However, the financial accountants and accounting companies were immune to the waves of the outsourcing industry and its capabilities briefly. On the other hand, the outsourcing industry grew exponentially with the volume of work being outsourced setting record growth levels each year even in the UK (The growth percentage of outsourced work was 20% in 2018).
The idea of outsourcing has penetrated numerous industries across UK, but the accounting domain has sustained its resistance to outsourcing citing financial confidentiality and integrity. Only in the past decade, the accountants and the accounting companies have come beyond the resistance and outsourced their redundant financial tasks to other companies. The entry of technology infused financial products and service offerings is a major contributing factor for outsourcing of accounting industry.
Today, there are multiple players (service providers) in this domain to handle outsourced accounting tasks with excellent technology, tools, resources and secure digital infrastructure in the UK. Accountants and accounting companies deploying latest tools with effective outsourcing policies have a competitive edge in their respective business.
Even today, one can find two schools of thought in the accounting ecosystem. Accountants/firms that accept outsourcing and accountants/firms that refrain from outsourcing. Both the sides have their own reasons to support what they believe in and both have their differences, risk factors, pros and cons. Analysing the differences between these two would give a clear understanding about outsourcing accounting work to other companies.
The differences between these two schools of thought can be best understood by explaining the associated factors and their way of operation.
Accountants that favour outsourcing to service provider companies
Costs
The first and foremost benefit of outsourcing is cost savings. Accountants and accounting firms who outsource their redundant works to other companies make enormous savings in their operations. Accountants or accounting firms that handle multiple clients outsource their transaction processing services, bookkeeping, filing tax/VAT returns, payroll processing to other companies.
As these accounting services provider has highly efficient process flows and captives in other countries, they can provide their services at a lower price to accounting firms in UK.
This in turn lets the accountants or the accounting firms to offer their services at a competitive rate.
Accuracy
Execution of accounting tasks as processes with stringent quality assurance and quality control methodologies coupled with trained accountants enable these companies provide maximum levels of accuracy in work.
Accountants or firms embracing these service providers would benefit by providing highly accurate and qualified output to their clients.
Time
The smart allocation of work by Project Managers in the service provider companies to multiple accountants enables faster completion of mammoth work load. Also automation of certain tasks with tools and programs reduces the task completion time effectively.
As accountants get to complete their work in short timeframes with greater accuracy by outsourcing, they can divert their time and attention to other core accounting tasks.
Scalability
The availability of large skilled workforce trained by the service provider companies enable them to handle unprecedented surges in accounting work volume as per necessity with ease.
The scalability of accounting service providers proportionately increase the scalability of accountants and accounting firms who outsource to showcase enhanced capabilities.
- Fraud detection
Numerous fraud detection policies and strategies deployed by these service provider organizations has higher probability of detecting fraudulent transactions thereby eventually eliminating them.
This increases the efficiency factor of the accountants and accounting firms gives them a competitive edge in the market.
- Technological Capabilities
By harnessing the potential of accounting software, tools and resources in their service delivery they build efficient process flows to achieve accurate, timely and cost effective output.
Resourcefulness
The presence of multi-functional capabilities and varied resources under one roof enable these service provider companies to take up ad hoc service requests and build solutions for any kind of request.
Customization
Most of these service provider companies offer end to end accounting services. So providing a customized suite of accounting services to suit the needs of the accountant or their client would be cakewalk.
Accountants that refrain from outsourcing to service provider companies
Costs
Accountants and accounting firms that refrain from outsourcing does not incur any extra cost of operations, but will miss out on the cost savings enjoyed by its counterparts. This may put these accountants in a tough spot on various factors in the market.
Accuracy
Accountants operating with in-house employees do deliver accurate results in book keeping. However, there might be instances where a small set of employees who can miss out on fulfilling the accuracy demands due to non-dynamic accuracy standards and resource constraints.
Time
The presence of limited number of employees and resources can make the accounting firms to demand longer deadlines with their clients to complete tasks compared to their outsourcing counterparts. This may diminish the competency levels of these accountants in the industry.
Scalability
Again the limited number of employees and resources may not enable the accountants to accommodate unforeseen spikes in volumes of work. This may put the accounting firm in a place to urgently hire new accountants and streamlining processes or end up losing the opportunity.
- Fraud detection
Detection of fraudulent transactions becomes comparatively tougher due to minimal workforce and challenges in implementing fraud detection strategies in the team for the accountants.
- Technological Capabilities
Accountants and accounting firms do use accounting software which makes their execution easier. However, they might have very few possibilities or resources to sew the software or its capabilities in this service delivery compared to the accounting service provider companies.
Customization
The possibilities of customization to perform trivial ad-hoc services is comparatively higher with personal accountants and small accounting firms as they have a personal connect with their clients. However, it may be limited only to the restricted capabilities of the accountant or accounting firm.
Many accountants and accounting firms who refrain from outsourcing believe in few myths like Will the confidentiality of client’s financial data be honoured? Will the countries to which outsourcing is done to possess commendable understanding of British tax laws? Will I have proper communication matrix or channels with the service providers?
All these myths are effectively and positively answered by the service providers by
- Signing proper NDAs to honour confidentiality and integrity
- By hiring and training their accountants with ins and outs of the British tax laws and
- Have excellent communication infrastructure with the accounting firms to have a transparent working system between both the parties
Large and mid-level accounting firms with multiple clients and humongous workload may find the need to outsource their tasks to service provider companies, but small accounting firms and accountants may not feel the need to outsource. But outsourcing in the accounting industry has become an open tool for all companies to squeeze the best benefits out of it. In the end it is all about the decision of reaping the best benefits of outsourcing by outsourcing or operate traditionally within the needs and limited preferences.