Outsourcing of the finance function of companies in Malta : an evaluation

Abstract

Purpose: The main aim of this study is to determine an economic company size that is likely to utilise outsourcing within the finance function, whether wholly or in part. Going deeper, it aims at establishing the characteristics of companies that use outsourcing. Additionally, an assessment of the triggers and barriers of outsourcing is carried out as well as the triggers to adopt such practice. Design: A Multinomial Logistic Regression Model is used to examine the effect of the independent factors on whether a firm outsourced in the past, currently avails of outsourcing, or never outsourced within the finance function. The model is further complemented by statistical tests as well as two series of in-depth semi-structured interviews with service providers and with recipients or potential recipients of outsourcing. Findings: From the model, it was found that improved processes/service levels obtained from outsourcing together with the number of times external service providers are made use of had the greatest impact on the company status with regards to outsourcing. An analysis of the advantages and disadvantages showed that ensuring better compliance with regulatory requirements and addressing any lack of internal resources and staffing issues lead most companies to outsource. Conversely, the dependence on the service providers and the fact that success depends a lot on the service provider were seen as the main drawbacks of outsourcing. Conclusions: From the findings, it was determined that outsourcing is used across various types of industries and companies. On the other hand, it is the perceived benefits that will be derived from outsourcing and its previous level of sourcing activity that determines the type of company that will outsource. Value: Currently, limited research exists on Finance and Accounting Outsourcing in the local scenario. In fact, this study is the first to evaluate the outsourcing of the finance function of companies in Malta since Malta's accession in the European Union.