Transparent Thinking

For Fund Accounting

Is outsourcing to a fund administrator right for you?

Is outsourcing to a fund administrator right for you?

Time is money, sure, but it’s also seemingly scarce. There aren’t enough hours in a day, so It’s understandable to see the appeal of outsourcing your back office to a fund administrator or part-time CFO.

Here are five reasons for, and against, outsourcing.

Advantages to using Fund Administrators and part-time CFO’s

  1. Expertise/Convenience. Administering a fund is no simple job. If you want to focus your energies on what you do best, having someone else do this heavy lifting could make sense. It’s more convenient too.
  2. Unforeseen circumstances. Perhaps you suddenly find yourself without a CFO or Controller. Engaging a third party could be a fast, safe way to right the ship.
  3. Objectivity. It happens to the best of firms. Sometimes internal politics can create distractions so having a third-party administer the funds adds an objective voice to conversations.
  4. Compliance. Regulations and filings can change overnight and staying on top of them all can burden already lean staffs. A competent fund administrator or part-time CFO will always know about the latest regulations as soon as they’re made public.
  5. Scalability. If you expect your firm to experience growth spurts from time to time, then having third-party professionals on your account may help you scale faster with less heartache.

Reasons to manage your own back office

  1. Control. Let’s face it, when senior management is liable for a fund’s financial disclosures, they often want to look to their own team members to make sure the job is done right.
  2. Deliver transparency. Similarly, ensuring transparency and being in control go hand in hand. Getting the attention of someone responsible for reporting is a lot easier when that person is within arm’s reach.
  3. Reliability/Timeliness. Since fund administration teams often handle more than just your account, at times it can be challenging to get timely answers to critical management team questions.
  4. Continuity/Turnover. Fund administrators often have high employee turnover, so you don’t want to find yourself re-training new consultants every six months.
  5. Attribution: When fund administration is done inhouse you can certainly better understand who's performing, who's not, and why.

Back office outsourcing is certainly not for everyone, but for some there are definitely compelling reasons to turn to a third-party fund administrator or part-time CFO. On the other hand, many firms find it’s hard to beat the control, transparency, and reliability of their own back office team.

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