| Offshoring and outsourcing are headline news today. | | | | - can accept new business without having to worry |
| Popular news sources as well as business publications | | | | about staff, space and equipment availability. |
| carry daily articles on the virtues and vices of | | | | |
| offshoring. How does offshoring affect the local CPA | | | | While the strategic advantages take some time to |
| firm? | | | | become effective, CPAs gain immediate benefits from |
| Let us state some axiomatic truths: | | | | offshoring, including: |
| - Every business today needs to focus on its key | | | | - A simple solution to the vexing problem of recruiting |
| competencies. | | | | and retaining bookkeeping staff and staff accountants. |
| - The internet has made it possible for any job that | | | | - An excellent way to handle peak load, especially |
| can be done across town to be done anywhere in the | | | | during tax season. |
| world. | | | | - Higher quality control: a lighter work load allows for |
| - US wages and overhead are substantially higher than | | | | closer review and eliminates the pressure which can |
| costs in other English-speaking countries. | | | | lead to mistakes. |
| | | | | - Significant cost savings. There are two parts to this |
| Outsourcing accounting and financial services is | | | | cost saving |
| growing by 30% annually. Sooner or later, every CPA | | | | |
| will have to deal with competitors who are offshoring. It | | | | a. There is the labor arbitrage |
| is our contention that CPAs who outsource will have | | | | factor which can deliver 50-70% cost saving. We |
| more time to attend to their most profitable clients. | | | | estimate that the true cost of a US Staff Accountant |
| They would also be freed from the headaches of | | | | is $34/hr worked. When you consider that offshore |
| recruiting and retaining qualified accounting staff. | | | | vendors provide the same service for $10 ±/hr. the |
| Making use of outsourced accounting services | | | | cost savings are obvious. We estimate that replacing |
| increases profits in the short run as well as the long | | | | one US staff accountant saves $47,000/year. (Please |
| run. | | | | see the Excel object at the end of the article. You can |
| Outsourcing the responsibilities of one US staff | | | | substitute your own assumptions and derive your own |
| accountant saves nearly $50,000/year. | | | | estimate). |
| Many people think of accounting and bookkeeping | | | | b. The outsourced accounting |
| outsourcing as simply a way to reduce cost. This | | | | provider has significantly larger scale than a single local |
| perception misses the greatest benefit to be had - | | | | CPA firm. It allows them to invest in process |
| giving the CPA the gift of time. | | | | improvements, systematic staff recruiting and training. |
| For the overworked CPA, time is a tyrant. Important | | | | c. It is not uncommon to see |
| business functions which lack urgency are often | | | | automation reduce the time required by as much as |
| ignored (e.g. business development, staff development, | | | | 90%. The CPA firm using an outsourced accounting |
| exit strategy etc.). | | | | services firm can improve its quality and lower cost at |
| By outsourcing the less skilled work, the CPA: | | | | the same time. |
| - gets the time to attend to the top 10 – 20% of | | | | - Improved security: Offshore vendors make |
| their clients, who contribute 80 – 90% of their | | | | substantial investment in security, which is not feasible |
| revenues. These clients are often the best sources of | | | | for a local CPA firm. Contrary to popular belief, |
| new business. | | | | offshoring improves security rather than reducing it. |
| - gets the opportunity to examine the client’s | | | | |
| financial affairs and become a trusted advisor. This | | | | |
| opens up a myriad of financial services that the client | | | | Is an outsource accounting service right for your |
| needs and the CPA can provide. | | | | firm? As with all tools, it is most effective when used |
| - develops a better understanding of value of the | | | | in service of a strategy. If you are ready to |
| CPAs service to the customer, making value-pricing | | | | increase levels of service, grow or diversify your |
| easier. | | | | practice, or just have more time to yourself for other |
| - trains fewer staff accountants, freeing time and | | | | pursuits, then it is appropriate to consider offshore |
| money for in-depth staff training. | | | | accounting as part of your business strategy. |
| - can invest in marketing. | | | | |