Top 5 accounting outsourcing problems and solutions

Unless you’ve been living under a rock for the last few years, you’ll know that outsourcing accounting solutions has emerged as a strategic approach for accounting and CPA firms to enhance efficiency and focus on core activities.

However, navigating the landscape of accounting outsourcing is not without its challenges. We aim to assist accounting firm owners in making informed decisions and addressing outsourcing challenges effectively. To achieve this, we will identify the top 5 issues that accounting firms often face when outsourcing accounting services and offer practical solutions to resolve them.

Top 5 Accounting Outsourcing Problems & Solutions

1. Ensuring Client Data Confidentiality

Accounting firms handle sensitive client financial information. Accounting outsourcing can raise concerns about data confidentiality breaches and unauthorized access, potentially damaging the firm's reputation and putting its clients' data at risk. We find it one of the major problems with accounting outsourcing.

Solution:

Prioritize data security by partnering with accounting outsourcing providers that adhere to strict confidentiality protocols, which can resolve most accounting outsourcing problems. Sign robust non-disclosure agreements (NDAs) and utilize secure data-sharing platforms with encryption. Opt for an accounting outsourcing provider that works on remote systems, ensuring data never leaves the firm. Any reputable accounting outsourcing provider will take some or all of the following precautions to remove all your accounting outsourcing problems and avoid making accounting outsourcing mistakes.

• SOC type II certification
• ISO 27001:2015 Certification
• GDPR Compliance
• Disabled USB and Data Transfer Devices
• 24×7 CCTV Surveillance
• Key Card/biometric Access-based Restrictions
• Prohibited Mobile Devices in the operations area
• No Pens-Papers-Printers in the operations area
• Controlled/Limited Internet Access
• Multi-Layer Authentication
• Strong Firewalls and 256-bit SSL encryption
• Process-defined Access to File Type Download and Access
• Server access on a need-to-know basis
• Monitored Instant Messaging and Email Exchange

 2. Communication Gaps

Clear communication is essential when availing of accounting outsourcing services. Many outsourcing providers operate in global destinations where English may not be their first language. This could lead to gaps, resulting in misinterpretations and task delays, and communication gaps can be major accounting outsourcing problems.   

Solution:

Establishing a structured communication plan can resolve most accounting outsourcing problems. Utilize video conferencing, written documentation, and collaboration tools to bridge communication gaps. Choose accounting outsourcing partners with staff from countries with strong English language skills, such as the Philippines and India. 
Another way to mitigate communication gaps is having regular weekly meetings when you start working with your onshore team members. This will establish a rapport and give them confidence in communicating with you. These meetings can reduce in frequency as the onshore and offshore team members become more comfortable. Most communication gaps occur not because of the level of spoken English but rather the confidence to voice their questions and concerns.    
If the role you’ve hired the offshore staff for is not client facing then having perfect English should not be the highest priority. However, if otherwise then you need to let the outsourcing provider know so they can source a suitable resource with high English competency.

3. Quality Assurance

Maintaining consistent quality in outsourced tasks is critical for accounting firms. Variations in work quality and discrepancies can result in errors and client dissatisfaction. 

Solution:

Implement a stringent quality control process to resolve quality-related accounting outsourcing problems. Define clear quality standards, conduct regular audits, and provide detailed instructions to ensure outsourced accounting tasks align with the firm's quality expectations. 

4. Cultural Differences

Various nations and societies possess distinct customs and principles. What may be deemed as socially acceptable or courteous in one culture could be perceived as impolite or unsuitable in another. Failure to appropriately acknowledge these differences can result in miscommunications and disputes, and we find this one of the reasons that create accounting outsourcing problems.

Solution:

To bridge cultural gaps successfully, it's crucial to recognize and respect the cultural standards of the country you're outsourcing to. Additionally, having a diverse team can offer valuable insights and perspectives on cultural distinctions, aiding in smoother communication. 

