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. A strategy 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 outsourcing accounting. Outsourcing accounting, the 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 accounting outsourcing solutions should be well-informed, weighing the advantages against potential challenges. 

The 2023 Deloitte survey revealed that the top objectives of outsourcing 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 outsourcing accounting, 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.  

Extensive benefits of Outsourcing include: 

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 outsourced accountants 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 accounting work 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 outsourcing routine accounting functions, 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 Entigrity 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. 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 outsourcing accounting services 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 Accounting Outsourcing

To make the most of accounting outsourcing for CPA firms, consider these best practices:

1. Onboarding Process: A comprehensive onboarding program is a must. While onboarding, include training resources, SOPs, clear roles, and task definitions. 
2. Choose the Right Partner: Select outsourcing providers with a strong track record in accounting and a reputation for security and compliance.
3. Clearly Define Expectations: Establish clear expectations and guidelines for the outsourced work, including quality standards, reporting, and communication protocols.
4. 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. 
5. 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. 
6. Continuous Monitoring: Regularly assess the quality of outsourced work and compliance with regulations. Be prepared to make adjustments as needed.

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 Accounting Outsourcing 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. 

Entigirity 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 Entigrity: 

• The company holds AICPA SOC 2 Type II certification and is GDPR compliant.   
• Entigrity is fully compliant with ISO 27001:2013 for information security. 
• The company has had 0 data breaches in its 9+ years of history. 
• Professionals and experts at Entigrity stay up to date with the latest technology in the accounting industry. 
• 850+ Accounting firms trust Entigrity to build their offshore team. 
• Entigrity has a greater credibility in working with accounting and CPA firms in the past. 
• The company strictly follows compliance to keep the data and information safe. 
• Entigrity has a 100-member dedicated and qualified IT team who make sure to safeguard your firm’s data and maintain strong data security. 

FAQs 

1. What criteria should be kept in mind while hiring offshore staff? 

Ans: Offshore staffing is the new-age solution for revolution in the accounting industry. However, there are some things to consider while hiring offshore staff. Deep research and careful consideration of the history and background of our outsourcing partner is a must. Look at their track record and case studies for better clarity. Moreover, make sure that the company has strong data security policies.  

2. How to maintain a proper relationship between my onshore team and offshore team? 

Ans: It is crucial to maintain a proper relationship between your onshore and offshore teams. To make this happen, ensure clear communication, regular updates, and a shared understanding of goals. Use communication tools like Skype, Slack, Zoom, etc., to bridge communication gaps. Also, team-building activities should be encouraged to improve coordination between the teams.  

About Entigrity

Entigrity™ is a reliable offshore staffing partner for 850+ accounting and CPA firms, 200+ CFOs & businesses across the US, Canada, and the UK, positioning itself among the top outsourced accounting firms. With a flexible and transparent model, the company enables firms of all sizes to acquire skilled accounting, bookkeeping, and tax preparation staff. As a pioneer in offshore accounting, Entigrity ensures precise alignment with the hiring needs of accounting firms, providing staff under your control and management and minimizing concerns about compliance, payroll taxes, overheads, or benefits. Trusted by 40+ of the top 200 US accounting firms, we specialize in supplying highly skilled personnel from India. We have 39 global offices across India. We are GDPR compliant, ISO 27001:2013, and SOC 2 Type II certified. We are now "Great Place to Work Certified™," "KPO Organization of the Year," and "Dream Companies to Work For" among accounting industries. Entigrity is also recognized as a platinum partner by the Institute of Management Accountants (IMA). The company is strategically partnered with Boomer, a BDO Alliance USA and Abacus Alliance member. 

Tushar Pansare

Offshoring Strategic Advisor

Tushar is an Offshoring Strategic Advisor for Accounting Firms with 21 years of experience in Business Development, Customer Success, and Client servicing. He has a proven track record of managing key accounts. Tushar is an experienced professional with about 8 years of experience in the North American market with Healthcare IT and Accounting and offshoring industries. He has a team-handling ability and is proficient in leading project development and ensuring compliance with quality standards. He is a team player and a a leader with exemplary analytical and problem-solving skills.