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Why don’t accountants outsource more?

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31st Aug 2011
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Many accountants are too busy working IN their business to explore ways in which they could be more successful, explains Mark Lee.

Some years back I received some great business advice, which is worthy of repeating here:

“Most people worry about what they’re not good at. Don’t. Concentrate on what you are good at. You can outsource what you’re not good at.”

This is rather simplistic as you could equally well employ people to perform the tasks that you’re not good at or that you don’t enjoy.

This still begs the question: What are you good at? Bookkeeping? Producing accounts? The related business advice? Preparation of tax returns? The related tax advice? Something else? 

At least one national accountancy franchise operation used to make it clear to franchisees that they need not have any traditional accountancy skills. They can employ staff or outsource work to those who do. Their role is to run, lead and build the business. How many qualified accountants focus on developing their skills to be able to run, lead and build their practice? Instead most focus only on keeping their technical skills up-to-date so that they can continue to work hard IN the business rather than ON the business.

Most owners and partners in accountancy practices are keen to contain the employment costs of running the business. This may lead to them doing work themselves even though they are over-qualified. Or it may mean them struggling to learn how to perform certain activities that a more junior person would do in an instant.

The question then follows as to how to arrange for work to be done other than by the owner(s)? The options include engaging any or all of the following:

  • Full time staff
  • Part-time staff
  • Independent contractors who visit the office
  • Independent contractors elsewhere in the UK
  • UK based outsourcing operations
  • Offshore based outsourcing operations

This latter option is often identified as one that enables you to arrange for the necessary client work to be performed at a fraction of the cost of any of the other options.

To my mind, ‘outsourcing’ means sourcing suppliers of work that will be performed OUTside the firm and that would otherwise be done by the accountant or their employees INside the firm.

You can outsource to anyone – they may be based in your town, elsewhere in the UK or overseas. So it is worth noting that outsourcing is NOT synonymous with off-shoring.

In practice I suspect that newer practices are more likely to consider all of the options. More established practices are more likely to stick with tried and trusted solutions. Maybe they have had bad experiences when experimenting with new approaches. Or are they scared? Or maybe they are unable to get agreement among the partnership to do something different and new? After all, prudence isn’t just a fundamental accounting concept.

Another common misconception is to assume that the only form of outsourcing is the production of accounts. Here’s a list of activities typically undertaken by accountancy firms but which can equally be outsourced – and often are:

Bookkeeping for clients (this can be done in-house, or clients can be helped to get started using an online bookkeeping package, or introduced to a third-party bookkeeper)

  • Payroll services for clients
  • Company secretarial work for clients
  • Tax planning and support (in effect avoiding the cost of having high level tax expertise in house and on tap 5 days a week)
  • Provision of credit to clients who want time to pay their fees (why act as a bank by allowing clients extended credit terms – often at no charge?)
  • Writing newsletters for clients
  • Tax return preparation work

In addition to services for clients some accountants outsource office-related facilities – such as telephone answering, typing and transcription.

As professional advisers many of us are used to the idea of contracting for specific ad-hoc support services. When we need regular help though, we can outsource this by engaging a third party to provide the services for and on behalf of our business. This can be a particularly cost effective approach for smaller businesses that should not feel obliged to take on staff when outside contractors or outsourcing are viable alternatives.

I alluded to the commercial benefits of outsourcing in my AccountingWEB article in April 2011: ‘Call yourself a business adviser?’. There have also been plenty of discussions about outsourcing in the Any Answers section of the website.

I admit to being just a tad amused when I see references to a predictable consequence of finding an overseas-based operation that promises charge out rates of less than £10 an hour. Almost inevitably the work is not done to the same standard as would be the case if a higher priced option were chosen in the UK. As a result you end up paying for more hours than you might have expected. As the old saying goes: “When you want your work done cheaply, accurately and in good time, you will only ever get two out of three.” It is important to factor this into your budgeting.

Higher than expected fees are not the only worry when it comes to outsourcing. However some people seem to only consider other issues in the context of outsourcing offshore. Anyone can lose papers, anyone can make mistakes, especially if not adequately supervised and anyone can attempt to make direct contact with ‘your’ clients when they feel sufficiently confident to do so.

The then chief executive of IRIS resourcing, Sharanbir Brijnath, gave his take on outsourcing on AccountingWEB back in 2008. In his opinion:

“any discussion about outsourcing that is conducted with cost savings as the primary driver has started off on the wrong track. The principal driver for most accountants outsourcing their data processing is because of a (growing) shortage of staff available to process work.”

