There may be a labor shortage in the accounting industry, but that doesn’t stop the demand for accounting services. In fact, workloads seem to be increasing, even amidst the Great Accounting Resignation. Faced with this paradoxical challenge, many accounting firms have started transferring their tax and accounting workloads to offshore providers in India, the Philippines and other locales.
This method, when done successfully, has a number of benefits, such as helping accounting firms meet the growing needs of their clients without overwhelming their teams. Let’s break down some of the benefits and strategies for offshoring accounting workloads.
Why accounting firms are offshoring accounting workloads
The COVID-19 pandemic hit everyone hard, and we’re still feeling the effects. Accounting, like countless other industries, saw many employees transition to work-from-home situations. For accountants who already struggled with a work-life balance, this change often proved to be a strain. The home was a place where they could get away from work in the past, but after COVID, there was no separation between the two. So, unsurprisingly, many of these accountants decided to make a career change.
The problem is that while the industry fell into an accounting skills shortage, the workload started going up. Businesses struggling during the pandemic needed accounting services to help them get their finances in order. Tax season became more hectic and complex in the midst of the uncertainty. Many of the remaining accountants left to deal with the growing workload became overwhelmed, leading to more resignations.
And that brings us to today. With fewer accountants and a workload that continues to grow, accounting firms have to face the choice between drowning their teams in work and risking the loss of even more valuable accountants, or seeking third-party help. The answer, many have found, comes in outsourcing and offshoring accounting workloads.
Where do the offshored workloads go?
These offshore accounts go to accounting professionals that are, well, offshore. But where, specifically, do the accounts go? Most end up in Southeast Asia or Central and South America. Eastern Europe also sees some offshored accounting workloads. Locations include:
- The Philippines
- Sri Lanka
These countries often offer significant savings to North American accounting firms because of the differences in currency and cost of living. They also tend to have high English-speaking populations, and a large number of highly trained accounting professionals.
What accounting work gets offshored?
Of course, accounting firms aren’t offshoring their entire workloads. Each firm makes its own decisions about which work to keep and which to outsource. Executives must sort through the various jobs that their firm provides and decide what work they need help processing. Some examples of workloads that can be offshored or outsourced include:
Bookkeeping and payroll
Businesses that require an accounting department to handle their bookkeeping and payroll will sometimes outsource this work to offshore accounting companies. Payroll providers can handle both the processing and distribution of payroll to the employees on salary within a company. Many offshore accounting professionals can also track profits and expenses for a business.
Financial reports and analysis
CPAs are typically required to create regular financial statements and reports for their clients, showing an overview of their earnings and expenses. This can be used to make internal decisions and help bring in external partners. They additionally provide a financial analysis that goes deeper, offering insights and helping clients to plan for the future.
This is an important process, but can be overwhelming amidst other intensive work like payroll and tax preparation. Many firms are finding that financial statements and reports can be offshored to free up time and energy for in-house accountants.
Tax season is the most hectic time of year for many accountants. Pouring over financial statements, receipts of expenses, bookkeeping, payroll and more to help clients prepare their taxes at all governmental levels can be all-consuming. The season only gets more hectic when you consider clients who are behind on their taxes, have an issue with their tax payments, or need help getting their financial statements in order. By outsourcing some of that tax preparation to offshore professionals, accounting teams can gain a little more time and breathing room during tax season.
Forensic accounting is an investigative field of accounting that seeks to reconstruct financial statements and determine whether there was fraudulent or illegal activity at play. For clients accused of fraud or who may suspect an employee is embezzling funds, this is an important form of accounting. However, it is also very time-consuming, making it a beneficial task to offshore if necessary.
Can a smaller accounting firm outsource its workloads?
Smaller accounting firms can and do benefit from offshoring accounting workloads. In fact, it can be a particular advantage for smaller firms that would not otherwise be able to take on that volume of work. The expense of hiring an offshore team is easily made up by the profit of being able to take on greater workloads and not having to pay their own team overtime as often.
Considerations when offshoring accounting workloads
Firms deciding to offshore some of their accounting services do so with the aim of realizing the following benefits:
#1 – Compliance
Compliance is essential to accounting firms, both in the midst of tax season and in the rest of their work. Statements and documents have to be submitted in just the right way and at the right time. Unfortunately, the more overwhelmed an accounting firm is, the more details are likely to slip through the cracks. Deadlines get missed simply because there is too much work for the team to handle. Key documents could be lost because the organization system isn’t designed for the increased workload.
