A COMPREHENSIVE GUIDE TO
Accounting Outsourcing Services
Learn how outsourcing accounting support can help firms manage the demand for their services, find qualified accounting talents, scale operations, reduce overhead costs, and improve turnaround times.
Accounting outsourcing services can help your firm streamline its operations and reduce overhead costs. Read on to learn more!
Chapter 1: Introduction to Accounting Outsourcing
Understand what accounting outsourcing means, the list of services you can outsource, and the three types of location-based outsourcing models.
Chapter 2: Things to Consider Before Outsourcing
Discover the benefits of outsourcing finance and accounting services, the right timing for outsourcing, and its common misconceptions.
Chapter 3: Selecting the Right Service Provider
Check out this step-by-step guide to selecting an accounting outsourcing partner, the cost of outsourced services, and the red flags to avoid.
Chapter 4: Tips to Make Accounting Outsourcing Engagement Work
Learn the best practices to make your accounting outsourcing engagement run smoothly and get the most value from it.
Chapter 5: Case Study of Successful Accounting Outsourcing
Explore how Standard Ledger Pty Ltd. transformed their operations and overcame staffing challenges through a successful partnership.
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Chapter 1: Introduction to Accounting Outsourcing
Accounting outsourcing is the process of hiring a specialized third-party service provider to assist an organization with their finance and accounting tasks.
Think of it as having an extension of your firm. With outsourcing, you can delegate accounting responsibilities to professionals who have expertise in bookkeeping, accounting, and taxation services.
This arrangement is especially beneficial for companies like accounting firms, audit firms, part-time CFO firms, and wealth management firms that need help with their accounting duties due to limited resources and increased work requirements.
List of Commonly Outsourced Accounting Services
The following list provides an overview of the key accounting services that you can outsource:
1. Bookkeeping
Bookkeeping services typically include keeping your general ledger up to date, managing accounts payable and receivable, reconciling bank statements, and preparing financial statements. It's all about maintaining and keeping the financial health of your business.
2. Payroll Processing
Payroll processing involves all the nitty-gritty tasks of calculating hours worked, applying tax deductions, and ensuring timely payments to your hardworking team. It's all about making sure every employee gets paid correctly and on time.
3. Tax Preparation and Planning Support Services
A back-office tax preparation and planning support service can save you from a major headache. This specialized service requires experts who understand tax laws and regulations inside out. They'll help you organize and complete all the necessary tax documents and forms to meet your tax obligations.
4. Audit Support
Audit support outsourcing lets you work with outsourced auditors. These professionals can assist your in-house audit team with back-office tasks, including planning, execution, and conclusion. If you want to learn the audit support services you can outsource, you may check out this page.
In addition to the extensive list of accounting services that can be outsourced, it is important to recognize the significance of knowing the different types of outsourcing models. With this knowledge, you can identify which outsourcing model complements your processes and can help you achieve your long-term strategic goals.
Outsourcing Locations: Onshore, Nearshore, and Offshore
When considering outsourcing accounting services, you must decide where the service provider should be located. Your chosen destination can have a direct impact on the cost of services, availability of talents, and cultural compatibility, among others.
To begin with, you can choose among these three options:
1. Onshore Outsourcing
If you're looking for an easier way to outsource your tasks, onshore outsourcing is the way to go. Basically, you hire an outsourcing firm within your own country. This means no language or cultural barriers to worry about, making communication and collaboration easier within your firm. It can be a suitable option if you prefer to work with a provider within close proximity.
2. Nearshore Outsourcing
Imagine partnering with an outsourcing firm located in your neighboring country or a country with a similar time zone. That's nearshore outsourcing. This model allows you for easier collaboration and communication while still benefiting from cost savings.
3. Offshore Outsourcing
Offshore outsourcing gives you access to a wider talent pool and even higher cost savings without compromising the quality of your service delivery. With this model, you can hire an outsourcing firm in a different geographical region, typically in a lower-cost location like the Philippines.
In addition to location-based outsourcing models, it’s also important to understand the different pricing structures and business relationships under outsourcing, which we outlined in this article: Understanding the Different Types of Outsourcing Models.
