Best Ways to Outsourcing your Accounting
Everybody’s doing it, it seems. The outsourcing wave that began in IT is now spreading through the world of finance. Once the exclusive province of lesser-skilled jobs, CFOs are looking at outsourcing as an option for more sophisticated roles and even entire finance teams. It is also changing from a tactic favoured by the corporate elite to the mainstream. This rise in step with accessible-from-anywhere data stored in the cloud and the growing links between Australia and countries with cheaper labour but high levels of education such as the Philippines seems to be leading a trend.
But is outsourcing necessarily the right choice?
Low-cost, high-quality workforce
This is simple economics. How much does it cost to employ a junior accountant in Sydney Australia for an hour? Perhaps $30. How much for an accountant with post-graduate qualifications and five years’ professional experience in Manila? One-tenth that price. The Philippines too boasts an outsourcing-ready workforce that is highly educated and with a level of “business English” proficiency that an Economist/Pearson survey recently found to be the world’s most advanced.
As more and more accountants outsource, this is going to send the cost of work – particularly basic compliance work – plummeting.
Focus on your competitive advantage
Every hour you don’t spend on administrative drudge work is one you can devote to something better, be it winning new business or higher-value tasks that make use of special knowledge. Whatever it is, it’s time that is probably better spent than inputting data relating to payroll and procurement.
There’s a spectrum of suitability for outsourcing accounting tasks. Tasks like decision-modelling and risk management sit at the very end of it, as the least apt to be contracted out. But if you are not outsourcing functions such as accounts payable, payroll, and expense reporting to better focus on those you do keep, you need to ask why.
If your client-base is highly changeable, then an outsourced workforce provides many advantages. Depending on where you choose to outsource, there’s often no redundancy, overtime, or sick leave provisions that come with full-time employees. You simply pay for the work you need done and can ensure that’s all you pay for. Distance also allows you to be completely rational about whom you engage and on what terms – it takes the emotion out of HR.
Extra capacity at short notice
Being able to rope in a dozen extra workers at short notice for a project that is running off-the-rails is not something that can be readily done in Australia or New Zealand, or any developed country without incurring a huge cost. There’s not enough slack in our labour market. But when working with an outsourcing hub, last-minute engagements are possible and come at a reasonable price.
If you pick the right location, having a workforce in another time zone can also speed up your processing time.
Foreign countries, or foreign companies, may not abide by the standards of security and privacy protection required by Australian law. The Accounting Professional and Ethical Standards Board recently issued guidelines for outsourcing and accounting data security, that reminded its members to conduct due diligence on how its data was handled and whether providers had set procedures for doing so.
The business of outsourcing and off shoring is good. Scarcely a day goes by without a piece in the business pages about another major institution shifting its operations to Australia’s new cheap labour provider of choice: the Philippines. Rapid growth is always a concern for an immature industry. Can standards at outsourcing firms keep up if another 50,000 employees are taken out of the market to work for blue-chip firms next year? Advocates say the supply of highly-qualified labour is abundant. But it’s one to watch, especially given the amount of faith you are placing in a provider.
The forfeiting of control
The greater the distance between you and the people working for you, the greater the difficulties. No amount of teleconferencing technology can make up for this. You don’t always know how good outsourced staff are, or how thorough the processes they follow are. It’s a different story for companies who ‘offshore’ and create a permanent presence in another country. But those branching out to a third-party provider for the first time may find it takes a few goes to get it right, something that can be risky.
The client conversation
Clients must be told whenever you plan to outsource work involving their data. Rightly or wrongly, many may have reservations about the quality of work being done offshore. And it will almost certainly lead them to question whether the benefits are being reflected in their bill.
While outsourcing might seem like a good option for some, it might not be for others. Advanced technology comes in handy here. If outsourcing doesn’t seem like the right step for you and your business but your staff is increasingly overwhelmed with their workload and tedious, manual compliance tasks, why not invest in better, automated systems that can support your existing staff and streamline your internal processes to run smoother.
The world of accountancy is experiencing an exciting time of change, so make sure you stay on top of latest developments that can help you run your business more effectively. To find out more, download our free ebook Beyond compliance: Five trends changing the world of accountancy.
Please note that this article is intended for general information only and is not legal advice. You should seek professional advice suitable to your own circumstances.