Allan Koltin, the CEO of Koltin Consulting Group, in a recent interview with Thomson Reuters, said, “Having a good outsourcing strategy in place is a way to keep great talent. In fact, in the top 50 or so of the high-performing tax & accounting firms, I wouldn’t be surprised if about 15% to 20% of all billable hours are done outsource within the next three years.”
Over the years, outsourcing has proven to be a strong and effective business model - one that comes with a multitude of benefits. If small CPA firms want to focus on productivity and growth, they must invest in outsourcing accounting services. With the immense talent shortage, approaching retirement years of the current accountants, advanced technology, and ever-changing regulations, it is quite difficult for young CPA firm owners to stay on top of everything.
Accounting is a critical aspect of any business and small accounting firms certainly need to adopt measures that help them stay ahead of the curve.
Before we delve deeper into how outsourcing can help small CPA firms gain an edge, let us understand the signs when a small CPA firm needs outsourcing as a business strategy:
- When there’s a shortage of talented professionals: After the great resignation, all industries have faced a dearth of talented candidates. But the scenario for small CPA firms is worse. Most competent accountants seek jobs in larger corporations - better money and brand recognition. The competitive employment landscape makes it hard to hire and retain talent in the field.
Outsourcing some non-core activities is one of the best solutions to tackle this issue. This way, the existing team does not end up working on repetitive tasks and getting burnt out. Outsourcing is also a great business model, especially if you have a lot of tasks on your plate during the busy seasons.
- When you want to expand your geographies: One of the major challenges that small CPA firms face is the lack of infrastructure to run a 24/7 business. Outsourcing is a great model because of the time difference. It helps you serve the clients round-the-clock. You get support from the outsource team at your odd hours. Outsourcing allows you to have a “follow the sun” model, which lets you expand your geographies without additional cost.
- When you want to provide accurate results: Accounting needs a resource’s undivided attention. As a small CPA firm, where most of the resources have to wear multiple hats, how convenient is that? Almost nil! Outsourcing tasks like bookkeeping, accounts payable and receivable, taxation, and payroll, you hire a team dedicated to doing just that. Besides using cutting-edge software like Quickbooks, Xero, and Zoho books, your task undergoes multiple levels of checks, which help deliver foolproof results.
- When your team is overburdened: Especially during tax season or year-end, small teams tend to get overworked and overwhelmed. Even on a regular day, there is a chance that your teammates might fall sick or need to attend to something personal, a business always has to be ready. Outsourcing is a great way to ensure that there is a balance in the work that your in-house team does. Offloading non-core activities from your team’s shoulders can be a great way to retain them for a long time.
- When the team is technologically challenged: Times are changing, and so are the accounting software and technology. Every client has their own set of needs and demands when it comes to the use of software. If your team is not up-to-date with the latest trends and time constraints hinder their growth curve, it might be a sign for you to outsource to a team of experts who are adept or can easily adapt to the needs of the clients.
Why are small CPA firm owners apprehensive about Outsourcing?
Contrary to what others might tell you, outsourcing is neither a magic potion nor a quick fix to your CPA firm's issues. Just like any other business strategy, leaders have to trust the process. Young CPA leaders fail to invest in the training and development of the external team. With the lack of a consistent feedback mechanism in place, this partnership will most likely not work out.
Understanding the value of time and money is key for small CPA firms. If you can get your job done at a lower rate, in an effective manner, and in less time, it is worth spending the first few days on training and awareness of the team. Outsourcing needs dedicated time for work review and the results soon become visible. Gradually, the time taken to review also decreases.
Initially, the team might take relatively more time to complete tasks than the in-house team. But you need to remember this is a learning curve for them as well. Their proficiency, productivity, and quality of output improve as they get better equipped with your CPA firm. This helps you scale faster and better.
Outsourcing as a Competitive Strategy for Small CPA Firms:
Michael Porter, an academician known for his theories in economics, business, and strategy, writes in his book “Competitive Strategy” that cost advantage and differentiation are the primary competitive strategies for a business. In this section, let us understand how small CPAs can leverage outsourcing as a model for their success.
- Cost advantage strategy: The concept of cost advantage revolves around lowering the cost of talent while achieving optimum benefits. For small CPA firms, outsourcing is the lowest-cost producer. When you outsource your tasks to regions with lower wages, you generate greater revenue, and get access to a better-equipped team, while spending much less.
- Differentiation strategy: With so much competition in the accounting industry, it has become crucial for small CPA firms to make a differential statement. It could be through the software you use, the efficiency and productivity you deliver, or the model you offer - your clients are noticing your competition as much as they are noticing you. While outsourcing, you can choose a partner that meets your client’s needs.
The world is changing and it is time for you to change the way you conduct your CPA firm. Outsourcing is a tried and tested business model that helps small, medium, and large accounting firms reap many benefits. For small CPA firms, it can be challenging to manage the heaps of work, worry about overhead costs, and yet deliver quality outputs in a timely fashion. While cost reduction is one of the top benefits of outsourcing, this model is a blessing in disguise for several other reasons.
Make sure to choose a client-focused outsourcing partner that can provide customized business solutions, help determine challenges, outline solutions, and implement changes quickly and effectively.