Financial Spreading Outsourcing: Streamlining Back-office Functions for Cost and Accuracy

Financial Spreading
Financial Spreading

Financial institutions, credit unions, and other lenders must pay special attention to financial spreading. They must transfer the financial information of their borrowers to a specialized software solution for further analysis. Lenders cannot indulge in credit analysis and informed decision-making without financial spreading. A few large-scale banks might have in-house experts to perform back-office tasks related to spreading. However, not every bank might have the resources or funds to hire a dedicated team of financial experts for spreading. This is where financial spreading outsourcing services come into the picture. Continue reading to understand how financial spreading outsourcing can help organizations streamline back-office functions for cost and accuracy.

Demystifying Financial Spreading

It is essential to understand the process of financial spreading before delving deeper. It is the process of transferring the financial details of a borrower to a lender’s spreadsheet or any other software solution. Moody’s CreditLens, nCino, CROWE, CLOSER, William Stucky, Black Mountain, Optimist, Bukers, CASH Suite, and many other spreading solutions are used by financial institutions. These tools are used by organizations to extract, organize, and analyze financial data from different sources. Spreading involves collecting and organizing data from income statements, balance sheets, and other financial documents.

Financial spreading is the initial step in credit analysis, loan processing, and other processes. You cannot make sense of financial data without spread. It spreads out the financial data so that it can make sense to analysts and loan processors. Lenders often spread financial data of borrowers dating back several years. They do so to determine the borrower’s creditworthiness and the previous years’ financials. Financial spreading gives a real-time view of the borrower’s financial position, which is used for credit evaluation and risk management. Ratio analysis, collateral valuation, loan underwriting, financial reporting, and many other back-office operations are also related to Financial Spreading.

How Financial Spreading Outsourcing Can Help Streamline Back-Office Functions?

As discussed above, financial spreading is the foundation for several operations. It has become indispensable for lending institutions in today’s high-risk business environment. However, every financial institution might not have the talent required for financial spreading. For the same rationale, lenders prefer third parties to help them with financial spreading software solutions and other operations. Here’s how financial institutions (lenders and credit unions) can benefit from financial spreading outsourcing:

Workflow Optimization

Financial spreading outsourcing can help lenders optimize their workflows. Back-office operations can be simplified with the help of outsourcing services. A lending institution can move redundant or time-consuming processes to a third party, thus simplifying the workflow. When redundant tasks are outsourced, in-house employees focus only on core operations. Back-office operations can never be streamlined when employees are under pressure due to redundant and time-consuming tasks.

Must Read: Algorithmic Advantage: Unlocking the Power of Machine Learning in Banking

Reduced Costs for Back-Office Operations

Workflow optimization involves removing unnecessary tasks and simplifying the current tasks. It leads to saved costs on different operations. Also, you need not hire in-house financial experts for every back-office operation, as some are being outsourced. Besides hiring in-house financial experts, lenders spend a fortune on training and onboarding. Luckily, these costs are eliminated once you streamline operations with the help of an outsourcing partner.  

Improved Risk Management for Lenders

Several back-office operations in lending institutions are related to risk management. For instance, credit analysis is a process to reduce the risk of default from the borrower’s side. Similarly, credit unions indulge in credit analysis to reduce the risk of non-payment. Third parties offering financial spread services have a dedicated team of experts. These experts have decades of experience in risk management and loan processing. Besides completing financial spreading tasks, they will help lenders identify and mitigate risks.

Technology Integration

Third parties offering financial spreading services can help lending institutions integrate technology into their back-office operations. For instance, a lending institution can benefit from automation technologies. Mundane back-office functions can be automated to reduce the chance of human errors. Consider a lending institution where loan processors rely on manual credit analysis. A simple non-judgment in the creditworthiness of the borrower can lead to an increased risk of default. It is better to use new-age software solutions that reduce the chance of human errors to almost zero.

Third-party service providers can help adopt technology on a wide scale for back-office functions. It will lead to improved accuracy and efficiency of financial spreading-related tasks. Not to forget, lending institutions have to spend a fortune to develop in-house IT infrastructures. It is better to benefit from the IT infrastructure of a third party while saving on operational costs.  

In a Nutshell

Financial spreading can be a challenging task for in-house employees. Loan/credit processors cover business, personal, credit bureau, borrowing base, and global cash flow spreads. You can reduce the burden of mundane back-office functions by choosing a reliable outsourcing partner. It helps improve the accuracy of back-office functions and saves operational costs. Outsource financial spreading-related tasks now!