Posted by Mary Milorrie Campos
Feb 14, 2024
Share
Understanding the challenges of outsourcing accounting tasks can give you the upper hand in managing potential issues you may encounter.
Before pushing through your accounting outsourcing initiative, learn these common outsourcing challenges, including some tips to resolve them.
.jpg?width=1434&height=600&name=Challenges%20of%20Outsourcing%20(1).jpg)
Outsourcing success stories are common — we often hear of case studies about businesses that achieved dramatic cost savings and enhanced their capacity to grow despite limited resources.
And you can also achieve these benefits, of course.
But that's if you're aware of the accounting outsourcing challenges you may face. When you have a foresight of these challenges, you can prepare an action plan to counteract them. Thus, limiting their possible effects on your operations.
What are the challenges of outsourcing?
Here’s a list of the 7 accounting outsourcing issues and challenges to watch out for:
Continue reading for a more extensive explanation of each challenge.
Challenge #1: Lack of standardized processes and KPIs
Your outsourcing engagement can go out of control when your provider does not have clear, specific, and structured processes and key performance indicators (KPIs).
Process standardization is crucial to maintaining a smooth workflow. When you’re unaware of how they do things on the backend, it’s possible to experience quality and productivity issues along the way.
On the other hand, a lack of transparent KPIs can make it harder for you to gauge your chosen provider’s effectiveness over time.
Recommended solution
Always do your due diligence. Before starting any engagement, probe into the existing processes of your shortlisted service providers.
Ask them how:
- they standardize repeatable and predictable tasks,
- escalate issues,
- resolve internal and external conflicts, and
- measure performance.
However, if these concerns surface amid an ongoing outsourcing engagement, it’s best to initiate an open discussion with your provider. Try to find a workaround to this concern as soon as possible so it won’t snowball into an even bigger problem.
If they’re unwilling to cooperate and improve their processes, then it’s time to review your deal lifecycle, contract, and the potential losses of an unproductive outsourcing engagement. We also recommend getting expert advice before making any steps to ensure things can work in your favor.
Challenge #2: Failure to deliver the benefits you expect
Setting high expectations on your outsourced provider only to receive subpar service quality is downright disappointing. After all, one of the key reasons you outsource is to expand the capacity of your accounting department. In other words, your in-house team needs reliable support to assist them with their growing accounting responsibilities.
Instead of getting ROI and saving costs, working with an unreliable outsourcing company can turn into an even bigger liability.
To prevent this, check out our recommended solution.
Recommended solution
Identify the services you need to retain in-house and which ones to outsource right before the outsourcing engagement begins.
Determine as well if these tasks require specialized knowledge and skillsets. This way, you can effectively communicate the project requirements to your shortlisted vendors. It can also increase your chances of reaping the full benefits of outsourcing.
If you’re already experiencing this dilemma, it’s still best to communicate with your chosen provider. And if they remain negligent about your concern, consider reviewing your contract and deal lifecycle (see our recommended solution on challenge #1).
Challenge #3: Language and cultural barriers
If you aspire to achieve bigger cost savings, it’s only typical to seek an accounting outsourcing provider from offshore locations — or the countries outside your geographical location — with inexpensive labor and cost of doing business.
However, the farther you go, the greater the language and cultural barriers can become. And when these differences exist, it can be more challenging to communicate your expectations and requirements to your outsourced provider and vice versa.
Recommended solution
The best way to prevent this issue is to find an outsourcing destination with a strong command of the English language and display a cultural affinity for your country.
The Philippines, for instance, is home to accounting professionals whose second language is English. The latest EE English Proficiency Index shows that the country ranked #20 out of 113 countries worldwide and #2 in Asia. The country is also popular for its rich cultural ties with the United States and Spain, which explains the highly adaptable nature of many Filipinos.
Must-try: Accounting support for growth-driven CFOs
Challenge #4: Time zone differences
Working from opposite time zones can cause communication delays. Just imagine starting your business day the moment your outsourced team clocks out from work. It can be a major challenge from both ends, especially when there’s an urgent task.
Recommended solution
Synchronization and clear-cut communication can help you resolve this concern.
