Accounting outsourcing is one of the better ways of reducing the operational costs of your accounting firm, increasing productivity, driving efficiency, and boosting profitability. You will find all the information you need to make the most of outsourcing accounting services on this page.
Outsourcing allows firms to focus on their core competencies while specialized teams handle routine and time-consuming tasks. It helps streamline processes, reduces the risk of errors, and improves compliance with regulatory standards. Additionally, outsourcing partners often bring advanced technologies and best practices that might otherwise be cost-prohibitive for smaller firms, enabling them to compete more effectively in the market.
The shift towards accounting outsourcing also addresses challenges such as talent shortages and high turnover rates in the accounting industry. By tapping into a global talent pool, CPA firms can ensure they have access to the expertise needed to deliver high-quality services to their clients. Moreover, outsourcing provides a solution for managing peak periods without overburdening in-house staff, thereby enhancing overall firm performance and client satisfaction.
As Maria from The Sound of Music aptly put it, let us start at the beginning, a perfect place to start; let’s quickly begin by discussing outsourcing.
Outsourcing is a work engagement model in which a third party performs tasks on behalf of its clients. This means the third-party provider’s employees will perform duties, handle operations, or provide the necessary support either offshore or onshore. They will be assigned client work as a team or individually and will sit out of the outsourcing provider’s delivery center.
Key Points to Understand About Outsourcing:
The top outsourcing objectives is ‘cost saving’. Organizations/businesses no longer have to hire in-house employees for specific tasks/profiles, which are outsourced, which means the infrastructure costs also go down. Taken together, there are plenty of cost savings to be experienced because of outsourcing.
The other significant benefit is the flexibility it offers, which essentially means clients can scale their services up or down on a need-based basis. Outsourcing can be a permanent business practice or a temporary one.
Outsourced accounting for CPA firms is hiring an accounting outsourcing services provider to manage all or some of the accounting functions of your firm’s clients. These functions can include but are not limited to:
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Virtual Accounting: Involves hiring remote accountants to work directly with your firm. They handle tasks like bookkeeping and tax preparation online, acting as part of your team but from a different location.
Accounting Outsourcing: This involves hiring an external firm to take over specific accounting functions or provide a full range of services. This can include both remote and on-site work, often using a team of professionals to manage tasks on a larger scale.
In short, virtual accounting is about remote individual accountants, while accounting outsourcing involves a whole firm taking over your accounting needs.
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There are plenty of reasons why CPA firms should look at outsourcing their clients’ accounting functions:
Build Capacity: Take a closer look at the figure. 47% of firms are still focused on offering compliance services. While most firms talk about moving to advisory services, only 29% of firms are taking on a more advisory role for their clients. One of the reasons for their inability to add advisory services to their portfolio is their lack of resources.
The accounting industry suffers from a severe talent shortage, which means it doesn’t find the time to become advisors to its clients. Compliance tasks take up most of their time. Scaling its team with outsourced accountants is a pragmatic solution. This team works as an extension of its in-house team and manages compliance tasks. This frees up time for its internal teams to offer advisory expertise to clients.
Cost Savings: Post-pandemic, firms are struggling with downward price pressure on services.
It is right up there in the list of the top 10 challenges. Clients will expect your firm to do more with the existing rates or offer discounts on their current rates. As can be imagined, this does not bode well for your firm’s profitability.
The question is – how do you keep generating revenue from your services? The simple answer is to bring down the operational costs. Unfortunately, the talent shortage means accountants are in great demand, and therefore their salaries are steep.
When you outsource accounting and bookkeeping services, you can hire accountants at far lower rates than accountants who might be on your payroll. These accountants will be working from a delivery center, which means you are also saving on your infrastructure costs. These savings mean the downward price pressure will not affect your profitability.
Economies of Scale: You can scale your team quickly, affordably, and flexibly without going through a long recruitment and training cycle. Scaling your services means getting the ‘economies of scale advantage. ‘ Get more work done and earn more revenue, ergo more profits.
Scalability also means you can transition from a small firm to a mid-sized firm and beyond. All firm owners aspire to scale their services and thereby grow their firms. Accountancy outsourcing services help set the ball rolling in this regard.
Talent Shortage: Difficulty in attracting and retaining skilled accounting professionals due to high demand and competition.
Regulatory Changes: Keeping up with frequent changes in tax laws, accounting standards, and compliance requirements can be time-consuming and complex.
Technological Advancements: The need to adopt and integrate new accounting software and technologies to stay competitive and meet client expectations.
Cybersecurity Risks: Protecting sensitive financial data from cyber threats and ensuring robust data security measures are in place.
Client Expectations: There is an increasing demand for faster, more accurate services and personalized financial advice, which requires firms to constantly improve efficiency and client communication.
