10 Common Myths of Outsourcing for Accounting & CPA Firms

Outsourcing has become an integral strategy for accounting and CPA firms, aiming to streamline operations and enhance efficiency. These approaches also enable firms to expand their global reach, driving growth and boosting profitability. However, despite their widespread adoption, several myths and misconceptions persist about outsourcing accounting staff in Accounting and CPA firms.

From concerns about job loss and compromised data security to questions about quality control and cultural differences, we will address the most prevalent myths surrounding outsourced accounting staff. We will explore the realities behind these misconceptions, exploring how these strategies can actually enable accounting and CPA firms to thrive in an increasingly globalized marketplace. 

In this article, we aim to debunk these common myths and shed light on the realities of accounting outsourcing services for accounting and CPA firms. By examining the facts and dispelling misconceptions, we hope to provide a clearer understanding of the benefits and potential impacts of these strategies on the industry. 

Debunking the 10 Most Common Outsourcing & Offshoring Myths:

Myth #1: Outsourcing and Offshoring Are The Same

There is a common misconception that outsourcing and offshoring are synonymous. Some think that outsourcing and offshoring both refer to the delegation of tasks and processes to another professional. This is true to some extent but does not completely have the same meaning. While both strategies involve delegating work to external entities, both have distinct differences. 

Reality: 

It's important to understand the nuances of the differences between outsourcing and offshoring to make informed decisions. Outsourcing accounting staff refers to delegating specific tasks or functions of a company to an external service provider. This can occur within the same country or across borders. Accounting outsourcing services involve hiring a third party to handle certain aspects of a business previously managed internally. On the other hand, offshoring specifically involves relocating operations or tasks to a foreign country. It entails moving a part of a company's operations or functions to another nation, typically for cost savings, access to specialized skills, or market expansion. 

For example, a U.S.-based accounting firm outsourcing its tax preparation work to a local service provider differs from offshoring the work to a team in India. Understanding these differences is crucial for making informed decisions. 

Myth #2: Outsourcing means quick and only cost-cutting for an Accounting Firm

The biggest myth is that outsourcing accounting staff solely equates to cost-cutting and is a quick fix for solving all financial challenges overnight. Outsourcing reduces the need for in-house staffing, training costs, and overhead costs. Also, outsourcing avoids technology and infrastructure expenses, as these resources are maintained by the end of outsourced accounting firms. While these factors help outsourcing reduce costs, they are not the only benefits one gets from it.  

Reality: 

While cost reduction is a significant advantage of outsourcing and offshoring, it is not the sole purpose. By offshoring accounting tasks, firms can save time and focus on more critical responsibilities like advisory services. Offshoring provides access to a skilled workforce that can handle routine accounting tasks. A CPA firm can delegate bookkeeping tasks to an offshore team, enabling their local team to concentrate on high-value client engagements. The benefits extend beyond cost savings, allowing the firms to optimize operations. 

Also, outsourcing doesn’t instantly reduce costs. It requires some time for the offshore team to understand the project flow and execution processes. Initial weeks to months might be spent on knowledge transfer and adjustment. It is advisable to start with a smaller offshore team to establish a working model and gradually expand based on success and comfort. Patience and effective communication are key to realizing the long-term cost benefits of outsourcing. 

Myth #3: Outsourcing or Offshoring is Only viable For Large Accounting Firms

This is among the most common misconceptions. Many often believe that outsourcing is only for large accounting and CPA firms. They simply make assumptions that small and mid-sized accounting firms wouldn’t benefit from this. The main reason for thinking so is that their financial requirements are less complex. 

Reality: 

Let’s break this myth. Outsourcing is not only for large accounting firms. This is a common misconception. In fact, outsourcing and offshoring are particularly advantageous for small accounting firms. Small firms often face resource constraints and need stability in their operations. Offshoring allows them to access specialized talent and services without investing heavily in hiring, training, and infrastructure. It provides a flexible and scalable solution for firms of all sizes, allowing them to focus on growth and client satisfaction. 

