non-core business functions. The primary motivators for Aussie businesses to outsource are cost reduction, flexibility, speed to market, access to tools and processes, and agility.

What typically comes to mind when discussing ‘outsourcing’ or ‘offshoring’ is low-cost labour in faraway countries. While this can be one element of outsourcing, it is often far more nuanced than that. And a very clear distinction can be identified between outsourcing and offshoring.

Outsourcing assigns the responsibility of achieving a specific outcome, with your outsourced partner delivering a total solution that they are accountable for.

Offshoring involves contracting a lower cost resource to execute specific tasks. However, the overall success of an offshore engagement still resides within the Australian business.

In simple terms, offshoring provides a resource, outsourcing provides a solution.

Therefore, it is essential that not only the type of service you're seeking to outsource meets the needs of your growing business but also how the service is provided. Without a robust structure to operate within, offshoring can end up costing you more than it saves.

But, by combining skilled resources with onshore oversight and documented processes, a business is far more likely to reap the benefits of cost-effective outsourcing than they can receive from simply offshoring the work to get a task done. We refer to this composite as the Hybrid Model.

A Hybrid Model better aligns you and your outsourcing partner. Giving them the responsibility of providing a specific outcome, while maintaining a consistent quality and service. Delivering you the cost savings of offshore execution and minimising the constraints on existing employees. This model may not be suited to all types of outsourced functions, but is particularly powerful when applied to accounting and financial management.

The Hybrid Accounting Model

In recent years, the number of Australian accounting firms looking overseas to offset costs and maximise output has grown exponentially. With some reporting savings of up to $47,000 per employee thanks to utilising offshore labour – nearly 50 per cent cheaper than acquiring local Australian staff.

Within Australia there’s also been a significant drop in tertiary-level graduates with accounting-based qualifications. Resulting in a steady decline in new professionals entering the industry since 2014. The growing demand for quality finance and accounting staff, combined with dwindling supply, means that the cost and difficulty of hiring and retaining good people has lifted considerably over the past decade.

While many firms are now securing offshore labour to complete repetitive accounting tasks, very few are harnessing the full potential of a truly Hybrid Accounting Model. This may be due to their size, existing process inertia or lack of knowledge resources.

So, what does a true Hybrid Accounting Model look like? It consists of:

An Australian Principal

An expert that understands your business intimately, as well as its distinctive needs. You need someone who can ‘look under the hood’ and offer an objective analysis. A seasoned professional to identify potential issues and risks, and help you move forward effectively into the next phase of growth.

They should have a wealth of experience in operational accounting and financial management. With a proven track record of helping similar businesses streamline reporting, improve financial management processes and scale efficiently.

Their role is to develop tailored processes specific to your business and work together with the offshore team to deliver a complete solution. One that is outcome driven and provides you with consistent, accurate and timely financial data.

Offshore Talent

Offshoring has become an increasingly popular practice, but it represents more than just a cost minimisation exercise. By expanding the talent pool, businesses gain access to a wider range of skills and attributes. Australia's dwindling resources and rising labour costs have made it difficult to find and retain high-quality talent, making offshoring an increasingly attractive option.

An integral quality for your Hybrid Accounting provider is a dedicated offshore execution team. One that is full of highly skilled individuals collectively working towards a common goal – the implementation and ongoing management of best practices that reduce time wastage, and improve data quality and transparency, in your business.

Behind every successful offshore operation lies a crucial, yet all too often neglected, ingredient – a trusted leader. One that values and nurtures a culture that’s focused on talent recruitment, career development and empowering the team to deliver. Ultimately driving the success of all outsourced and offshore activity. Ensuring this leadership is highly competent and deeply involved within the discovery process will help garner the best possible outcome for your business.

A Complete Solution

You rely heavily on timely and accurate financial data. It drives strategy, allocation of resources, day-to-day operations, investment (and re-investment), and so much other essential business activity. Trusting this information is integral to the success of any business.

A Hybrid Accounting Partner should seek to learn every intricate detail of your business. Tailoring their processes, technology and people to meet its specific needs and operate as an extension to your team. Thus, providing the operational accounting and reliable data that helps you drive success.

Case Study - Blooms The Chemist

Blooms The Chemist, a leading Australian retail pharmacy chain, faced challenges with inconsistent and inaccurate financial reporting due to the do-it-yourself bookkeeping model running in each store.

Misunderstood or misinterpreted instructions meant there was no consistent accounting process delivered across the network. Resulting in costly rework and error-prone shortcuts and leaving them exposed to the risks of cash leakage and poor decision making.

It was also frequently left to the last minute, delaying the lodgement of Business Activity Statements (BAS) and negatively impacting working capital management. At store level, meeting monthly BAS meant receiving the GST refund prior to paying suppliers and other creditors. This simply wasn’t possible under the legacy model.

Even more damaging was that without a standard process for recording information and creating month-end adjustments, any information was essentially unusable for benchmarking or making network wide decisions.

To address all of the above issues, Blooms enlisted Aretex's Hybrid Accounting services in 2014, starting with a trial in a single store. The trial's success led to the service being mandated across all Blooms stores nationwide. Providing up to date financial data for informed decision-making, improved cash flow, and freeing up internal resources to focus on customer service. It also offered a cost-effective and scalable solution tailored to Blooms' specific needs, with a dedicated team that operates as part of their business.

The Hybrid Accounting Model has now become a key differentiator for Blooms in attracting new partners into their network.

What They Say

"Aretex is a critical partner in our network service delivery, providing incredible attention to detail in the bookkeeping, BAS and financial reporting for each of our stores. Giving us the comfort of knowing the network financials are consistent, timely and ATO compliant.

Seamless communication, their willingness to invest in us and a strong expertise has made Aretex extremely easy to work with - an important consideration when choosing the right outsourcing partner.

They've also proven their ability to operate at scale and to scale up without anyone noticing, reaffirming our confidence to work with Aretex across our growing network of stores."

If, like Blooms, you’d like a highly competent Hybrid Accounting Partner to provide your franchise with best-practice accounting and consistently accurate financial data, contact us today for a free discovery call.

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