How Outsourcing Accounting Drives Growth in CPA Firms?

CPAs are confronted with vital decisions in 2024. The choices they make now will impact their firms and clients and will also have far-reaching effects on people’s financial well-being and businesses, as well as the overall economy, as accountants navigate the challenges in the marketplace.

In our previous article, we discussed the current challenges facing the accounting profession, which are leading to a concerning situation where accountants are turning down work.

However, accounting firms are swamped and short-staffed, leading to 42% of firms being unable to accept new clients due to staffing shortages.

One method for accounting and tax firms to address these staffing shortages is through offshore outsourcing accounting. However, to implement this effectively, they must take several important considerations into account.

Formerly and Presently, CPAs and Outsource Accounting

Many well-known and substantial CPA firms from the US, the UK, and other countries have been using offshore accounting outsourcing to India and other Asian countries for many years. 

The primary forces behind these larger companies’ accounting outsourcing strategies were efficiency and productivity gains that improved profitability.

However, over time, technological advancements have greatly increased productivity and efficiency.
Accountants are now considering offshore outsourcing more to build a dependable growth engine than for profit.

Outsource Accounting and Services that can be Outsourced?

The process of hiring a third party (from outside the company) to handle the accounting and finance functions of an organization is known as outsourcing accounting. 

All of the company’s financial operations, such as bookkeeping, payroll, financial reporting, management accounting, taxation, accounts payable, accounts receivable, debtor follow-up, and other account-related services, are managed by external accountants.

Other accounting services that you can outsource for your CPA firms:

Bookkeeping 

The process of daily or weekly recording of financial transactions involves systematically documenting all inflows and outflows of money, including sales, expenses, and other monetary activities. 

This record-keeping helps in accurately tracking the financial health of a business or individual, providing insight into spending patterns, identifying potential areas for cost savings, and ensuring compliance with financial regulations. 

This practice is essential for maintaining up-to-date and accurate financial records and informs decision-making processes related to budgeting, financial planning, and tax preparation.

Payroll Processing

Payroll processing involves the calculation of wages, taxes, and benefits for employees. 

This includes accurately determining the amount of money employees are owed for their work, calculating and withholding the appropriate taxes, and managing any additional benefits or deductions. 

Overall, payroll processing ensures that employees are compensated correctly and in compliance with relevant laws and regulations.

Accounts Receivable (AR)/Accounts Payable (AP) Management

For their clients, an outsourcing partner can assist a business in managing accounts payable and receivable, ensuring that all payments are made and received on time.

Furthermore, the offshore accounting team will oversee the administration of client invoices and payments. In addition to processing vendor invoices and payments. 

Outsourced teams can take care of several primary responsibilities for you, such as managing invoices, reporting expenses, processing checks, handling orders, and managing collections.

Get assistance with tax preparation.

Tax preparation involves the delegation of the task of gathering financial information, analyzing records, and preparing and filing tax returns for corporate, partnership, and individual clients to an external accounting service provider. 

This allows CPAs to focus on core activities such as client consultation, audit, and advisory services while ensuring that tax preparation is handled efficiently and accurately by experienced professionals. 

By outsourcing tax preparation, CPAs can optimize their resources and provide comprehensive financial services to their clients.

Prepare and Report Financial Statements

When it comes to creating financial statements such as income statements and balance sheets, outsourced accounting firms can be a valuable resource. This is particularly helpful if they are already managing bookkeeping tasks and accounts receivable/accounts payable.

If this service is offered, the outsourced company can provide your clients with customized reports and accurate financial statements that they can use internally and distribute to other stakeholders.

Although your outsourcing partner can handle the preparation of these statements to save you time and resources, you need to review them for accuracy before passing them on to your clients.

Benefits of Outsourcing Accounting For CPA Firms

Outsourcing accountants for CPA firms allows for the optimization of resources, enabling firms to focus on high-value activities and client relationships while reducing operational costs and accessing a global talent pool for specialized tasks.