Myth #4: Outsourcing Jeopardizes My Client's Data 

Data security is the biggest concern for accounting firms. This concern sometimes prevents firms from choosing to outsource. They worry that outsourcing might jeopardize their sensitive information and data and increase the risk of data breaches and unauthorized access. 

Reality: 

Concerns about data security are valid but can be addressed with proper due diligence. It is essential to partner with a well-trusted offshore firm like Entigrity. As one of the trusted offshore staffing partner, Entigrity holds an ISO 27001:2013 certification and adheres to GDPR regulations. They place a high emphasis on safeguarding data privacy and security, having implemented robust IT and privacy policies. These measures guarantee the utmost confidentiality of client data. 

Myth #5: The Output is Not Up to The Mark When Outsourcing Accounting Tasks 

Firms may worry that outsourced accounting staff will not produce satisfactory results, as this increases the risk of errors and inaccuracies in the financial statements. They think that outsourcing accounting tasks might not be as precise as done by their in-house teams. 

Reality: 

“When we tell accounting firms that the pandemic has resulted in a notable shift toward offshore staffing, they are still skeptical and cautious of offshore staffing! Several firms have expanded their horizons and are now considering offshore outsourcing from a new perspective.” 

- Shawn Parikh, Founder & CEO of Entigrity Solution LLC 

For any accounting firm, quality is crucial regardless of whether tasks are outsourced or handled in-house. Reputable offshoring service providers like Entigrity implement multiple review layers and a buddy system, where an onshore team member guides and supports the offshore team. This collaborative approach ensures continuous improvement, and the output meets the desired quality standards. The offshore team is dedicated to delivering exceptional work that aligns with the firm's requirements and expectations. 

Myth #6: Outsourcing Means More Jobs Are Being Sent Overseas 

Offshoring leads to job displacement in another country. This is the most common misconception people often think. It follows with the belief that when firms offshore their certain tasks, they create job opportunities in the receiving country, reducing positions in their home country.  

With this, some even conclude that Outsourcing can negatively affect the country's economy. It has a complex impact on it.  

Reality: 

Offshoring is often misunderstood as a practice that directly hampers local employment. However, offshoring can contribute positively to the global economy by creating opportunities for skilled professionals in the local country and the offshoring destination. It allows firms to tap into a diverse talent pool and build mutually beneficial partnerships that can lead to innovation and growth for all involved. 

Offshoring can also benefit the onshore staff by providing opportunities to upgrade their skills and work on more value-based tasks. When certain routine or repetitive tasks are offshored, it frees up the onshore employees to focus on more strategic and complex responsibilities that require critical thinking, creativity, and decision-making skills. This shift in job roles can enhance job satisfaction and professional development for the local workforce. 

While outsourcing may lead to job displacement in specific sectors, it also fosters competitiveness and enables firms to allocate resources strategically. Moreover, outsourcing can help local firms focus on higher-value activities and contribute to overall economic growth. It is crucial to consider the broader financial perspective when evaluating the implications of outsourcing. 

It is important to recognize that offshoring is a strategic decision made by firms to optimize their operations and remain competitive in a globalized economy. While it can involve the relocation of certain job functions, it also opens new avenues for skill development and innovation, benefiting both the local and offshore workforce. 

Myth #7: Long-term Partnerships Can't be Established With Outsourced Accounting Staff 

One of the myths people often think about outsourcing is that it can be challenging to establish long-term partnerships with outsourcing partners. This made them think that, as with outsourcing, there can be difficulties in communicating and building trust & relationships between the firm and the outsourced accountant.  

There might be fewer opportunities for outsourced partners to connect and interact due to cultural norms, time zones, and distance barriers.  