Brijnath was speaking just after the first Great Debate hosted by AccountingWEB. Guest speakers argued as to whether outsourcing was an entirely good thing for British accountants. This led to much online discussion. A few months later Vipul Sheth, of AdvanceTrack Outsourcing, explained what he saw as The true value of outsourcing’. He supported the view that all firms need to be true business advisers and stated that:

“Outsourcing supports this approach, but it is in no way a service that replaces the firm and the need for local delivery. Some may be surprised by this comment from an outsourcer, but I firmly believe that some work will and should always be retained in-house due to its nature, and also to provide the grounding for trainees to understand the basics.”

Sheth went on to address many of the points raised in the debate. I tend to agree with much of what he said but I still think that outsourcing overseas remains more the exception than the rule.

What is your view on this?

Mark Lee is consultant practice editor of AccountingWEB and chairman of the Tax Advice Network of independent tax specialists. Visit his personal website and blog.

Replies (17)

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By Spartacus
01st Sep 2011 00:06

My own view - which may not be popular -
Where possible, and if there is sufficient work, employ someone - then you have total control over quality etc.Otherwise outsource to a UK contractor. You then have legal safeguards not available when using overseas contractors.

In these times of high unemployment, and public debt, it is, in my opinion, unpatriotic to place work abroad.  By doing so you leave someone in the UK unemployed, and, cost the taxpayer money in unneccesary benefits payments.

We should, whenever possible, buy British and employ British. Anything less is morally wrong and indefensible.

 

 

 

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By PETERP
02nd Sep 2011 13:22

Outsourcing

I run The Payroll Department in Bristol  a UK payroll bureau that has three firms of accountants as clients. One firm with nearly 100 payrolls particularly tells everybody the best days work he ever did. We do a professional job, which believe it or not means training and investing in staff and unless you have the volume is not cost effective particulary for a small practice. It also menns that the practicing accountant can do what they are good at, always the danger of being a jack of all trades and master of none.Our guys now make a profit out payroll, and so do we. I speak from experience having been a prracticing accountant before setting up this business. If anyone would like further information please contact me [email protected]

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By [email protected]
01st Sep 2011 08:55

Outsourcing

My recent experience of outsourcing bookkeeping is that it is not as easy as some of us make it out to be. I found out that there are problem areas which are not mentioned when outsourcing is mentioned. The main problem areas are scanning of documents and related costs, outsourcing costs may be as much as doing the work in the UK if you add the time to sort out all the queries created by outsourcing companies when processing the documents.

I would be interested to hear from anyone who has managed to benefit from outsourcing bookkeeping.

 

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By ShirleyM
01st Sep 2011 12:42

A few tips

Personally, I think the following requirements should be considered when outsourcing (the list is not prioritised).

Confidentiality, with written agreement not to contact your clients direct - it is unlikely a subbie or outsourcer would steal your client as it would be professional suicide, but it could happen.Security of data and records - are they going to be kept securely, and if actual documents are taken are they insured if replacements are needed.Experience - are they limited to the easy tasks, or will they take on the more difficult, or messy, jobs?Availability - are they available throughout the year - will you get plenty of notice regarding planned holidays?Software - can they prepare accounts/tax in the required software?Bookkeeping - will they take client records in any format, eg. Manual records, Sage, Quickbooks, etc.Working papers - will they work to your templates so as to maintain consistency? Will they produce a good enough analysis for you to be able to check the accounts?How thorough are they - will they fully reconcile Wages, PAYE, VAT, Bank, etc.Will they examine the accounts to spot incorrect analysis of income/expenditure by your client.Will they perform a review of the accounts, summarise all the adjustments, list any errors or omissions, and highlight any concerns.Will they work to agreed timescales.If amendments are needed, will this incur an extra charge?Finally, will they do all this at reasonable cost?

 

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By Tom 7000
02nd Sep 2011 11:51

Good Idea

I currently do all our audit work...and end up working too much says the Mrs.

I am going to outsource the lot, well I'll do the planning and sign it off and check it etc

Anyone want to run our auditing portfolio, I think Ill outsource it on an employer employee basis.

Good annual salary and working conditions etc, based at GU147LY

Ive got charities, residents associatioons, companies, international groups , its a mix and quite interesting. Anyone interested [email protected]

 

Thanks for the idea

 

Tom

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By ThornyIssues
02nd Sep 2011 12:05

Also

@Sparticus - gets my vote.