Outsourcing accounting for CPA firms is a strategic decision that can help CPA firms improve their efficiency, quality, and profitability.

By outsourcing the routine and time-consuming accounting tasks to a reliable partner, CPA firms can reduce their overhead costs, access a large pool of qualified and experienced accountants, scale up or down their accounting services based on their needs, and enhance their client satisfaction.

By embracing outsourcing, your ability to manage numerous tasks will be significantly enhanced, positioning your accountancy firm as one of the highest achievers in productivity

Outsourcing accounting can also enable CPA firms to focus on their core competencies and provide value-added services to their clients.

Let’s read all the above points on the benefits of outsourcing accounting for CPA firms in detail.

We’ll start with the most apparent reason, which is money.

Significant cost savings for CPA Firms through offshore outsourcing accounting

Recruiting, training and, most of all paying an accountant is no picnic and is a crucial component for every successful entrepreneur is efficient cost reduction.

Hiring a third party for your accounting task is usually less expensive than hiring someone internally. Hiring in-house accountants can be costly when considering office space, insurance, sick days, etc. Furthermore, hiring an accounting company provides access to a team of employees with diverse expertise (as opposed to an employee who can only do one activity at a time). 

Outsourcing tasks to an offshore partner can result in substantial savings for a CPA firm. For instance, consider the difference in labor costs. A CPA firm in the United States might pay a local accountant around $70,000 per year, whereas hiring an accountant in India or the Philippines could cost approximately $20,000 annually. This results in direct savings of $50,000 per employee per year.

If a firm employs ten accountants, the total savings can reach $500,000 annually just from wage differences.

Additionally, operational costs such as office space and utilities can be significantly reduced. A CPA firm might spend about $10,000 per year per employee on office-related expenses in the US. With ten employees, this amounts to $100,000.

By outsourcing, these costs can be minimized or eliminated since the offshore partner typically provides their infrastructure. Moreover, overhead costs related to employee benefits and taxes can also be lower.

For example, if a firm saves $5,000 annually on benefits and taxes per employee by outsourcing, this would result in an additional $50,000 in savings for ten employees. In total, a CPA firm could save around $650,000 annually by outsourcing tasks and hiring an offshore partner.

Outsourcing accounting work enables CPA firms to tap into a global talent pool and expand their services beyond geographic boundaries. It facilitates 24/7 operations and supports clients with international operations.

It’s time to have more things under your control

One of the most significant advantages outsourcing accounting for CPA firms offers is getting rid of the worst attribute an accountant comes with.

Unpredictability, While managing your resources in advance, you must always remember the slight chance something may happen with your employers.

According to research cited in the Denver Post, “one in six firms experienced turnover rates above 20%,” with the largest accounting firms polled having an average annual turnover rate of 17%.

If there is one indispensable position in your business, that is of the accountant, something that makes the chance of it being unavailable all of a sudden the more frightening.

This fear and the painful process of finding the right person are going out the window.

Assessing the company’s needs based on client volume is now possible.

Whether the requests are in the dozens or thousands, this is none of your concern since there will be nobody working hard or hardly working, regardless of the scenario. As your company expands, so will its requirements. This can pose issues when you constantly need to hire new personnel to meet the increasing demand. As a result, your labour needs to catch up to your company’s actual needs, resulting in productivity gaps and lost earnings. 

On the other hand, businesses that hire staff too soon wind up with inflated labour costs and bored employees who feel they need to be more valued. Hire an outsourced accounting staff based on your needs and save up unnecessary costs.

Having this tedious process out of the way now, your company can focus on more specific roles and services to take its place, allowing for much better service in general.

Your time is one of your most valuable assets. Caring for things that could’ve been outsourced is a tremendous waste, especially when discussing this subject. Having plenty of time to brainstorm the client experience is crucial. Any aspect that can be taken care of without your direct involvement should be so.

Also Read: 10 Essential Accounting Tips For Startups and Small Business

The industry is going fast. Stay caught up!

