Outsourced Accounting: A Guide for Accounting Firms

Accounting and CPA firms in the U.S. are continuously looking for innovative strategies to boost efficiency, cut costs, and provide enhanced services to their clients. An approach that really took off with IT and is now prevalent in the accounting industry is outsourced accounting solutions. 

In this comprehensive guide, we will dive into the world of outsourced accounting for CPA firms, examining its benefits, challenges, and best practices.

Introduction

Let us start from the beginning; certainly the perfect place to start; we quickly begin by discussing accounting outsourcing. This practice of entrusting specific accounting tasks or processes to external service providers has become a transformative approach for many CPA firms. It enables them to streamline operations, tap into specialized expertise, and refocus on their core strengths. However, the decision to embrace outsourcing should be well-informed, weighing the advantages against potential challenges.  

The 2023 Deloitte survey revealed that the top objectives of outsourced accounting are “Cost Reduction” and “Standardization and Efficiency of Processes.” Firms no longer have to hire in-house employees for routine and small tasks. Instead, they can simply outsource their functions while the in-house team can focus on core business. This can save costs but, more importantly, increase the firm's efficiency.  

While these two are the most preferred benefits of outsourced accounting services, they are not the only benefits. Outsourcing accounting brings more benefits to the table, whether you are considering it as a permanent solution or just a temporary option.   

Key  Benefits of Outsourced Accounting Services

1. Access to Specialized Expertise

Outsourced accounting solutions providers typically specialize in accounting services such as bookkeeping, tax preparation, auditing, and accounts payable/receivable (AP/AR). When CPA firms partner with accounting outsourcing experts, they gain access to a wealth of experience and knowledge. These professionals are well-versed in the latest industry regulations and best practices, ensuring the accounting work is accurate and compliant. 

Many outsourcing accounting firms also offer services beyond traditional accounting roles. Virtual Administration, Data Entry and Digital Marketing are just some of the services now being offered to optimize and enhance accounting firms.  

2. Focus on Core Services

The Accounting Today Survey raises concerns that only 29% of firms focus on advisory services and 24% on administrative work. One major reason for a firm’s inability to focus on advisory and administrative work is a lack of resources. The 2023 AICPA & CIMA Talent revealed that the accounting industry suffers from a 33% talent shortage, which simply means that it is difficult to find time to focus on advisory and administrative areas. Scaling the team with the best outsourced accounting services is a preferred solution for Accounting and CPA firms to tackle this.

Outsourcing routine accounting functions liberates CPA firms to allocate their in-house resources and skills to more value-added services. Instead of being bogged down by time-consuming tasks, such as data entry or reconciliation, CPA professionals can dedicate their expertise to strategic advisory, financial planning, and client consultation.

3. Scalability and Flexibility

One of the remarkable advantages of accounting outsourcing for CPA firms is the flexibility it offers. Firms can scale their outsourced accounting services up or down according to their needs. Whether it's handling a sudden surge in workload during tax season or streamlining operations during slower periods, outsourcing provides a cost-effective solution.

The beauty of accounting outsourcing is that it’s not just for work overflow. Yes, it can be utilized for seasonal requirements. However, most firms that start using it for that purpose realize its greater value. 

4. Substantial Cost Savings

One of the most compelling reasons for CPA firms to consider outsourced accounting services is the potential for significant cost reduction. The Covid-19 pandemic made firms struggle with downward price pressure on services. Clients wish you could offer more with the existing rates. This simply can’t bode well for your firm’s profitability. 

The concern that arises for Accounting and CPA firms is how to keep generating more revenue from services. A simple solution to this is to bring down the operational costs. As discussed above, talent shortage in the accounting field is a headache for firms, and the bigger problem is those who are left with skills demand high salaries. 

In this scenario, outsourcing steps in as the most prominent solution. By accounting outsourcing, firms can minimize the expenses associated with hiring, training, and maintaining in-house accounting teams. This translates to reduced overhead costs and a more streamlined budget. 

5. The Technological Advancement 

Technology and Accounting might sound weird together! But the truth is technology has always been a tough row to hoe for the accounting industry. Accounting is a traditional profession and many of its processes have undergone technological transformations. It is a challenge for the industry to be at this pace. 

The study by Financial IT claims technology to be the biggest challenge in the accounting industry. There are many reasons for this. Small-sized firms reasoned budget as a hurdle in accommodating new technological changes.  

Top accounting outsourcing partners offer technologically adept candidates who are well-versed in the latest accounting and bookkeeping software. Partnering with them allows accounting and CPA firms to undergo a technological revolution within their firms. 

Challenges of Accounting Outsourcing for CPA Firms

While the benefits are compelling, it's essential to recognize the potential challenges of accounting outsourcing for CPA firms:

1. Data Security Concerns

CPA firms deal with highly sensitive financial information. Entrusting this data to third-party providers raises legitimate concerns about data security and confidentiality. Therefore, it's crucial to select reputable outsourcing partners who prioritize robust security measures. Data breaches are sensitive issues that can cost accounting and CPA firms a lot.  

Before contracting an outsourced accounting solutions partner, review their data security protocols and verify they are ISO, SOC certified, and GDPR compliant.

