| Once you have selected and chosen a suitable | | | | Fixed fee works well when you have regular monthly |
| accounting outsourcing service provider for your | | | | accounting requirements. The most often used fixed |
| accounting needs the next level would be to draft the | | | | fee model is the FTE (Full-Time Employee) model |
| service agreement and lay down points which are | | | | where service providers charge a fee per full-time |
| essential: | | | | employee working on the client projects. Transaction |
| A service agreement should cover the following: | | | | pricing is the toughest for a service provider to provide |
| 1. Define the scope of work | | | | as the risk of non-performance gets directly built into |
| Clearly define the scope and schedule for your | | | | the pricing. However this pricing is not suitable where |
| project. This might seem obvious, but any successful | | | | transaction volume is not high, or where a |
| outsourcing engagement always starts with a clear | | | | ‘transaction’ cannot be clearly defined in |
| statement of what you are hoping to accomplish. | | | | processes such as year-end finalization. The most |
| Define your project requirements up front. Give | | | | used approach is a fixed-price contract. |
| vendors as much information as you can about what | | | | Also clearly define the scope of work covered under |
| you need delivered and the way in which you need | | | | a given pricing. Confirm from the service-provider any |
| the work done. | | | | additional charges that could be applicable apart |
| 2. Define the level of quality | | | | processing or service charges. |
| The level of the quality of services from the vendor | | | | 5. Payment terms. |
| should be clearly defined. The parameters used to | | | | You should pay your vendor as you do your staff or |
| define and measure level of service will vary | | | | other vendors. Don’t accept demands for payment |
| depending on the process. For transaction processing, | | | | before the work is complete. |
| it should be measured on accuracy or processing | | | | 6. Length of the contract. |
| speed. For example, in accounts payable processing, a | | | | Usually it’s a yearly contract that renews |
| popular metric is the accuracy % of the invoices | | | | automatically unless notified otherwise by either |
| processed correctly. Turn-around time is another | | | | service provider or client. You could negotiate for |
| popular measure. Ensure regular error tracking and | | | | easier terms in the first few months, when the |
| reporting with periodic submission of quality reports | | | | process is new. |
| 3. Process Specification | | | | 7. Define termination procedures. |
| There are usually two ways: The offshore staff would | | | | Any termination of services from either party is usually |
| be performing the process by remotely accessing the | | | | by a prior written notice of thirty (30) days to the other |
| accounting software hosted on your server using a | | | | party of its intension to terminate. Insist that your |
| remote access software or working on the backup | | | | vendor agree to transfer all files back to you and |
| copies of the accounting file. A third and increasing | | | | provide reasonable assistance to a new vendor. Also |
| popular way is to use a web-based version of the | | | | you could get a lower termination period (15 days) in |
| accounting software. A clear specification of the | | | | the pilot phase of the contract (usually first one |
| process and document flow in the agreement is | | | | –two months). |
| important the processing speed and other | | | | 8. Data Security. |
| performance parameters can vary based on the | | | | Ensure that the data with the service provider is |
| method chosen for processing. Source Documents | | | | completely safe. Always sign up a Nondisclosure |
| can be faxed or uploaded on to the service | | | | Agreement with the service provider which is |
| providers’ server, or they may be accessed | | | | punishable under the law if broken. |
| remotely by the service-provider’s staff. This is the | | | | 9. Build flexibility into the contract. |
| slowest method in terms of processing. | | | | As your business needs change, you will want to |
| 4. Pricing | | | | change the scope of the contract. Build in a process to |
| There are several factors to be considered while | | | | resolve these issues as they arise. While the |
| negotiating the price of the contract. The type of | | | | outsourcer shouldn’t charge you for every little |
| pricing- hourly, fixed fee or transaction based. Hourly | | | | change, recognize that changes cost money and you |
| pricing works well where you have small projects that | | | | may need to pay for such changes as they arise. |
| need to be completed on as and when needed basis. | | | | |