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

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.  

Key  Benefits of Outsourced Accounting Services

1. Access to Specialized Expertise

Partnering with accounting outsourcing experts, CPA and accounting firms 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.  

2. Focus on Core Services

The Accounting Today 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.  

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.

3. Scalability and Flexibility

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. 

Not only this, but it can also be utilized for seasonal requirements. However, most firms that start using it for that purpose realize its greater value.  

4. Substantial Cost Savings

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.  

By accounting outsourcing, firms can minimize the expenses associated with hiring, training, and maintaining in-house accounting teams.   

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. 

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

By acknowledging the potential backlash and understanding their mitigation strategies, firms can leverage accounting outsourcing as a powerful tool for growth and success. 

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. Quality Concerns

It's often said that you get what you pay for, and this nugget of wisdom holds true in the realm of outsourcing, too. Cheaper services can sometimes be akin to buying a pig in a poke—you think you're getting bacon, but what you really end up with is more like a ham.  

Accounting services outsourcing often presents challenges like sloppy account management, miscalculations, or compliance issues. It's a bit like showing up to a chili cook-off with a can of beans—it's just not what anyone was hopin’ for. 

How to mitigate this? 

It is understandable that some outsourcing companies offer services at cheap rates but with potential risks. However, this risk can be mitigated if you partner with a professional outsourcing company. Leading offshoring providers prioritize quality and reliability. So, it's better for an accounting firm to settle for "pigs in a poke"; instead, they can partner with outsourcing companies. 

3. Unsustainable Savings 

Like raiding grandma's secret cookie jar, the initial savings of outsourcing can be sweet, this can be due to inflation, contractual changes, or unintentional but inevitable service increments.  

It's a classic tale of diminishing returns, akin to eating the same meal every single day; the novelty wears off pretty quickly, huh? Unsustainable Savings is also a major reason for accounting outsourcing failures. 

How to mitigate this? 

Proactive partners manage these challenges. How? With their transparent pricing models and contracts, they ensure that outsourcing benefits remain sustainable in the long run.  

4. Language Barriers

Language Barriers are a primary disadvantage of outsourcing accounting services. Communication is the lubricant that keeps the gears of firms running smoothly. Toss a language barrier into the mix, though, and you might find those gears grinding like a rusty bicycle chain.  

How to mitigate this? 

Bridge the language gap by implementing English as the communication language between the client and outsourcing partner. Moreover, clear and seamless communication channels are facilitated to convey details accurately. 

5. Cultural Differences

We found it to be one of the major accounting outsourcing drawbacks. It's like trying to put a square peg into a round hole—they just don't mesh. If an outsourced team doesn't understand the cultural nuances of their client firm, they might misinterpret crucial instructions like mistaking cilantro for parsley in grandma's meatball recipe. Now, that would be a disaster! 

How to mitigate this? 

Maintain effective communication and mutual respect toward each other's culture. Consider outsourcing as a platform for cultural exchange and collaboration. 

6. Time-zone Disparities

Time-zone disparities can also complicate matters, throwing a wrench in the works of the outsourced communication machine. It's the equivalent of working on opposite sides of a see-saw—you're never quite on the same level at the same time.  

How to mitigate this? 

Organize workflows strategically and leverage technology properly. This can lead to seamless communication and collaboration across different time zones. Use time-zone differences as an opportunity for around-the-clock productivity.  For non-end client-facing roles, 3-4 hours of overlap with client hours is sufficient. So, it is better to schedule meetings with the offshore team within the first hour of the day. For end client-facing roles, 6-7 hours of overlap with business hours is needed. 

7. Inadequate Due Diligence

A lack of solid due diligence can be a killer. It's like playing darts in the dark—you'll likely end up nowhere near the bull's-eye. Rushed outsourced decisions can overlook significant discrepancies or operational flaws, leading to a fall from grace that lands harder than a belly flop off the high dive. Inadequate due diligence is one of the mistakes in accounting outsourcing. 

How to mitigate this? 

Before selecting an offshore accounting partner or company, do the proper due diligence. Avoid "mom-and-pop" shops, which can potentially steal your client’s confidential information. Always work with specialists who have more significant experience in the accounting domain. 

8. Vague Contracts

Unclear contracts in accounting outsourcing can be as tricky as a greased pig at the county fair. Without clear terms, firms can get mired in misunderstandings that lead to conflicts, delays, and possibly even more complex and expensive litigation. Now, ain’t nobody got time for that! 

How to mitigate this? 

Clear contracts are a cornerstone of successful outsourcing, so choose a company that always prioritizes transparency and clarity in its contractual agreements. 

9. Ineffective Oversight

Poor oversight can let the outsourced situation go awry, like a pack of unsupervised toddlers in a candy store. If no one monitors quality and efficiency, it can lead to a below-par performance, tarnishing the firm's reputation worse than a scarlet letter at a church gathering.   

