7-Step Guide to Outsourcing for Small Firms

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Table of Contents

Hey, Fellow Small Firm Owner!

If you’re reading this, you’re likely considering outsourcing as a strategy to efficiently scale your firm. Trust me, it’s a journey worth embarking on, and I’m here to guide you through each step. Let’s dive in!

7 step of outsourcing journey

Step 1: Hiring the Initial Offshore Member

Objective: Start by hiring a mid-senior level offshore accounting professional with at least two years of experience (Level 3 or Level 4).

First things first, let’s hire our offshore champion.

We’re looking for a mid-senior level professional with at least two years of experience. Let's call our new hire "John." John’s role will be crucial as he handles preparation, transactional, or testing work.

He’ll work closely with our onshore team to gain a solid understanding of our business and client needs. This integration phase is vital, so keep a close eye on John’s performance and provide constructive feedback.

Step 2: Documenting Processes

Objective: Document processes to streamline operations.

Next up, documenting our processes.

Tools: Use tools like Loom for video recording and www.scribehow.com for creating step-by-step guides. You can record videos for basic processes. Continue to improve the process. We also use the Fireflies app to record voice and convert it to text with AI, allowing you to document things that come to your mind on the fly.

Format: While tools can help convert processes, using Word documents for detailed documentation is recommended to keep it simple. Engage both onshore and John in the documentation process to ensure accuracy and comprehensiveness.

Step 3: Expanding the Offshore Team

Objective: As we get more comfortable, it’s time to scale up by hiring additional offshore staff for transactional and preparatory work. The goal is to move all preparation work offshore first.

John will play a dual role here, not only performing the work but also helping onboard and train new hires. Although he’s not yet a reviewer, he’s like a senior associate ensuring everything runs smoothly.

Step 4: Documenting Review/Control Checklist & Collaborating Closely with John

Objective: Enhance review processes through meticulous documentation and close collaboration.

Use applications like Fireflies, etc., to document unique review/control pointers tailored to our industry and clients. For instance, when dealing with unreimbursed employee expenses for clients, document every possible approach and keep everything clear and consistent.

John’s role will evolve as he collaborates closely in this documentation process, receiving ongoing feedback to sharpen his review skills.

Example on Unreimbursed Employee Expenses for Clients:

Context: While unreimbursed employee expenses are typically not deductible from W-2 income on tax returns, clients with side hustles or businesses (filed under Schedule C) may be eligible to deduct these expenses. Here are three options for handling this situation:

Option One: Client Consultation: Reach out to the client via email or chat to discuss the possibility of claiming these expenses as deductions. Explain the potential tax benefits and ask for their opinion on proceeding with the deduction.
Option Two: Evaluate Relevance: Assess whether these expenses are genuinely related to the client’s side business. If deemed unrelated, do not include them in Schedule C as they are not pertinent to the business.
Option Three: Proceed with Deduction: Without consulting the client, go ahead and take the deduction if it benefits the client. Operate under the assumption that this approach will maximize their tax benefits.

Firm's Approach: Document your approach thoroughly to ensure consistency and clarity in handling such situations. Make sure to evaluate each case individually, keeping the client’s best interest in mind.

Review Responsibilities for John or New Hire: Clearly communicate expectations to John regarding his review responsibilities. Define what constitutes an opportunity and what is expected from him in his role in the future.

Ongoing Feedback: Provide John or the new hire with constant feedback on their reviews. Highlight areas they are missing or going wrong and offer guidance for improvement.

Step 5: Promoting the Person as Reviewer Officially / Shift Review Work & Admin Work

Objective: Elevate the initial offshore hire to a reviewer role, or if that person is not capable, then get a new hire. He will review the work officially of offshore staff. This would be the first level review done offshore.

Training: Work closely with John or the new hire, training them thoroughly for 6-12 months to adapt to our firm’s standards.

Administrative Work: Gradually shift administrative tasks to the offshore team to increase efficiency. (Here is a list of admin tasks that can be offshored easily, click here to learn more).

Outcomes: This collaboration reduces review time and increases the complexity of work handled by the offshore team. (How having a reviewer has a positive impact overall on the process, click here to learn more). At regular intervals, monitor what level of review improvement is happening and how much of the work is being done flawlessly.

Checklist: Whatever checklist you prepare, it will never be finite. You may be adding one or another point every now and then. When John is ready, or if we find someone better suited, promote him to an official reviewer role.

Step 6: Transitioning to a Planner and Advisor Role

Objective: Utilize a reviewer to enable the firm owner to focus on higher-value activities. With a solid reviewer in place, it’s time for the firm owner to focus on higher-value activities.

Handling More Complex Work: Complex tasks can be delegated to the offshore team, allowing for specialized handling.

Increasing Volume of Work: The offshore team can manage a larger volume of work efficiently.

Reducing Review Time: The time required for reviews by the onshore manager or firm owner is significantly reduced.

Increasing Client Interaction: The onshore team has more time to spend with clients, enhancing client relationships and engagement.

Enhancing Advisory and Planning: With reduced focus on routine tasks, you can invest more time in advisory and planning services. For example, reviewing returns with a broader perspective to identify tax-saving opportunities and other advisory services to add value to clients' businesses.

Step 7: Building a Scalable Business Model

Objective: Develop semi-advisory roles within the team, both onshore and offshore.

Promotion to Practice Lead: Onshore managers are promoted to practice lead positions, managing the book of business effectively. They conduct strategic reviews, planning, and advisory meetings with clients quarterly/six-monthly as needed.

Promotion of Offshore Reviewer to Manager: Offshore reviewers are promoted to manager, handling ongoing client communications, questions, and queries. Strategic client communication is managed by the practice lead, while the firm owner focuses on high-value clients and manages administration and business development.

Scalability: This model allows efficient management of a large book of business with margins exceeding 45% and scalability.

Democracy of Access: All your process documentation, review checklist, planning, and strategies shall be available for everyone to access.

Bonus Accounting Tips

Conclusion

To wrap it all up, ensure that all your process documentation, review checklists, and strategies are accessible to everyone on the team. This transparency fosters a democratic approach and empowers everyone to contribute to the firm's success.

And there you have it – a 7-step journey to outsourcing that will transform your small firm into a well-oiled machine. Ready to take the plunge? Let’s do this together!

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.