We are in the new era of outsourcing.
This term has different connotations and different approaches. Some call it subcontracting, freelancing, remote workers, offshore workers, or virtual assistants. The rise of outsourcing has been phenomenal and it is now a reality of modern business.
The Finance & Accounting (F&A) industry were the early adopters of outsourcing. Firms first outsourced back-office processes, and the practice continues to boom.
Several factors have contributed to the rise of outsourcing, some of them being:
- A shortage of skilled accountants
- Lack of processes
- Inability to meet peak tax season demands
- Poor organizational structure
- Inadequate governance
Many accountancy practices realize outsourcing is inevitable to grow their business. It allows them to focus more on core activities and stay competitive, rather than spend time on back-office or time-consuming transactional activities.
Outsourcing can take low-level tasks off the plate of valuable employees or bring expertise to an area of business not available in-house. In some cases, outsourcing helps accounting firms in the process of digitalisation. When dealing with increasing operational costs that go out of control and procedures that seemingly do not deliver, accounting firms and accountants often explore the outsourcing option.
As the F&A outsourcing industry continues to mature, accounting firms are exploring innovative ways to streamline processes. The impact of F&A outsourcing is now profound and deep-rooted across new areas and diverse industries.
In spite of this rise of smart outsourcing, F&A firms still continue to make mistakes which result in the blame game and communication breakdown. This blog provides valuable tips to practice owners on errors to avoid when they first start outsourcing.
Here are the top 7 mistakes to avoid when outsourcing in your accountancy practice…
1. Putting rates over quality and results
Often, the worry that practice owners need to cut costs in all areas leads them to consider outsourcing. And undoubtedly, cost saving is one of the key benefits of outsourcing. However, accounting firms often make it the sole decisive factor while outsourcing the project and adopt a “cheapest is best” outlook.
Accountancy practices can easily become too focused on the lowest hourly rate and its impact on bottom line results. Because of this, practices often overlook the fact that low rates can frequently come with poor quality of work, a lower expertise level and poor communication.
For lower pay rates, outsourcing companies tend to attempt to work insanely long hours.
In other words, you get what you pay for in terms of quality. So, creating a reasonable budget and sticking to it is the best method, but never compromise on quality to save a few pounds.
It is all about fair compensation and outsourcing won’t work if you don’t keep your offshore team happy. So, rise above cheap deals and think about long-term business goals.
2. Not knowing what and when to outsource
Outsourcing is a significant strategic step forward. And often practice owners can fall into a trap of outsourcing things left, right and center. To begin with, outsource tasks that can be specified in detail, and managed with measurable deliverables.
Be careful not to give up your company’s competitive advantage that acts as a critical differentiator for your firm. If the requirement for a particular service in business is outgrowing your staff or available resources, outsourcing might come across an obvious decision. Outsourcing this aspect of your firm can save you from hassles and help you meet customer demand.
Not knowing when to outsource is also a big mistake accounting firms make. Recently, HMRC’s Making Tax Digital brought about a massive upheaval in Finance & Accounting (F&A). MTD compelled accountants to bring about changes and take advantage of the opportunities that digital tax would offer. It was about the right time to change and evolve.
Firms and their clients will have to invest in new packages to change how the firm operates and drive new efficiency levels. Outsourcing may be a feasible option for many firms to take advantage of MTD.
3. Leaving Room for Ambiguity & Poor Onboarding
Outsourcing is all about defining a process or task with guidelines, procedures, and rules. Accounting firms can be guilty of not investing time in charting out rules and procedures which could help explain the process. Many times, guidelines are unsaid and unwritten. However, when you outsource, everything needs to be in writing. There is no room for assumption, vagueness or ambiguity.
Effectively onboarding and communicating with your outsourcing partner is the key to success. Keep communications regular regarding expectations, systems, payments, and make sure that deadlines are clearly defined to avoid a setback.
4. Lack of Communication
Once you’ve decided what you’re onboarding and are exciting and raring to go, the next step is to jump into onboarding and testing. It’s really important to remember that communication needs to be consistent, and you need to provide detailed and regular feedback. It is absolutely essential to set a reliable mechanism in place for questions and ensuring that the project moves in the right direction in order to be successful.
Regularly reviewing work is a must. Now I know a major reason why we outsource is the fact that we are often too busy. But if you don’t make time to review outsourced work regularly you may find that work is done incorrectly or to a poor standard. In these scenarios, you’ll simply be creating more work for yourself, especially if you have to fire the outsourced worker. Not a good idea.
Always remember that your business is continually evolving and requires changes. If you don’t explain what the goals are while you’re working with an outsourcer, your business relationship will be counterproductive.
Whether you use an offshore F&A service provider or someone right across the street, it’s essential to communicate what’s needed. There is often a complete disconnect when it comes to setting expectations right in terms of what’s delivered.
You need to regularly monitor throughout the process to check for deviation if any, in the original project. It will minimize losses and keep the project on track.
Written communication leaves a clear record. Anything you want your team to remember or refer back should be in writing, such as feedback, guidelines, manuals, and MoM.
5. Underestimating The Importance of Interview
A quick research on the internet will tell you there are tons of outsourcing options for Accountants. And it can be tempting to rush the process and rush through the signoff procedure to get someone hired and the ball rolling ASAP.
If you do, you will have committed the most common mistake. You can easily overlook the interview process needed to hire a dedicated accountant for your project.
So how do you find the right accountant for your project?
Keep a questionnaire for outsourcing interview process ready.
You need to ask questions that gauge knowledge in the following areas:
- Communication Skills
- Command over English
- Role specific questions
- Scenario questions
- Types of projects handled
- Software Proficiency
- Time Zone
- Working Hours
- Preferred Mode of Communication
6. Not Rewarding or Appreciating
The deepest principle of human nature is an unyielding craving to be appreciated. Remember, your dedicated team working on offshore location allows you to focus on strategic tasks. It gives your firm the much-needed impetus to move ahead.
One of the biggest mistakes that accountants make in outsourcing project is not providing growth opportunities for their best and most trusted offshore team members. Show that you care and travel the extra mile to appreciate your team. Small gestures could go a long way. Don’t shy away from sending appreciation mail or send a video testimonial.
Also, ensure competitive rates, consistency of workflow and growth opportunities.
7. Dictatorial and Micromanaging
This is just the opposite of not providing feedback or communication. Several factors make outsourcing less efficient such as dictating your terms, micromanaging, and not appreciating expertise. The truth is that many accountants overlook the fact that accounting outsourcing companies can bring great ideas to the table. It is all about being open to suggestions.
We hope these tips will help you overcome roadblocks experienced during F&A outsourcing
Ketan Gajjar works as Group Sales Director with Initor Global, a leading Accounting Outsourcing Services Company.
He brings a wealth of experience in the outsourcing industry and helps accounting firms improve ROI.