At the start of your outsourcing engagement, make sure to communicate when you need your outsourced team to report to work. You should also specify the modes of communication you plan to use, including the acceptable response times.
Finding an accounting outsourcing company with mid and night shifts can also work to your advantage. This way, you can have the assurance that your outsourced team can work with you simultaneously regardless of time zone differences.
Challenge #5: Cybersecurity concerns
Outsourcing to a service provider with poor data security measures can put your sensitive business information at risk. It's an even bigger concern if you’re outsourcing finance and accounting tasks since it means that you’ll need to share sensitive and confidential financial data with your outsourced accountants.
If left unattended, poor data security can result in data breaches, reputational damage, and monetary loss. It can also disrupt your business operations and subject your company to potential legal action.
Recommended solution
Prevention is still better than cure. That’s why it’s crucial to choose an accounting service provider with strong data security measures right from the onset.
During the onboarding process, you must also be critical of the information and access privileges you provide.
If a data breach unfortunately happens during your outsourcing engagement, we recommend consulting with your legal counsel to identify the necessary steps you must take. You can also check out this guide from the U.S. Federal Trade Commission for a more comprehensive data breach response.
Challenge #6: Budget constraints
While outsourcing your accounting functions comes in handy, this also comes with a price.
Note that the cost of outsourced accounting services often depends on several factors. This includes the number of accountants you need, their expertise and seniority, the number of hours, and other add-on requirements.
Recommended solution
You may opt to outsource an accountant per hour or full-time, or only during the busiest seasons of your team.
We also recommend finding a provider with scalable solutions. This way, you can have the option to start small and grow your team later. It's an ideal strategy if you want to test the waters first and see if it works for your organization.
Challenge #7: Unfit service provider
If you’ve already started an outsourcing engagement but you’re still not getting the results you need after a considerable period, then it can be a sign that your chosen service provider is not the right one for you.
Recommended solution
Rather than losing more resources, it’s time to reassess your ongoing outsourcing engagement to examine its potential long-term impacts on your organization. You can also check out this resource for some tips on how to make outsourcing work for your organization.
What makes a good accounting outsourcing partner?
Expertise ensures the quality of work being done. Some companies have quality assurance teams to guarantee that things are done with the highest standards. Consistency enables the firm to continue operations even when the employee is on leave due to sickness or any other reason. Good partners have backup employees, ready to take on the job at any point in the business process. Finally, there is excellence. This separates the good from the great.
Excellence is your partner’s ability to handle complex tasks. There are a handful of outsourcing firms that have teams able to do specialized tasks and deliver with speed and precision.
Related: Efficiency of Outsourcing as a Business Strategy
With proper execution and leadership, outsourcing certain accounting functions can take your company to greater heights. Though outsourcing problems may still arise, coordination with your partner firm can help in solving such concerns.
A partnership built on mutual trust
Like other business activities, outsourcing requires strategic planning, adequate advice, and good management. And much like winning a game of chess, it’s crucial to understand the fundamentals behind a successful outsourcing engagement.
Assessing your needs, doing extensive research, and conducting your due diligence are some of the good ways to start. It can also help if you gain enough knowledge about what outsourcing is, the different outsourcing models, its benefits, and the challenges associated with it.
If you have plans to outsource — whether it’s to expand your operational capacity, fill in talent gaps, or reduce operational costs — then it’s worth noting the challenges of outsourcing provided above.
By gaining enough understanding of its challenges, you can minimize potential risks and create a plan to handle potential mishaps when they occur.
Remember, outsourcing is a two-way street. You do not simply outsource just to offload your tasks and get away with it. Instead, outsourcing works best when you treat it as an extension of your accounting department — where your outsourced team can work hand-in-hand with your in-house team.
And like a domino, an overlooked issue can cause the entire team to collapse — just as how a simple transposition error can make a financial statement invalid.
Let’s be partners for growth
Looking for the right finance and accounting outsourcing partner? Contact us and see what the right outsourcing partner can do for you. You may also download our free guide Outsourcing: How to Make it Work to know how we can contribute to the achievement of your business goals.
This article was first published on 31 August 2015 and has been updated since then for relevancy and comprehensiveness.
Last update: 14 February 2024
Edited by: Mary Milorrie Campos