Chapter 2: Things to Consider Before Outsourcing
When you decide to outsource specific tasks, there are a few things you should consider. Here are some factors to keep in mind:
Benefits of Outsourcing Finance and Accounting Services
Here are a few reasons why outsourcing your accounting task can be beneficial for you:
1. Cost Savings
When compared to hiring in-house personnel, outsourcing finance and accounting function allows your firm to access a highly skilled workforce for a fraction of the cost. For example, labor costs in countries like the Philippines are much lower, making it an ideal offshore outsourcing destination for accounting services.
You can read more about the cost of accounting outsourcing in Chapter 3.
2. Access to Specialized Expertise
The Philippines is known for its talented pool of finance and accounting professionals who are familiar and well-versed with international accounting standards and regulations. By partnering with the right outsourcing company in the Philippines, your firm can access this talent pool and benefit from their expertise.
3. Ability to Scale and Adapt
Offshore outsourcing companies can quickly adjust their resources to meet the ever-changing needs of your business.
Whether you require an expansion of your accounting team during busy periods or a reduction in staff during slower times, accounting outsourcing providers can provide the flexibility to accommodate any requirement without the complexities associated with hiring and terminating employees.
However, as with any benefits, there are also specific considerations to keep in mind when deciding whether to outsource accounting.
When to Outsource Accounting
Here are some key indicators that may suggest it is time to consider outsourcing:
1. Lack of Qualified Accounting Professionals Onshore
If your firm is based in the Western region, you may be facing a shortage of qualified accounting professionals onshore. This scarcity of talent can really put a damper on your business operations and growth. However, the good news is you can tap into offshore accounting outsourcing. This way, you can access a wider pool of skilled accountants who can efficiently handle your accounting tasks.
2. Growing Client Base/Clientele
As your firm experiences the positive challenge of a growing client base, it becomes crucial to capitalize on this opportunity and accelerate your firm's expansion. One effective strategy to achieve this is by outsourcing to an external provider. By outsourcing, you can tap into your chosen provider’s expertise and resources, allowing your firm to accelerate growth and meet the demands of an expanding clientele
3. Time Constraints
Time constraints are a common issue for many businesses. Your in-house accounting team is valuable, and sometimes their time is better spent on strategic initiatives, business development, and client acquisition. Outsourcing accounting tasks can free up their time, allowing them to focus on more important matters.
4. Cost-Prohibitive In-House Operations
Maintaining an in-house accounting department can be quite costly, especially for small to medium-sized professional service firms. Outsourcing accounting services offers a more cost-effective alternative that doesn't compromise on quality or accuracy.
5. Seasonal Fluctuations
Many professional service firms experience seasonal fluctuations with their workload. Instead of hiring temporary staff during peak periods, outsourcing can cover your seasonal needs to ensure uninterrupted service and provide your clients with the right level of support during busy periods.
6. Desire for Business Process Improvement
Offshore accounting not only provides immediate relief for your accounting tasks, but it also offers an opportunity for process improvement.
Reputable finance and accounting outsourcing firms can bring in fresh perspectives and suggest efficiency-enhancing measures for your existing processes. Additionally, it is also important to familiarize yourself with common concerns and misconceptions surrounding outsourcing so you can gain better understanding.
Addressing Common Concerns and Misconceptions about Outsourcing
Although there are numerous advantages of accounting outsourcing, there are still some common misconceptions that hold firms back from giving it a try. Here are a few:
Misconception #1: Outsourcing is only for large corporations
Many small and medium-sized firms believe that outsourcing is only suitable for large corporations with extensive resources.
Fact: Accounting outsourcing is beneficial for businesses of all sizes. It will help your firm, regardless of its size, to access top-notch talent and streamline operations by leveraging the expertise and experience of professionals in bookkeeping, accounting, and taxation services.
Misconception #2: Outsourcing exposes sensitive financial data to security risks.
Fact: Reputable accounting outsourcing services prioritize data security and confidentiality. This includes the use of strong encryption to protect client information, restricted access controls, and regular checks for security issues.
Misconception #3: Outsourcing leads to a lack of communication and control over financial processes.
Fact: Offshore accounting service providers understand the importance of maintaining open lines of communication and providing regular updates to their clients. They utilize advanced collaboration tools and establish clear communication protocols to ensure transparency and accountability.
Misconception #4: Outsourcing to a different country may result in cultural and language barriers.
Fact: Many accounting outsourcing firms recognize the importance of cultural alignment to ensure smooth collaboration. They hire professionals who are not only skilled in finance and accounting but also possess strong English language proficiency and cultural adaptability.