Seasonal Workload: Managing peak periods, such as tax season, which can lead to overworked staff and the need for additional temporary resources.
Fee Pressure: Competition and client demands for lower fees can impact profitability, pushing firms to find more cost-effective ways to deliver services.
Remote Work Challenges: Adapting to remote work environments, maintaining team collaboration, and managing client relationships remotely.
Sustainability: Balancing environmental, social, and governance (ESG) responsibilities with profitability as more clients and stakeholders prioritize sustainable practices.
Also Read: How to optimize outsourced accounting and bookkeeping services for your CPA firm
Accounting firms opt for outsourced accounting services for several reasons.
Different CPA firms look at outsourcing differently. Some are already using outsourcing to take care of accounting functions, others are ambivalent about outsourcing (sitting on the fence), and others see outsourcing negatively. They foresee a range of problems with outsourcing. Let us take a look at them and address them or, to be more specific, bust these myths:
This is a very genuine concern. But, if you properly approach your outsourcing strategy, you won’t have to worry about your employees being worried about losing their jobs. From the get-go, make your in-house team of accountants a part of this decision. It would help if you made it very clear to them that outsourcing commoditized and time-consuming compliance tasks will only be a boon rather than a bane.
It would also help if you pointed out that outsourcing will free up valuable time and resources and enable the in-house team to focus on high-margin, high-value tasks like advisory services. They will also have more time to develop their skill sets. It is essentially a win-win for everyone.
This is, again, a cardinal misconception. Outsourcing accounting firms, that is, CPA firms that outsource accounting services, are not losing visibility of their outsourced tasks. Reputed outsourcing firms strictly follow agreed-upon Service Level Agreements (SLAs), which means you can exercise as much (or as little control) as you wish. You can also track your work, its status, and any other information you might require. Therefore, monitoring your work and its progress is not a problem. In addition, outsourcing providers also sign NDAs, which means your work information is sacrosanct.
In a world where ransomware attacks are rife, and accounting firms are on the radar of cybercriminals, there is a genuine fear amongst CPAs about data security. Outsourcing means critical financial information is shared with outsourcing providers, and you should only share it if these firms show proof they comply with data compliance laws. The firm you work with should be SOC 2 Type II compliant at the very least. If you do the due diligence, you will find outsourcing providers implementing the security controls you are looking for.
How do you trust the assurances of accounting outsourcing companies? Good question. Everyone will say they are the best in business. Well, are they? Their professed successful record of accomplishment needs to be evaluated, and one of the better ways of doing this is by asking for client references. This is tricky because a reputed outsourcing provider has signed strict NDAs with clients, which might prevent them from sharing client details.
However, most of them will give you a free trial that will help you test their mettle. This is one of the better ways of ensuring you can build trust in the skillsets you will put to work on your accounting tasks.
Nothing can be farther from the truth. A modern outsourced accounting services provider focuses on hiring accountants with good communication and interpersonal skills. They are good at their jobs and can blend in seamlessly with a firm’s in-house team.
They are trained to do so and, more importantly, work independently without any micro-management whatsoever. What’s more, as an accounting firm that wants to add outsourced accountants to your team, you are the one who will judge the merits and demerits of the accountants before you choose them to work on your accounting tasks. Therefore, you can select the person who you believe suits your firm’s work culture best.
Now, let’s be honest here. Such problems are a worry if you work with just any outsourcing provider and not the best outsourced accounting services provider. So, how do you go about searching for the best provider?
The easiest step is to look into your inbox. You might have received numerous emails from outsourcing providers pitching their outsourcing services. The natural reaction is to think of them as spam and delete them to clear your inbox. Nevertheless, there is a chance that some names have stayed with you or that you have saved some of these emails.
Even if you haven’t saved these emails, there is a good chance that you will receive these emails regularly. Keep an eye out for them
The second step in the search process is entering search terms like ‘accounting outsourcing services,’ ‘best accounting outsourcing providers, USA,’ and so on. Google will throw numerous results at you. The key here is to look at the websites of the service providers and do some digging. Look up if they have won some recognition in their field and look at their testimonial section.
Also, talk to your peers and check whether they can refer you to an outsourcing provider offering accounting services. This is one of the better ways of searching for the best outsourced accounting services. You do not have to worry about the quality of services, as people you trust have already worked with them and can vouch for the provider’s services.
The ideal way of searching for an outsourcing provider is by creating a top ten list of providers you want to reach out to and then talking to them. Get a clear idea about their experience, expertise, engagement models, and charges. Try to get client references and talk about the scope and scale of accounting works they have managed to date.
The idea here is to ask the right questions to get the answers you want.