Reality: 

Building long-term partnerships with outsourced accounting partners is entirely feasible. By selecting the right outsourcing provider, firms can establish relationships based on trust, professionalism, and shared goals. Clear communication, ongoing collaboration, and regular performance evaluations contribute to successful long-term partnerships. The key is to choose a provider like Entigrity, known for its commitment to client satisfaction and the ability to align with the firm's values and vision. 

Myth #8: Accounting Outsourcing Requires a Sophisticated IT Infrastructure  

Outsourced accounting staff demands seamless operations, and for this reason, a sophisticated IT infrastructure is needed. It is much needed as it supports data security, communication, and collaboration between the accounting firm and outsourcing partner. If there is a robust IT system, then the transfer of financial information can be done securely and seamlessly. Also, it is equally important to maintain compliance with regulatory standards and firms’ requirements.  

Reality: 

Due to worries about their own IT capabilities, many firms are hesitant to contemplate outsourcing accounting services. Firms think that making a big investment in top-tier IT infrastructure is necessary to connect with outsourced service providers. This belief, however, is untrue and does not take into account the state of technology today or how accessible it is. 

Numerous communication tools are now widely accessible and reasonably priced in today's rapidly changing technology environment. These tools are easily accessible to small accounting firms, enabling them to create easy connections with their outsourced accounting service providers. There are several solutions that can be tailored to various financial limitations, from video conferencing platforms to collaborative project management software. 

Still not clear about the myths surrounding outsourcing and offshoring for accounting and CPA firms? You can find all the information you need regarding offshore staffing in Entigrity FAQ. 

Myth #9: Outsourcing Leads to Loss of Control and Authority of Your Firm’s Accounting Department 

Many firms often fear that outsourcing their firms’ accounting department means losing control over their financial data. This simply leads to the conclusion that the firm no longer manages its accounting operations, and an external entity is managing it. This misconception further brought several challenges. 

Reality: 

Let’s break this myth, as this can be a hindrance to firms considering outsourcing as an option. Firms losing control over their financial operations is not true; in fact, outsourcing partners work closely with their clients and create clear communication and connections. Together, they set proper guidelines to maintain firms’ accounting data and tasks. Firms and outsourced accountants can monitor and oversee financial processes efficiently and effectively. 

Myth #10: Outsourcing is Only For Small Routine Tasks

Firms believe that outsourcing is an option for handling routine tasks only, such as data entry. They think that critical accounting tasks such as bookkeeping should remain in-house as outsourced accountants can’t handle all this. 

Reality: 

This is a big concern for accounting firms before the pandemic, but post-pandemic, when firms opt for outsourced accountants for their big tasks, they get to know this is such an invalid concern. This is the reason that, in recent years, accounting firms have gone with outsourcing on a larger scale.  

Even many outsourcing companies or partners offer customized solutions as per their client’s needs and demands. This led firms to outsource their tasks, also big ones, to outsourced accountants for increased efficiency and productivity.  

Conclusion

Outsourcing for accounting and CPA firms offers numerous benefits beyond cost reduction. However, there are several myths that prevent accounting firms from choosing outsourced accounting. By dispelling the myths surrounding these practices, firms can make informed decisions that drive operational efficiency and growth.  

Don’t let these misconceptions create a hindrance to your firm’s success and productivity. Explore outsourced accounting, as it is the best solution for your firm. Entigrity has over 9 years of experience helping firms achieve their goals. Reach out today to learn more about the company’s outsourced accounting services. 

Christopher Rivera

Christopher Rivera, Chris serves as a Director of Client Relations and Business Development at Entigrity. He is an expert at leading and managing teams actively from the front. His expertise in sales, training, coaching, mentoring and influencing combined with his competitive nature makes him a strong leader. Chris has traveled through the length and width of the country and has spoken with more than five thousand CPAs, understanding their challenges and limitations. On the grounds of that, he can now easily provide opinions and solutions that can be immensely helpful to the professionals. He has also represented Entigrity at a number of major accounting conferences and networking events.