Since the Industrial Revolution, businesses have grappled with how they can gain a more significant competitive advantage to increase their market share and profits.
The growth model – as we know – for the majority of the 20th century was rooted in “owning, managing, and directly controlling” assets.
The 1950s and 1960s compelled businesses to broaden their corporate bases and benefit from economies of scale through diversification, resulting in multiple management layers.
As companies started competing globally in the 1970s and 1980s, they struggled with poor agility, which came from bloated management structures.
To enhance their creativity and flexibility, many large companies deployed a new strategy for focusing on core business called outsourcing, which required them to identify and outsource those processes for which they had no competency internally.
Outsourcing in recent times
Call centers are perhaps the oldest example of outsourcing in recent times, which started with the IT boom in the 1990s. When it comes to accounting, the Big Four – PwC, Deloitte, EY, and KPMG, have been outsourcing legal practice and accounting audits since their inception.
Outsourced accounting initially involved delegating low-risk functions such as bookkeeping and accounts management, which are time-consuming and tedious. Countries like India, the Philippines, Mexico, and China gained popularity as ideal outsourcing partners.
However, it is not just businesses that are outsourcing accounting anymore. Accountants also delegate their clients’ accounts to third-party service providers to get help with AR/PR, taxation, bookkeeping, and payroll.
The current stage in outsourcing highlights the development of strategic partnerships. In the past five years, accounting firms have moved away from merely outsourcing monotonous and labor-intensive functions.
The focus is now banking on the financial advisory and business consulting expertise of accounting outsourcing service providers that can help businesses gain a strategic advantage.
Top 5 accounting outsourcing trends
The outsourcing trend of embracing disruptive technologies remains in the accounting sector. However, the fallout from COVID-19 has signaled a return to the basics, i.e., shoring up value and driving down costs – with renewed attention to risk management. Here are the top accounting outsourcing trends you should know about:
1. Cost reduction back on the top
For a long time, accountants would outsource their clients’ accounts for faster turnaround at a lower cost. However, cost reduction soon became a secondary objective as improving the quality of service or increasing agility gained precedence.
In the face of a likely pandemic-induced global recession, accountants are again prioritizing cost reduction. Even though the processes are more streamlined thanks to the third-party service providers, being price-driven is believed to level the playing field for outsourcing in the future.
2. The talent war continues
Health concerns, economic pressures, quarantine/lockdown measures, and Flexi work models have contributed to historic labor shortages. Today’s employees prioritize their families and mental health besides demanding wage increases and asking for better benefits.
In an already resource-strapped industry, accountants are now scrambling to retain their staff with stay-bonuses, promotions, the record raises, and other perks.
Another problem with accountants is that they are competing with companies that are willing to meet the needs of prospective employees. The overall scenario has compelled accountants to go after talent in any geography and outsource to ensure delivery of services to clients – without worrying about the headcount.
3. Cloud and RPA on a fast track to becoming outsourcing mainstays
It is no surprise how tech-driven the accounting industry has become. AI and Robotic Process Automation (RPA) have automated complicated and repetitive tasks and processes with extreme accuracy, thus minimizing operational expenses and increasing efficiency.
On the other hand, cloud computing allows accountants to perform accounting tasks from any location and deliver financial information through the cloud.
Today’s tax software has helped improve accuracy while reducing margins of error – a boon for businesses for avoiding tax penalties and preventing issues with stakeholders.
Accountants can freely rely on their mobile devices to access data – safely and securely – while on the go. Cloud-based accounting software providers such as Xero and Quickbooks have rolled out mobile apps, helping accountants stay in touch with clients even when not on their desks.
Technology has automated many accounting tasks, giving accountants the mental space and energy to focus on areas that demand human interaction.
4. Agility is critical
Changing business scenarios, economic instability, and increasing client expectations are imperative for accountants to become more agile to better support the businesses they world.
In a world of speed, quality, and flexibility, it is becoming necessary for accountants to rethink how they provide services effectively, streamline processes that can be easily integrated with any business model, and have contracts that allow them to pivot as the situation evolves.
This means accountants must derive value from cloud technologies and outsourcing models to build and deliver specialized analytics, financial reporting, and forecasting capabilities.
5. Outsourcing to rise above the hate
While most businesses across industries swear by the many advantages that outsourcing brings to the table, accountants continue to argue its long-term impact and sustainability.
Several misconceptions about accounting outsourcing include the lack of control over the quality of output, data confidentiality and security that may be at risk, inflexible contracts that do not accommodate change, hidden costs, and so on.
However, despite the criticism, outsourcing has continued to grow. In fact, the recent global pandemic is a testament that all types of businesses have to learn how to survive during a downturn and discover newer ways to overcome weak economic conditions.
Accountants are no exception either. They have realized the value of working from home and are open to leveraging hybrid operating models in the future, partnering with third-party accounting outsourcing service providers based anywhere worldwide.
Over to you
Will accounting outsourcing survive in years to come? Very much so!
At its core, outsourcing gives accountants access to specialized skills. It helps them save time and effort unnecessarily spent on complicated or tedious functions, which can be better channeled into other pivotal business ventures.
If you are keen to learn more about how outsourcing can help your accounting firm, please leave your contact details here, and we will get in touch.
Speak to Stellaripe!
We have the experience, expertise, and resources to help your CPA firm spend less time doing bookkeeping and more time giving strategic advice to clients.