Being conscious of the customs, traditions and holidays of the country you’re outsourcing to can go a long way in establishing cultural awareness. Knowing what values your outsourcing team holds dear lets you have a greater connection, resulting in higher productivity and quality of work. Having the right culture can determine success or failure in accounting offshoring. CEO and founder of Entigrity, Shawn Parikh stated in an interview in Inside Public Accounting.

"Indian accountants are taught about American history, culture, and commerce, which includes an introduction to the American dream, politics, insurance, common finance phrases, racial diversity, commonly followed sports, festivals and holidays, college education" 

Accounting firms don't need to go to this extent however, they should be open to individuals with different cultures. 

A recent report by the Economist Intelligence Unit shows that cultural dissimilarities and intercultural communication are challenges most organizations encounter when outsourcing work. 

5. Loss of Control

Accounting firms might fear losing control over outsourced tasks. Concerns about accountability, accuracy, and timeliness can arise when tasks are handled externally.

Solution:

Establishing transparent processes and reporting mechanisms with your outsourcing partner can erase the problems with accounting outsourcing. Clearly defining roles, responsibilities, and key performance indicators (KPIs) to maintain control and visibility over outsourced accounting work it will minimize most accounting outsourcing problems.
Work with an accounting outsourcing provider who is dedicated to understanding your firm's intricacies, culture, and workflows as intimately as you do. They should exhibit the capability to seamlessly integrate talent into these aspects.

Ideally, you should partner with a trusted outsourcing provider, relieving you from constant supervision while retaining the control necessary for smooth operations. You dictate the direction while your provider manages day-to-day tasks. This way, you can erase common accounting outsourcing mistakes.

Your virtual accounting provider should consistently prove that reduced time spent on general ledger rework and supervision doesn't equate to diminished control over these processes.

In the early stages, this might involve frequent check-ins and 'hypercare' calls, including you, your stakeholders, and a team member from the provider who can advocate for you as you familiarize yourself with your new outsourced accounting team.

Over time, strong partnerships result in direct and respectful relationships between onshore and virtual accounting talent.

Conclusion

Accounting outsourcing presents tremendous opportunities for accounting firms to optimize operations and focus on value-added services. By proactively addressing the top 5 challenges associated with accounting outsourcing and implementing the recommended solutions, accounting firms can successfully navigate the outsourcing landscape. 
Data security, effective communication, quality assurance, cultural awareness, and maintaining control are key factors that contribute to a successful outsourcing partnership. You can also read our recent blog, “A Guide for Accounting Firms to Make the Most of Accounting Outsourcing.”

Accounting Outsourcing FAQs

1. How can accounting firms ensure the security of client data when outsourcing tasks?

Ans: Prioritize data security by choosing trustworthy outsourcing partners, signing NDAs, and using secure data-sharing platforms.

2. What strategies can help bridge communication gaps when working with outsourced teams?

Ans: Implement a communication plan with video conferencing, written documentation, and collaboration tools.

3. How can accounting firms maintain consistent quality in outsourced tasks?

Ans: Set clear quality standards, conduct regular audits, and provide comprehensive instructions to outsourced teams. 

4. What steps can firms take to ensure regulatory compliance when outsourcing tasks?

Ans: Partner with providers familiar with relevant regulations and continuously update compliance protocols. 

5. Can accounting firms maintain control over outsourced tasks without sacrificing efficiency?

Ans: Yes, establish transparent reporting mechanisms, define roles and responsibilities, and monitor KPIs.

6. Are the benefits of outsourcing tasks for accounting firms worth overcoming these challenges?

Ans: Absolutely; outsourcing can enhance efficiency and provide access to specialized expertise, contributing to overall firm growth.

Entigrity™ is a trusted offshore staffing partner to 725+ accountants, CPAs, and tax firms across the US and Canada. Our flexible and transparent hiring model helps firms of all sizes to hire staff for accounting, bookkeeping, tax preparation, or any other task for 75% less cost. As a firm 'run by accountants, for the accountants,' Entigrity captures the hiring needs of accounting firms most precisely, providing staff that works directly under your control and management; still, you are left with the least to worry about compliance, payroll taxes, overheads or any other benefits.