@ShirleyM - every one of your "will they" questions have to be turned into binding contractual terms with defined penalties in the SLA.

£0.02

 

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By WallyGandy
02nd Sep 2011 12:15

Let's get back to the question.....

 

As a former Practitioner I had subcontractors and ShirleyM's checklist is thorough and complete.

This set up the model for my venture into subcontracting with the added understanding that the subbie will get the messier jobs. Earlier career in Practice says "Get on with it".

To my knowledge every box on ShirleyM's list can be well & truly ticked (no complaints ever heard)

I too had trepidation about subcontractors, but in time I realised how advantageous they can be.  I base my operation on my expectations of subcontractors working for me.

BUT!! The OP question hasn't been answered- Why don't accountants outsource more (or even try it?)

PS I'm a UK based subcontractor.

 

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By alansealey
02nd Sep 2011 12:18

What are we frightened of?

Mark,

I think the real debate is around "give and get". For it to work well in my experience, it has to be on a work exchange basis eg you do my bookkeeping work and I will do your accounts work with some monetary exchange for any difference in value of work done. If both providers are of a similar size, the relationship can work well.

IF our prime concern is the quality of service to our clients and the value we add to their business, we should be seeking to have their work done by experts, not enthusiastic amateurs. A good accountant should act as a signpost, helping clients access the skills they need to succeed in business.

If we don't refer, it's likely to be for two reasons. Either we do not trust someone else to do as good a job as we can, and this will be seen by our clients and reflect back on us, or we are afraid that they may like the new person more, maybe eventually leading to the loss of a client. Both of these have fear at their root, which is not a very positive thing.

Unfortunately I think we may miss a trick because we isolate ourselves from the opportunity to learn and share best practice. Ultimately this will backfire, when it comes to succession planning, as the skills have not been passed on.

On a very proactive note therefore, we are based in Southampton, and would welcome email form any local businesses that would like to explore whether we have opportunities to share share skills and work around. My email is [email protected] and you can read about us at www.davidpooleaccountants.co.uk.

 

 

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By stuart1696w
02nd Sep 2011 12:37

Get the Right Guy

Frankly, the Indians are rubbish yet seemingly having cornered the market accountants can't think of anyone else who they could outsource to. My advice, as I have done, is to find an expatriate UK Chartered Accountant who just wants to do contract work and is clued up as to how to receive and deliver work. My guy, who is based in Israel, does work of the highest quality needing little if any in the way of checking or review. I will be happy to recommend him if anyone contacts me. [email protected]

 

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By consultfdi
02nd Sep 2011 12:38

Outsourcing

I believe that flexibility of staff will have a significant role in the future survival and profitability of British small business.

Outsourcing can encompass many disciplines from tele-marketing to the provision of specific professional services or basic admin.

No longer does this involve sourcing a provider overseas as there are now many qualified accountants offering services on a contract basis.

I myself provide professional service outsourcing remotely, due to regular international travel, often for an agreed %age of the fixed fee quoted to the end client.

Anyone interested please let me know - [email protected].

 

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By MartinLevin
02nd Sep 2011 13:29

Outsourcing? Clean up input first (ABC)

Back in the hey days of the 1980s, I tried to arrange a discussion group with fellow local accountants.  Too many of them answered "I'm busy, but if anything interesting comes up, do let me know".  This was the opposite as to what I was trying to instigate.  The group DID get formed, and we had some fruitful meetings.

That meant that WE got the chance to look at how we ran our practices.  Too many High Street Accountants did not spend enough time in guiding new clients through the niceties of what records to keep.  They told them "go to a High Street Stationers and buy an Accounts Book".  If anyone was presented with blank pages, then they become intimated.  As a result the Garbage In - Garbage Out syndrome prevailed.

To address that, I designed the ABC ACCOUNTS BOOK, and issued each client a free one.  I still do this annually.  As a result, great records come in, they are rapidly analysed, and the Financial Accounts are prepared swiftly, accurately, and very little enquiry from HM Revenue & Customs.  The Book is readily available to other practitioners at £8 each.  The publishers are Emandee Publishers, and they can be contacted via my Website: www.MartinLevinABC.co.uk  

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By Albasas
02nd Sep 2011 13:31

Outsourcing. Why? Simples.