Regardless of the strategy, outsourcing can offer advantages beyond cost savings, delivering a team approach with a variety of talents and scalable resources that are difficult to match with hired workers.

According to a survey conducted by the American Institute of CPAs (AICPA), nearly 60% of CPA firms outsource at least some portion of their accounting functions.

Meeting deadlines

It’s crucial to have a clean history when it comes to satisfying compliance obligations. However, deadlines are often missed when business owners and accountants are overworked with everyday chores and operations. 

Any company must adhere to compliance deadlines, but it is essential for businesses with plans to look for outside capital. Your outsourced, qualified finance team will check that all returns are current and will promptly notify you of any approaching deadlines.

The advantages of cutting-edge technology and a knowledgeable accounting and finance team frequently persuade clients of the value of changing their business style. By assisting businesses with the efficient management of their accounting and finance departments, they can devote more time to their core strengths and less time to handling paperwork and figures. Because current tech solutions improve accounting accuracy, reduce service costs, free up resources, and enable financial advisers to spend more time solving their client’s needs, the strategy is effective for both clients and CPA companies.

See More: Types of Outsourced Finance and Accounting Services

The Risks And Difficulties Of Offshore Outsourcing For CPA Firms

Offshore outsourcing presents numerous challenges for firms, including geopolitical risks stemming from unstable political environments in other countries, foreign exchange rate risks due to fluctuating currency values, and compliance requirements dictated by different regulatory frameworks. 

Cultural differences and operational process changes further complicate the situation, as effective communication and teamwork across borders can be difficult to achieve. 

Additionally, the proliferation of offshore outsourcing entities that compromise on quality and data security adds to the risks, as businesses may struggle to find reliable partners that meet their standards. 

These challenges lead many firms to turn away from offshore outsourcing despite its potential benefits, such as cost savings and access to specialized skills.

Why your CPA firm Outsource Accounting Services

Outsourcing financial accounting services can benefit US CPA firms in several ways. 

Offshore accounting allows CPA firms to reduce their professional and overhead costs, resulting in overall cost savings. This can lead to increased efficiency and productivity because the CPA firm staff can focus on higher-value activities. 

Additionally, outsourcing provides access to advanced technology and tools, which can further enhance the firm’s operations. 

Overall, outsourcing financial accounting services presents an opportunity for CPA firms to improve efficiency, reduce costs, and enhance service quality, ultimately contributing to a more profitable and sustainable business model.

How Outsourced Accounting Solves Key CPA Firm Issues

Accounting services outsourcing addresses important financial management issues that companies of all sizes face.  

These offshore accounting services handle growth management and offer adaptable, scalable solutions to match the demands of your business. Furthermore, these outsourced accounting firms have strategic decision-making power and can provide in-depth financial analysis and insights to help businesses make good decisions and develop effective growth strategies.  

These offshore accounting service providers ensure compliance and risk management, including identifying potential financial risks and adhering to changing regulations. 

Your outsourcing accounting partner is responsible for providing professional-level accounting at a fraction of the cost of an in-house team and at reasonable prices. Furthermore, you can track their performance and use this data to implement robust financial reporting for clear visibility into business performance.

By leveraging their expertise, you can transform financial management from a challenge into a strategic advantage.

Maintaining Compliance Through Outsourced Accounting

Federal, state, and municipal rules and regulations governing your business’s operations and tax filing needs are constantly evolving. It’s a lot to keep track of.

You pass the liability and risk of noncompliance to your outsourced provider when you use outsourced accounting. Furthermore, they are specialists in their industry and take great care to stay up to date on the ever-changing rules and regulations to make your business, its records, and its reporting entirely compliant.

About Invedus: Invedus offers finance and offshore accounting services to businesses. we provide solutions for bookkeeping, financial reporting, tax preparation, payroll, and more. Our team of offshore accountants helps optimize financial management and compliance, allowing businesses to focus on their core operations. reach out to us for more information.