See how MYCPE ONE ensures data security:

2. Communication and Coordination

Effective communication with an outsourced team can sometimes be challenging due to differences in time zones and potential language barriers. This challenge leads to gaps, which can result in task delays. To mitigate this challenge, you just need to establish a structured communication plan. Do regular review meetings via Skype, zoom calls, slack, or other means. These meetings are essential in making onshore and offshore teams comfortable with each other. To avoid language barriers, use English as your communication language.  

3. Quality Control

Maintaining consistent quality standards across outsourced tasks can be a concern. It can pose challenges even in the best outsourced accounting services. Variations in work quality or discrepancies can harm the firm's reputation. Establishing a stringent quality control process and setting clear expectations can help address this issue. 

4. Regulatory Compliance

Accounting regulations can vary significantly by region and jurisdiction. Ensuring that outsourced tasks comply with these regulations requires careful consideration and often ongoing monitoring and adjustment.

*Note:

CPA firms hold diverse perspectives on outsourcing within the accounting industry. Some firms have wholeheartedly embraced outsourced accounting as a means to manage their accounting functions efficiently. Meanwhile, others hesitate to commit to outsourcing fully.

Then, there are those who view outsourcing through a negative lens, anticipating a plethora of challenges and pitfalls. It's crucial to examine these concerns and misconceptions surrounding outsourcing and, more importantly, dispel any myths associated with accounting outsourcing. 

Best Practices for Successful Outsourced Accounting

To make the most of Outsourced Accounting for CPA firms, consider these best practices:

• Onboarding Process: A comprehensive onboarding program is a must. While onboarding, include training resources, SOPs, clear roles, and task definitions. 

• Choose the Right Partner: Select outsourcing providers with a strong track record in accounting and a reputation for security and compliance.

• Clearly Define Expectations: Establish clear expectations and guidelines for the outsourced work, including quality standards, reporting, and communication protocols.

• Regular Communication: Maintain open lines of communication with your outsourcing team. Use collaboration tools and schedule regular meetings to stay informed and address any concerns promptly. Provide regular feedback to ensure new hires understand expectations and work as per your needs. 

• Data Security Measures: Training and Handholding: Give proper training and support to the offshore staff so that he/she can understand your work process better. 

• Continuous Monitoring: Regularly assess the quality of outsourced work and compliance with regulations. Be prepared to make adjustments as needed.

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Outsourcing vs Offshoring

While it's commonly assumed that outsourcing and offshoring are interchangeable terms that signify the delegation of tasks to external parties, this oversimplification needs to be more accurate. It's correct that remote work is a shared characteristic in both approaches, but the realities of accounting outsourcing and offshore staffing diverge significantly, each embodying its own distinct business model.

To determine which strategy is right for your firm, you first need to analyze and understand its requirements. Based on these results, you will gain clarity on which strategy will work best for your firm.  

Considerations for Choosing Outsourcing Accounting or Offshoring

• Nature of Tasks: Evaluate the specific accounting tasks you need assistance with. If they are routine and standardized, outsourcing might be suitable. For more complex tasks requiring close collaboration, offshore staffing could be preferable.

• Data Sensitivity: Consider the sensitivity of the data involved. Offshore staffing may provide better data security if you're dealing with highly confidential client information.

• Resource Allocation: Assess your firm's current resources. It might be a viable option if you have the infrastructure to manage an offshore team. Otherwise, outsourcing can offer a seamless solution.

• Budget: Your budgetary considerations will play a crucial role. Offshore accounting services might have higher initial costs, but it provides long-term value. Outsourcing, meanwhile, offers cost savings in the short term but there’s more to it than that.

Conclusion

Outsourced accounting offers a wealth of opportunities for CPA firms to optimize their operations, reduce costs, and provide enhanced services to clients. While there are challenges to consider, selecting the right outsourcing partner and implementing best practices can help CPA firms make the most of this transformative strategy. By embracing accounting outsourcing, CPA firms can position themselves for greater efficiency and success in an ever-evolving industry. 

MYCPE ONE can be the best outsourcing option for your accounting and CPA firms. If you are thinking why, here are some of the reasons to choose MYCPE ONE: 

• The company holds AICPA SOC 2 Type II certification and is GDPR compliant.   
• MYCPE ONE is fully compliant with ISO 27001:2013 for information security. 
• The company has had 0 data breaches in its 10+ years of history. 
• Professionals and experts at MYCPE ONE stay up to date with the latest technology in the accounting industry. 
• 1000+ Accounting firms trust MYCPE ONE to build their offshore team. 
• MYCPE ONE has greater credibility in working with accounting and CPA firms in the past. 
• The company strictly follows compliance to keep the data and information safe. 

MYCPE ONE has a 100-member dedicated and qualified IT team who make sure to safeguard your firm’s data and maintain strong data security. 

FAQs

Shawn Parikh

Co-Founder & CEO

Shawn Parikh is the CEO and Co-Founder of MYCPE ONE. A Chartered Accountant by qualification, he has over 15 years of experience of being a problem solver for small to mid-size firms and over time he has given consultation to thousands of CPAs, accountants and tax pros. Shawn has always been a big believer and advocate of social enterprises and small accounting firms & businesses. He consults and speaks on several topics ranging from Building Remote Team - Remote Working, Offshore Staffing, strategic planning, Scalability of Accounting Practice, cloud accounting, practice management, LinkedIn marketing, etc.