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Outsource to boost your firm’s profitability

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23rd Feb 2015
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Accounting practices are facing a steady demand for a wide range of outsourced services, from traditional payroll and bookkeeping support to providing virtual finance directors, says Nigel Harris.

As accountants, we have a huge breadth and depth of skills and experience that small and growing business owners can buy in as and when they require them.

For a very small business, it is often cost-effective to outsource services like payroll, bookkeeping or VAT returns, and who better to supply them than a trusted adviser in the form of their existing accountant? And if you would otherwise be unable to help clients yourself, introducing them to a reliable third-party can help cement the client relationship even if you have to give work away in the short-term.

Taking outsourcing to the next level, we can add value to these basic compliance services. You could team up with a law firm or employment specialist to provide HR support alongside your payroll service. An obvious extension of bookkeeping is to provide regular management accounts and report on KPIs.

Indeed, with most accounting software you can produce such data with minimal extra effort, allowing you to earn extra fees by spending time with clients explaining the figures to them.

For more ambitious and financially sophisticated clients there is scope to make the logical progression to providing a virtual FD service, attending board meetings, advising the directors on performance, developing and monitoring budgets and carrying out ongoing tax planning based on real-time management data (which your firm may well be producing too).

Such services will command high fees for qualified accountants at partner or senior manager level, provide greater job satisfaction for those delivering them and help the firm retain high flyers who might otherwise be tempted to leave in search of new challenges. When the client decides they are ready to recruit their own FD, there's one final service we can supply – helping them select and recruit the right person, vetting applications and participating in the interview process.

What we have described so far might be described as “in-sourcing” from the accounting firm's perspective. However, many profitable firms have built their success in recent years on outsourcing their own work, i.e. subcontracting some or all of their routine compliance work to lower cost providers in the UK or abroad.

Financially it makes sense – the outsourcing provider represents an infinitely flexible resource charged only by the hour for work done. If you have no work they don't have to be paid. When you're busy, they can process one, 10 or 20 jobs simultaneously. An added advantage of outsourcing abroad to somewhere like India is not only the relatively low hourly rates but the time difference which means that a lot of work is effectively done overnight for UK clients.

Whether you are a supplier, customer or both, outsourcing offers huge potential to increase the profitability of your firm.

To read the full article and others like it, download AccountingWEB’s Practice Profitability Guide.

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By johnjenkins
24th Feb 2015 10:51

There's always

been an argument between outsourcing and in-house. local Councils change their minds regularly.

For many business the costs make outsourcing a no no.

Finding the balance is the key.

We do all aspects with our clients, however we won't take on VAT, Payroll or bookkeeping without doing the Accounts. Encouraging clients to do it themselves in-house is our main aim.

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