As professionals offering services, the clients of course mutually engage your practice to do the job, (degree of skill and acumen and all that), and so not just subcontract it out. To tell them otherwise (worse still- not!) is probably not good for your credibility; and; generally not going to go down well. A bit of a spivvy money grabbing type concept then from professionals who are perceived as being paid well enough to do the job as it is.....but it seems as only the middle men, can't after all.

Yes, practicalities are issues.. Sensitive commercial and cultural considerations aside, what about any HMRC queries? Surely if you outsource you just risk having not got to know your client properly in the current regulatory climate ? Very superficial. If the outsourced 'accounts factory farm sweat shops' mass-producing these generic financials have no feel for the job, then what is the point or advantage? Other than getting A. O. Nother to sign of an audit that is. Then there's the shareholders. The local accounts staff put out of work etc by mostly cheaper overseas competition.In my opinion, outsourcing is also going further down the path to demeaning accountancy and audit as a profession. If you know your stuff anyway, then its not that hard to knock out a set of accounts nowadays. That's why outsourcers exist in the first place surely? The biggest threat or boom to the profession being software. Depending on your Luddite views of course. Outsourcing is perceived by the layperson as a cynical exploitation of technology, misleading clients and generally does away with client confidentiality. There is no real professional demand for it. We are not in the rag trade.

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By David_Lewis
02nd Sep 2011 13:43

Outsourcing the unfamiliar...

I have spent 23 years in traditional practice and now 7 years as an independent consultant. 

When I started operating independently I at first thought that smaller accountancy firms could benefit from my skills which include investigative work (such as due diligence), troubleshooting, and commercially orientated work such as business planning, process and information improvement through to outsourced FD services.   I knew from my experience when in traditional practice, that not all accountants have those skills and usually when these one off projects arise they are (or were at the time) often difficult to resource.  In addition it provides a flexible resource that could strengthen the offering of some practices and help cement their relationship with the client, without the fixed costs.

Whilst I do work with accountants, most of my work is direct to client.  However, notwithstanding the benefits, I eventually came to the conclusion that I was often seen as a threat and  I stopped actively marketing to accountancy firms.   Also on reflection, accountants are generally conservative, so perhaps I was unrealistic to expect  to be trusted  straight off on complex non routine work (which would probably be on their larger clients!!).

I am however wondering whether views have changed and if attitudes have softened.  Would you ever contemplate outsourcing this sort of work?  Your views would be appreciated.

 

David Lewis

Camrose Consulting

 

 

 

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By ejkless
02nd Sep 2011 13:55

The answer to the question posed in the title of the article is - the ABH - Almighty Billable Hour. Unless and until the profession abandons the ABH it will be forever doomed to all that is contained in this article. 

If you are interested in liberating yourself from the HMS Billable Hour visit - www.verasage.com. We have nothing to sell, we just want to help.

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By plummy1
02nd Sep 2011 23:19

Outsourcing

I feel duty bound to mention the need to recognise services such as capital allowances claims on commercial property including furnished holiday lets. Many accountants do not understand that this work is not only worthwhile but will benefit some of their clients greatly. However it does need to be outsourced to a reputable to a reputable company.

Message ends.

 

 

 

 

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By 0618000
05th Sep 2011 21:45

I have the answer!!

[Comment removed - Sales pitch]

 

 

 

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By peterhool
06th Sep 2011 16:09

I work with a firm that has wholly owned offices and staff in the UK and India. We have systematised all of the practice work from compliance right through to specialist client services so that every Partner, Manager and member of staff does the work they enjoy most and does best.

We do outsource some aspects of very specialist work.

We have been approached by older practitioners seeking phased retirement in a way that enables them

To retain contact with clients.To be freed from long hours doing work they are over qualified for.To focus on activities that they enjoy.To add value to their fee base which we will ultimatley buy at full market value.To offer clients fixed fees for routine work, thus eliminating dependence on time sheets.To reduce working capitalTo be freed from commonly experienced staffing difficulties.To continue to 'take home' at least their current share.To share all the benefits of a progressive dynamic practiceTo be able to backout fully at any time

We had thought of offering to 'outsource' compliance work for other practitioners but as many have experienced this is difficult to do successfully. We have already successfully achieved working relationships with a number of sole practitioners, which is more in the nature of a Practice Management Service which produces a true win/win result plus an improved service to clients.

If anyone wants more information on our working model please email me [email protected]

 

 

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