Practices offshoring accounting workloads are looking to reduce the amount of work their team has to manage and therefore much more easily meet deadlines. This can also leave more room for a thorough quality check to ensure everything is up to current compliance regulations.
#2 – Onboarding and operational maintenance
When you hire in-house staff, you have to go through the recruitment process, train them, get them on payroll, make sure they have all the right equipment and evaluate their performance throughout. This is a costly and time-consuming effort that can sometimes take away from your main tasks.
Firms offshoring accounting workloads are looking to reduce their worry around recruitment or training and have the outsourced company take care of all that. This can be a significant weight off of the shoulders of accounting executives.
#3 – Scalability
There are hectic times of the year for accountants, such as tax season. However, there are also times of the year when accounting work is at a low tide. You may have to handle a few financial statements, but not much else. These low periods are a great time to stick to the team you have in-house and make sure they have enough work to justify their paycheck. During more hectic periods, you can scale the accounting work by outsourcing to an offshore team. This way, you’ll have just the right amount of people at all times.
#4 – Cost savings
A significant lure of offshoring accounting workloads is cost savings. Most offshore destinations have considerably cheaper exchange rates and lower cost of living levels. Because of this, a fair rate of pay is much lower than it would be in North America or Europe. This can save accounting firms considerable money compared to paying their full-time employees overtime or hiring new employees.
#5 – Talent pool
Accounting is a large industry in North America, but within your local area, there is only so much accounting talent to be found. When you take your accounting workload global, you’ll find a greater pool of highly trained accounting professionals. You may even find some that specialize in just the services you need to outsource, such as forensic accounting or payroll.
#6 – Core business functions
The more overwhelmed you are, the harder it is to prioritize the important core business functions of your accounting firm. Offshoring some of your workload offers the potential to get back to the most essential elements of your business.
#7 – Employee retention
Reducing onerous workloads usually means staff are much less likely to become burned out. This will help your accountants to feel valued and remember what they enjoy about their job. In the midst of such high labor shortages in the accounting industry, employee retention is an invaluable benefit.
#8 – Client retention
The truth is, sometimes your clients don’t realize that they might be overwhelming your accounting team. They don’t know about the rest of your workload. So when a client has urgent accounting needs or a particularly large task that needs to be completed and your team isn’t equipped to meet those needs, the client may decide to move on. Offshoring some of your workload can help you meet those urgent requests and make it more likely that you will keep your clients. You may even be able to offer additional services to your clients that you couldn’t before.
Challenges of offshoring accounting workloads
Of course, there are challenges and risks to offshoring accounting workloads, as well. It is important to be aware of those risks so that you can best protect your firm. Here are a few of the biggest challenges facing accounting firms offshoring their workloads:
#1 – Security
Cyber security is a great risk for accounting firms, and it’s only gone up since the COVID-19 pandemic. Accounting involves sensitive tax information and financial records that can be especially alluring to cybercriminals. You may have your own tight security process, but when you offshore your accounting workloads, you’re giving that to another team that may not have such strict cyber-security. It’s a good idea to talk with the outsourced team about their security process before you agree to work with them.
#2 – Language and cultural barriers
In many of the countries that are popular destinations for outsourced accounting work, there may be certain phrases or ways of speaking that have very different connotations from one culture to another. You want to work together seamlessly with your offshore partners, but sometimes clashing cultures can make the work dynamic awkward. It helps to have multilingual staff members who understand the gap between cultures to smooth over any miscommunications.
#3 – Communication of expectations
It’s easy to communicate with your in-house team. You likely have regular meetings, and if any miscommunication arises, you can clear it up easily on the same day. But with offshore partners, you may not realize that there was a miscommunication or a misunderstanding until the work is turned in. It’s important to be clear about your exact expectations for the work, and to make sure those expectations are communicated in a way that everyone understands. It can help to hire an offshore team with experience in exactly what you need.
#4 – Time zones
For the most part, time zones won’t be too much of an issue. It can even be a benefit to work with people in vastly different time zones, as it means that you have someone tackling your accounting work no matter what time of day. But if an emergency arises for a particular client or for a section of accounting work, it can be difficult to coordinate getting the entire team together. It helps to have a remote work software platform, such as Caseware Cloud, for use by everyone that allows your in-house team and outsourced team to access the work even when they’re not in the office.
Caseware Cloud offers a high-security, encrypted cloud accounting platform that your entire team can access from any device, anywhere in the world. This is perfect for working with global partners. And because of the product’s central storage and smart organization features, your team can stay organized even when the workload becomes hectic. Contact us today to learn more or to obtain a demo of Caseware Cloud.