This promotes effective communication and minimizes any potential barriers that may arise between you and your third-party service provider.
Misconception #5: Outsourcing compromises the quality of accounting services.
Fact: When you choose to delegate your accounting needs to an external service provider, you can expect quality work. However, it is crucial to remember that the caliber of the service you receive ultimately hinges on the service provider you opt for.
Outsourcing firms that specialize in finance and accounting have a team of highly skilled professionals who possess expertise in different domains, some of whom have previously worked in prominent accounting firms like the Big 4.
In addition, these firms make use of cutting-edge technology and adhere to industry best practices to ensure that they provide you with precise and efficient accounting support.
By taking these factors into consideration, you'll be well-prepared to navigate the outsourcing landscape and make a smart decision that matches your business goals and objectives. Remember to do your research, evaluate different service providers, and pick the one that fits your exact needs.
Step-by-Step Guide to Finding an Accounting Outsourcing Service Provider
When searching for the right accounting outsourcing service provider, consider the following steps:
1. Define your requirements
Clearly identify the accounting tasks you wish to outsource, the level of expertise you require, and your budget.
2. Research and shortlist potential service providers
Conduct a manual online search, ask for recommendations from your professional network, or attend industry events to find potential service providers.
3. Evaluate service providers
Assess their experience, expertise, security measures, and communication capabilities. Request case studies or client testimonials to gain insights into their past performance.
4. Conduct interviews and due diligence
Schedule interviews with shortlisted service providers to understand their approach, communication processes, and ability to meet your specific needs.
5. Make a decision and establish a partnership
Once you have thoroughly evaluated the proposals and assessed pricing, it's time to make a decision and establish a partnership with your chosen accounting outsourcing service provider.
Take the initiative to notify the selected provider and engage in fruitful discussions regarding next steps, such as contract negotiation, service level agreements, and the smooth onboarding process.
As you move forward, it is crucial to carefully consider a range of criteria to ensure you select the ideal outsourcing accounting partner.
Tips to Choosing the Right Outsourcing Accounting Partner
Here are a few things you need to keep in mind when choosing the right outsourcing accounting firm:
1. Scalability and Flexibility
As your business grows, it's important to find an outsourcing accounting partner that can adapt to your changing needs. Look for a partner that offers scalable solutions to accommodate and support your firm's growth trajectory. Flexibility in terms of service options, pricing models, and customization is also essential to ensure a seamless partnership.
2. Quality Assurance and Performance Metrics
To ensure that you receive accurate and quality services, it's important to choose an outsourcing partner that has robust quality assurance processes in place.
Find out how they monitor and measure the performance and accuracy of their accounting services. Ask them about the metrics they use to evaluate their own performance and how they address any discrepancies or errors promptly.
A partner committed to delivering accurate and high-quality work will have well-defined quality control measures, regular internal audits, and open feedback loop for continuous improvement.
3. Pricing Structure and Cost-effectiveness
Consider the pricing structure and cost-effectiveness of the outsourcing accounting partner as well.
Request detailed information about their pricing models, whether it is based on a fixed fee, hourly rates, or a customized package. Take the time to compare their pricing with other potential providers in the market while considering the level of expertise and the quality of services they offer.
Choosing a partner that offers competitive pricing without compromising on quality can provide long-term cost savings for your firm.
4. Client References and Testimonials
A reputable outsourcing accounting partner should be delighted and willing to share references and testimonials. Take the opportunity to reach out to their existing clients to get a sense of their level of satisfaction and whether the partner meets their expectations.
Ask about the partner's responsiveness, professionalism, adherence to deadlines, and overall customer service. Gathering insights from their current clients will give you a better understanding of the partner's strengths and areas for improvement.
Additionally, it is also important to keep an eye out for some red flags when choosing an outsourcing accounting partner to avoid problems down the line.
How Much does Accounting Outsourcing Cost?
The cost of accounting outsourcing can vary depending on several factors, including:
1. Labor Cost
Outsourcing to offshore countries like the Philippines offers cost advantages due to lower labor costs compared to western countries. This cost advantage allows your firms to achieve substantial savings without compromising quality.