How to mitigate this?  

Many offshore staffing companies implement robust monitoring to ensure the ultimate quality and efficiency. Considering monitoring and evaluation as drawbacks is of no use; indeed, firms need to rely on outsourcing partners to enhance transparency, accountability, and performance. 

10. IT Security Risks

With outsourced accounting services, shadier-than-a-maple IT security risks can crop up like moles in a perfectly manicured lawn. Confidential client information and financial data at stake? It's like playing Russian roulette with cyber thieves and hackers—a risk not worth taking. 

How to mitigate this?  

It is suggested that the IT security measures of an offshoring company be thoroughly examined. Look for a company with no data breaches.  

11. Integration Challenges

Mismatched tech systems can turn the process into a regular carnival of chaos and one of the accounting outsourcing challenges. It's like trying to solve a jigsaw puzzle when half of the pieces belong to a completely different set. Settings and protocols gelling together with the ease of oil and water can make seamless operations a pipe dream. 

How to mitigate this?  

Yes, mismatched tech systems can create chaos, but if we see the positive side of it, we see that it is an opportunity for outsourcing companies to showcase their expertise and skills. When a company uses the right knowledge and tools, these challenges can be overcome, improving efficiency as a result. 

12. Inadequate Tech Support

Poor support can feel like showing up to a gunfight armed with a rubber duck. Without the right tools and know-how, glitches and hiccups in the system can snowball into full-blown operational disasters. 

How to mitigate this?  

Before choosing an outsourcing company or partner, review the tech support they provide. Inadequate tech support can hinder operations, so always partner with an outsourcing company with robust technical expertise and resources. The company should be able to respond effectively, resolve troubleshooting issues, and ensure smooth operations. 

13. Limited Industry Insight

A lack of industry knowledge can spell doom for an outsourcing venture and create accounting outsourcing challenges. It's like trying to bake a soufflé without knowing the first thing about baking—you're bound to end up with a flat, yucky mess.    

How to mitigate this?  

While choosing an outsourcing company, keep in mind to know their expertise in the industry you have. Just as a skilled chef can guide a novice through the intricacies of baking a soufflé, a well-reputed outsourcing partner can navigate complex accounting processes with finesse and precision.   

14. Employee Resistance

Employee resistance can hamper the whole operation faster than a one-legged man in a hopscotch tournament. Changes can cause frustrations or resentment, leading to productivity dips and a souring workplace culture. 

How to mitigate this? 

Navigating changes with ease is not everyone's cup of tea. So, choose an outsourcing partner wisely who can deal with changes and address your concerns.  

15. Unintended Dependencies 

Over-reliance on outsourcing can lead to unhealthy dependencies. It's like feeding a cat exclusively canned food— eventually, Garfield is going to forget how to hunt. Firms may lose valuable in-house skills and experience, which, in the long run, can do more harm than good. Over-reliance is the disadvantage of outsourcing accounting services.  

How to mitigate this? 

You should depend on your outsourcing partner but not entirely on them. Keep your hold also. However, many offshoring partners offer a balanced approach.  

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Practical Recommendations for Firms

Put simply, don't rush in headlong like it's a Black Friday sale, folks. Do your homework, set clear contracts, and nurture a healthy monitoring system. Tailor your approach to suit your firm's unique fabric—like a custom-tailored pair of blue jeans, there's nothing quite like a good fit. 

The Way Forward 

While there are risk of offshoring, it's essential to recognize that offshore accounting can offer a viable and advantageous solution when approached thoughtfully.  

Here are some reasons why offshore accounting might be a better solution:   

• Your Staff: Remote Staff is the one you interview and hire instead of an outsourcing vendor's relationship manager. 

• Staff vs Ghost: You never really know who works for you for the outsourced tasks, but you can supervise your remote staff’s functions at will. 

• 100% Control: The remote staff works dedicatedly for your firm. They work strictly under your firm’s protocol. There is no such privilege in outsourcing. 

• Direct Reporting: Remote Staff sends you daily time sheets to monitor time tasks and review reports regularly. 

• Learning Curve: An outsourcing vendor can never gain experience according to your firm’s functions. He can not learn as much from the time spent working for you.  

• Work Efficiency: Regular monitoring and supervision make your remote staff time efficient, adding value to the work delivered. 

• Cost: While outsourcing is just a one-time adventure, a remote staff member saves the firm about 75% of the cost. In the long run, investing in a small team proves worthwhile. 

• As Per Your Need: Along with hiring as per your requirements. You can even scale up and down the number of remote staff without a long-term commitment. 

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.  

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  

• 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 and accounting firms. While there are challenges to consider, selecting the right outsourcing partner and implementing best practices can help firms make the most of this transformative strategy.  

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 27001:2012 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.