Also Read: What is a Virtual Outsourced Accounting Staff and How to Find the Perfect Match?
The questions are listed in no particular order, and all of them are important if you are going to work with the right outsourcing provider:
This is the most critical question that your firm should ask. You must understand the levels of expertise and skillsets of the outsourced accountants working on your project. Also, make sure they have the requisite experience in the kind of work you send their way.
The answer to this question helps you understand the number of years the provider has spent in US accounting outsourcing. This is important because a provider that has spent many years in the accounting domain has fine-tuned the operational processes to ensure no glitches and work is delivered on time, without any quality compromises.
You will find client testimonials on the website of the outsourcing provider. Please go through it and get in touch with the clients to clarify the quality of the provider’s services. You can also ask the outsourcing provider for clients’ names. But, it would help if you remembered that sometimes NDAs signed with clients might stop them from taking names.
There might be a scenario wherein you need to send more accounting work to the provider. What if the outsourcing firm cannot take up this work? In this scenario, you might have to say no to your clients, which might bring down your reputation a notch. So, it is advisable to ask this question to know whether the outsourcing firm can scale up the association with your firm when needed.
Typically, firms offer two main engagement models: ad-hoc and Full-time Equivalent (FTE). The former is the right choice if you want to outsource some accounting tasks and do not know whether the flow of work coming your way will continue unabated. The latter is a good choice when you have regular work flowing in, which demands a substantial number of person-hours.
This is again a critical question that needs answering. Check whether the provider has implemented the necessary security controls and is compliant with the required compliance frameworks such as SOC 2, GDPR, ISO 27701, and others.
The best-outsourced accounting outsourcing companies have set processes to help clients keep track of their work at all times. They are sent regular progress reports, and many times, these outsourcing firms use custom tracker apps to ensure clients are up to speed 24×7.
The rates might vary from one provider to another but do not fall into the age-old trap of evaluating a provider purely on pricing. Other parameters include security, accreditations, expertise, experience, turnaround time, and more. Yes, always get a quote and compare it with another provider. However, never lose sight of the other parameters
If you are working with an offshore accounting outsourcing firm whose delivery centers are located offshore, it is advisable to ask this question. The onshore manager becomes your point of contact, who you can reach out to in case of any problems you might be facing.
An important question; you must understand the TAT and whether it can be speeded up as per your requirements.
Is outsourcing accounting a good idea?
Yes, outsourcing accounting can be a strategic move to reduce costs, improve efficiency, and gain access to specialized expertise, allowing your firm to focus on core business functions.
What is accounting process outsourcing?
Accounting process outsourcing involves hiring an external service provider to handle various accounting tasks such as bookkeeping, payroll, tax preparation, and financial reporting.
When should (and shouldn’t) you outsource your accounting services?
Outsourcing should be used when costs need to be reduced, efficiency improved, or specialized skills obtained. If quality is not controlled or if it compromises client relationships, you can switch to a better outsourcing service provider.
When should I outsource my firm’s client accounting?
Consider outsourcing client accounting when your firm faces peak workloads, need to streamline processes or requires access to advanced technology and specialized expertise.
Is it cheaper to outsource accounting?
Outsourcing can be more cost-effective than maintaining an in-house team, as it reduces overhead costs such as salaries, benefits, and training while providing scalable solutions.
How risky is accounting outsourcing?
Risks include potential data security breaches and loss of control over processes. Mitigate these by choosing reputable, experienced outsourcing partners with strong security protocols.
What are the benefits and challenges of outsourcing accounting for a company?
Benefits include cost savings, improved efficiency, and access to expertise. Challenges involve managing quality control, ensuring data security, and integrating outsourced services with existing operations.
Who benefits from outsourcing accounting?
CPAs, accounting firms, and businesses of all sizes benefit from outsourcing by gaining specialized skills, reducing operational costs, and enhancing service quality and efficiency.
How effective is outsourcing accounting?
When done correctly, outsourcing accounting can be highly effective, leading to increased accuracy, faster turnaround times, and improved overall financial management.
Which company is best for outsourcing accounting?
The best company for outsourcing accounting depends on your specific needs. Look for providers with a strong reputation, industry experience, robust security measures, and positive client reviews.
What should I consider when choosing an accounting outsourcing partner?
Consider their expertise, security measures, technology, cost structure, and client testimonials. Ensure they align with your firm’s culture and can meet your specific accounting needs.
Creative and enthusiastic, Shweta turned into a marketer for her independent ventures long before she formally joined the realms of QXAS marketing team. Alumni of the University of Delhi and MICA - school of ideas, and with experience in creating content for multiple niches, Shweta now creates content and strategies to chart the changing landscape of the accounting industry.
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