To provide a clear comparison, let's review the earnings of Western accountants compared to Filipino accountants. According to the latest data from the US Bureau of Labor Statistics, accountants and auditors receive a median pay of $79,880 per year or $6,656.67 per month. On the other hand, the median yearly salary of full-time Filipino accountants is $5,982.90 or $498.58 monthly.
Aside from the actual data, it is recommended to perform a cost-benefit analysis to help your firm determine whether outsourcing is an effective option for your business based on the anticipated costs, benefits, or opportunities.
*Based on the converted amount. The original data shows that the average yearly salary of accountants in the Philippines is Php336,598. As of 29 August 2024, $1 is equivalent to Php56.26.
2. Full-Time Equivalents (FTEs)
The number of FTEs you need can directly impact the cost. FTEs are determined based on the volume and complexity of work to be outsourced. Hence, it's important for you to assess your workload and decide how many FTEs you require based on your specific needs.
3. Length of Contract
The duration of the outsourcing contract can also have an impact on the cost. Longer contracts may offer more favorable rates compared to short-term engagements. Hence, it is essential for your firm to carefully evaluate your accounting outsourcing needs and consider the ideal contract duration that strikes a balance between cost-effectiveness and flexibility.
Note: While this information is meant to help you make decisions, it's always best to talk directly with the business development officers of the outsourcing companies you're considering so you can get accurate information about their costs and pricing models.
Accounting Outsourcing Red Flags: Service Providers to Avoid
When considering an accounting outsourcing service provider, it is crucial to watch out for the following red flags:
• Lack of experience or expertise in the accounting industry
• Poor track record or negative reviews from previous clients
• Inadequate security measures for handling sensitive financial information
• Limited or outdated technology and infrastructure
• Lack of transparency in terms of pricing and service agreements (see the following section to get a gist on the common factors that affect pricing).
It is important to thoroughly research and vet potential service providers to avoid any unfavorable experiences or outcomes.
Outsourced Accounting Challenges and How to Overcome Them
While outsourcing can bring numerous benefits, it is essential to be aware of the potential challenges and take proactive measures to overcome them. Here are some common challenges associated with outsourced accounting and strategies to address them:
1. Communication and Language Barriers
One challenge that can arise when outsourcing accounting services is the potential for communication and language barriers. It’s essential to choose a service provider that has a team fluent in your preferred language and who can understand and effectively communicate your specific accounting requirements.
Regular communication and clarification of expectations can help overcome language-related challenges and ensure smooth collaboration.
2. Time Zone Differences
Outsourcing accounting services often involves working with service providers located in different time zones. This can present challenges in terms of coordination and timely response.
To overcome this, establish clear communication protocols, including designated points of contact and agreed-upon response times. Tools such as project management software and video conferencing apps can also help you facilitate real-time collaboration and bridge the gap caused by time zone differences.
You can also select outsourcing companies that adjust their work schedule — or work in a shifting schedule.
3. Maintaining Data Security
Data security is a critical concern when outsourcing accounting functions. It is important to ensure that your service provider has robust security measures in place to protect your sensitive financial data. This includes regular data backups, restricted access controls, and encryption protocols.
Additionally, you must establish a clear data protection agreement with the provider to outline responsibilities and expectations regarding data security and confidentiality.
4. Loss of Control and Oversight
Outsourcing accounting functions can sometimes lead to a perceived loss of control and oversight over financial processes.
To address this challenge, it is essential to establish clear communication channels and implement regular reporting mechanisms with your service provider.
Additionally, clearly defining the level of control that the client is entrusting to the outsourced service provider is crucial. This approach will enable you to maintain visibility into the outsourced activities, ensuring their alignment with your business objectives and compliance requirements.
5. Cultural Differences and Business Practices
When outsourcing accounting services to a provider located in a different country or culture, it is important to be mindful of potential cultural differences and variations in business practices.
By taking the time to understand and appreciate the cultural nuances of your outsourcing service provider, you can foster a positive and productive working relationship, ensuring the success of your accounting outsourcing engagement.
By considering these factors, you can make an informed decision that will benefit your firm in the long run. Remember that investing time into selecting the right service provider is crucial for achieving a successful partnership.
Chapter 4: Tips to Make Accounting Outsourcing Engagement Work
To make outsourced accounting services work effectively, it is important to follow these best practices:
1. Clearly Define Your Objectives
Before outsourcing any accounting functions, it is essential to clearly define your objectives and communicate them to your chosen outsourcing partner. This includes specifying the tasks to be outsourced, the expected outcomes, and any specific requirements or timelines.
