As HMRC crackdowns on Limited Company taxes grows more intense, and as laws to prevent fraud promulgate and increase, an accountancy firm is evermore pressed to look for outsourced accounting services.
It’s a contentious subject. If there is one thing we accountants pride ourselves on, it is the professionalism and integrity of our work. We are proud members of the ICAEW. We seek further qualifications with institutes such as the ACCA, AAT and ATT. We constantly look for legal ways to bring the highest possible profit to our clients, so that they continue to use our services and recommend us to others.
In a sense, we are somewhat like virtuosos. And no true artist wants to have his artwork produced by another.
But we are also businessmen, and the very essence of our profession is to ensure profitability. There is simply too much work to be done for us not to at least consider outsourcing.
The types of outsourced accounting services
To attempt to lower the workload, an accountancy firm might seek to outsource one or more of the following services:
- Preparing ledger accounts from raw documentation such as receipts, invoices, bank statements, etc.
- Reconciliation of balances to bank statements
- Finalising accounts from the trial balance for final review to extended trial balance level
- Drafting and preparing financial statements with corporation tax computations
- Financial controller services
- Company registrations
- Payroll processing
- And others
Reading the list, one gets the idea that it’s possible to outsource one’s entire business and then simply go to the beach, stretch one’s legs and drink piña coladas all day.
Well, yes and no.
Mostly no, in fact — until now.
Busting the myth that outsourced accounting services save time and money
There is no dearth of information on the internet about the purported benefits of outsourced accounting services. Many of the links lead to Search Engine Optimised articles written by an outsourcing company’s marketing department.
Yes, you do need a solution to reduce the workload, but let’s consider a few factors regarding outsourcing as it is done today before you jump on this bandwagon and pay for it severely later:
You need to review outsourced work again
This is true of any business, but is especially true for accountancy firms. Errors could lead to being banned by the ICAEW, which itself can lead to a closed business.
You simply cannot afford to not review the outsourced work. It is our experience that, with outsourcing, 90% of the work received needs to reviewed again to ensure quality is not compromised.
This is both time-consuming and costly. If you pass inaccurate reports onto clients, there is a very good chance you’ll either lose the client or get sued for incompetency.
With outsourcing, you are dependent on the outsourcing company to deliver the accounts in a timely manner. If they fail to meet deadlines, ultimately it is your firm which will face the consequences. It is still your responsibility to ensure deadlines are met.
Possible loss of quality controls
This is not necessarily true of all outsourcing companies, but is a factor that must be watched like a hawk in order to prevent catastrophes. It is our experience that many outsourcing companies’ key motive is to cut costs so as to achieve mass data entry. The business model of an outsourcing company is bulk work for cheap prices.
In such an ecosystem, quality is the first attribute to go out the window. It might take several attempts by you to find an outsourcing company that does work this way. During those attempts, you will need to review work and check on quality for all the work you send to them. Instead of reducing your workload, you will likely have increased it.
Of course, the outsourcing company itself is probably also going through the growing pains of “Too much work and too little time.” Even if, after all your false starts, you do find a company that does the outsourced work with good quality, you will periodically have to check the work to ensure that no corners are being cut.
The risk is always there.
As mentioned previously, other professions might be able to pass off low-quality work and get away with it. But, for us accountants, it could cost us our livelihood.
Hidden outsourcing costs
This is particularly true of bookkeeping. There always seems to be some small hidden charge when it comes to something that requires custom treatment. Not all clients are the same, and a small tweak can cost you dearly in the long-run. It’s vital that you read the fine-print.
This is yet another potentially catastrophic area for an accountancy firm, especially since the enactment of GDPR laws. In this digital age, data breaches are a common occurrence. When shortlisting an outsourcing company, you must take into account their level of compliance with data privacy laws.
Additional administrative burden
When you’re managing a number of clients that are being outsourced, you’ll need to ensure there is a robust process to account for each job delegated. This means you’ll need to have an internal manager to stay on top of the new workload.
Different time zones and deadlines
Many outsourcing organisations are based abroad. It is imperative that you can communicate at the same time. When emails are exchanged after 12 hours, this can cause delays in your expected deadlines and further add to the administrative burden.
Our solution: A new paradigm to outsourcing accounting services
Perhaps in its heyday of the early 21st century outsourcing was the boon every expanding company was looking for. Regulations were less restrictive, and penalties weren’t so severe.
But things have changed. A new paradigm is required for “outsourcing.” What is needed now is something above outsourcing, a full-service company which is both accountable, trustworthy, transparent, competent. A company which can take the load off your shoulders while still allowing you to retain control of your clients.
There is no word for this new type of service. I believe we are the first to offer it.
Whatever your choice is regarding the subject of outsourcing, as an accountant you must be aware of the risks involved, and the potential loss of money if you hire a company that does not deliver the goods. You need to do your homework, and go with a company that you feel you can trust, and who really does save you time and money in the long run.