One of the most interesting articles I read last year was also one of the most obscure. Levi Strauss announced in July that they were outsourcing their entire Finance and Accounting function:
The move is the last part of Levi Strauss’ global productivity initiative, announced last year and designed to shave $175 million to $200 million annually from the company’s expenses.
Two things are remarkable about the announcement. First, instead of selecting functions such as Accounts Payable, Levi’s is outsourcing the whole enchilada. Second, it’s Levi’s. The company has been around since before Lincoln was president. These days, they operate a global wholesale and retail business that has far more complicated logistics than the average hoodie-wearing startup.
Shortly before Levi’s made its announcement, another article talked about accounting and finance productivity initiatives. While Levi’s chose to outsource, some companies are steadily improving their internal productivity:
Big companies such as Pilot Travel, New York-based Verizon Communications Inc. and GameStop Corp., of Grapevine, Texas, are among those using software to automate many corporate bookkeeping and accounting tasks.
Businesses use these programs to save time and staffing costs. Since 2004, the median number of full-time employees in the finance department at big companies has declined 40% to about 71 people for every $1 billion of revenue, down from 119, according to Hackett Group, a consulting firm.
Shown graphically, we see a clear trend:
I think we’ll continue to see substantial productivity gains for the next several years. For example, Verizon reduced its manual accounting entries by 35% in this year alone. Meanwhile, Levi’s bold outsourcing play will be watched carefully. And regardless of the approach, firms will continue find ways to run tighter ships.
We are in the midst of a once-in-a-lifetime labor shift in our profession. And while some might view developments as threats to the accountants, I think the opposite is true. None of us joined the accounting profession to enter data or to master spreadsheets. We joined to help build and run great businesses. And these changes are will not only afford us the time but they will also provide us with better data.
In upcoming posts I’m going to share insights about new accounting technologies and thoughts on why we should welcome our new offshore colleagues and robot overlords.