By providing clear instructions, you can ensure that the outsourced partner understands your expectations and can deliver accordingly.
2. Conduct Thorough Due Diligence
Selecting the right outsourcing partner is paramount to the success of outsourcing accounting services. Thorough due diligence should be conducted to assess the credibility, experience, and expertise of potential service providers. It is essential to inquire about their track record, industry certifications, data security measures, and overall reputation.
By conducting due diligence, you can mitigate risks and ensure that you are partnering with a reliable and trustworthy accounting outsourcing firm.
3. Establish Service Level Agreements (SLAs)
Service Level Agreements (SLAs) are essential for setting clear expectations and defining deliverables in an outsourcing partnership. SLAs establish metrics and benchmarks for quality, timeliness, and accuracy of work. They also serve as a foundation for performance measurement and improvement.
By formalizing expectations through SLAs, both parties have a clear understanding of their roles and responsibilities, ensuring a smooth workflow and accountability.
4. Foster Collaboration and Teamwork
Treat your outsourced partner as an extension of your own team. Encourage collaboration and teamwork by involving them in relevant discussions, sharing updates, and seeking their input on accounting matters. By fostering a collaborative environment, you can leverage the outsourced partner's expertise and effectively integrate them into your workflow.
5. Foster a Long-Term Relationship
Building a long-term relationship with your outsourced partner can yield numerous benefits. It fosters trust, ensures continuity in service delivery, and allows for a deeper understanding of your business's specific accounting needs. Consider signing a long-term contract or agreement to solidify the partnership and incentivize the outsourced partner to provide consistent and high-quality service.
Note: Remember, outsourcing is not just about cost savings; it's about forging a strategic partnership that adds value to your business and helps you achieve your goals.
Chapter 5: Case Study of Successful Accounting Outsourcing
If you're curious about what a successful accounting outsourcing story looks like, we highly recommend checking out this case study between D&V Philippines and Standard Ledger Pty Ltd.
In January 2015, Remco Marcelis, the co-founder and CEO of Standard Ledger, an accounting firm based in Australia, faced a challenge. The company needed a permanent and scalable outsourcing solution that aligned with their own processes. They required a service provider that could deliver advanced services and be trusted to have a backup plan in case of any unforeseen issues.
Solution
Coincidentally, D&V Philippines' Marketing Team reached out to Remco through a social networking platform to introduce the company's finance and accounting outsourcing services.
After recognizing our potential, Standard Ledger sought assistance from D&V Philippines. Our team worked closely with them to understand their specific needs and challenges.
To ensure a seamless transition for our accounting professionals, together, we devised a comprehensive plan to address workload scalability, systems, and processes.
Implementation
During the implementation phase, we collaborated closely with Standard Ledger to transfer their work processes and establish clear communication channels. Our team underwent rigorous training to align with Standard Ledger's standards, ensuring accurate and efficient handling of their clients' accounts.
Interested to read the full case study? Click the image above to get full access.
Challenges and Strategies
As with any transition, there were challenges along the way. One of the main hurdles was ensuring effective communication between the Standard Ledger team and our offshore team in the Philippines. To overcome this, we implemented regular video conferences and utilized project management software to streamline communication, enhance collaboration, and maintain transparency.
Results and Impact
The partnership between Standard Ledger and D&V Philippines yielded impressive results. Standard Ledger experienced a significant reduction in client backlog as their staffing problems were solved, enabling them to deliver on time and enhance client satisfaction.
With our support, they were able to scale their operations seamlessly, taking on more clients without compromising the quality of their services. This resulted in increased revenue and growth for the firm.
Ready to Outsource Your Accounting Needs?
Our experience, specialization, and commitment to providing world-class finance and accounting support make us the perfect partner for accounting firms, audit firms, part-time CFO firms, and wealth management and financial planning practices. Let us help you streamline your processes, enhance your financial management, and boost your profitability. Contact us today to discover how we can support your accounting needs.
You can also read and download our whitepaper, Finding the Right Talents: D&V Philippines Solutions for Modern Accounting Firms, to learn how we invest in our talents’ professional growth and know more how we can be your ideal partner here in the Philippines.
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