Fortune 500 companies could save $20 billion annually by sending 650,000 finance and procurement jobs overseas, according to a new Hackett Group report. By doing so, each corporation could cut costs by as much as $40 million in one year, concludes the study.

In fact, the strategic advisory firm says that each Fortune 500 firm could save even more—$116 million in annualized savings—if it sent many of its general and administrative (G&A) activities overseas. Assuming companies decide to take advantage of such outsourcing advice, their labor cost-cutting measures could affect 1.47 million back-office jobs in the next decade, the study’s authors claim.

Despite the potential savings, some companies are dragging their feet when it comes to sending finance and accounting jobs overseas. The reasons include negative assumptions about offshoring, the current premature state of the business process outsourcing industry, worries about the initial investment, and concerns about risk and compliance issues. Furthermore, some CFOs want to see other companies jump into the fray first, so they can prove to their own audit committees that they would be able to retain internal controls and meet Sarbanes-Oxley requirements, according to Hackett managing director Julio Ramirez. In a post-Sarbox era, “companies are a lot more risk averse,” he says. “Before moving, they want to see a lot of examples of companies and make sure those companies are successful.”

According to Hackett, which promotes the idea of offshore outsourcing as a way for companies to stay competitive in the global economy, finance chiefs need to take a second look at their business models. CFOs should determine whether their company could benefit from sending jobs offshore, and if the organization would realize the savings derived from labor arbitrage—which on average is nearing 60 percent—from sending jobs to low-cost countries.

Hackett officials contend that companies should evaluate outsourcing activities in the context of whether they are tasks that can be decentralized, are core to the business, and need to be close to the client base. Hackett based its findings on 14 years of benchmark studies that focus on outsourcing costs.

Widespread acceptance for finance and accounting outsourcing (FAO) is eminent, according to the Everest Research Institute. The independent research and analysis organization has predicted that the FAO market will grow by double digits in the next five years. The market has doubled during the past two years, with 175 FAO contracts signed this year, compared to 80 in 2004. “The momentum is there, and it isn’t going to stop,” says Phil Fersht, vice president of Everest’s business process outsourcing group.

In 2004, a CFO magazine survey of 275 finance executives said that 18 percent of the respondents were outsourcing jobs overseas. Of those that that either did or planned to send jobs overseas, 21 percent expected to outsource finance and accounting tasks.

Those outsourcing numbers are likely higher today, because in 2004, company executives were just starting to understand that the savings associated with offshoring were not a fluke, noted Everest. Currently, more than half of the Fortune 2000 companies send back office work of all kinds overseas, with FAO accounting for between 30 percent and 40 percent of cost reductions, adds Everest.

Still, will there be enough skilled workers and facilities available in other countries to absorb the outsourcing boom if the top 500 U.S. companies send their 1.47 million back-office jobs overseas? While Fersht isn’t sure, Ramirez says that the overseas market is gearing up to absorb ten times that amount. The skill sets, infrastructure, and technologies have vastly matured over the past few years, he adds.