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.
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 wherein a third party performs tasks on behalf of their clients. This means the third-party provider’s employees will perform duties, handle operations, or provide the necessary support either offshore/onshore. They will be assigned client work as a team or individually and will sit out of the outsourcing provider’s delivery center.
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, online, and outsourced accounting can appear the same at first glance, but these terms should not be used interchangeably. However, the difference is simple – ‘All offshore/onshore accounting outsourcing is online or virtual accounting, but all online or virtual accounting is not outsourced accounting.
Virtual or online accounting is the process of an accountant delivering services through the internet. This can also be an employee working from home or remotely; but accounting outsourcing always involves using the services of outsourced accountants you do not employ. These are employed by accounting outsourcing companies and will be assigned to your firm’s accounting project. While the internet or the online provision of accounting services is central to accounting outsourcing, there is subtle difference between the two.
These days, post the pandemic, firms are hiring remote accountants or even creating a team of virtual accountants that are on their payroll but don’t work out of the firm’s offices. In such cases, the firm is not using outsourcing services, but its accountants work virtually. There are plenty of firms out there that are entirely virtual, meaning they might not have a physical address.
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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 they lack resources.
The accounting industry suffers from a severe talent shortage, which means they don’t find the time to become advisors to their clients. Compliance tasks take up most of their time. Scaling their team with outsourced accountants is a pragmatic solution. This team works as an extension of their in-house team and manages compliance tasks. This frees up time for their 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 lesser rates than accountants that 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 in super quick time, without going through the 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 firm. Accountancy outsourcing services help set the ball rolling in this regard.
Also Read: How to optimize outsourced accounting and bookkeeping services for your CPA firm
Accounting firms opt for outsourced accounting services for several reasons.
For most firms, the journey to accounting outsourcing starts with the need to cut costs and improve scalability during the busy season.
Outsourced accounting firms use this work model to manage basic-compliance tasks, but outsourcing also helps accounting firms reach their growth goals and get more clients on board.
In addition, when you are not busy with endless to-do lists, you can finally get more things done.
Here are a few reasons when accounting firms should start seriously considering outsourcing:
Accounting outsourcing is especially beneficial for small and medium accountancy practices looking for ‘specialist’ employees. Outsourcing opens access to a team of specialists at running compliance functions. You will not need to worry about staff vacations or unexpected absences with this option.
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 skillsets. 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 than 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?
Read on to know more.
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 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 take a look at the websites of the services providers and doing 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.
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