For accountants, outsourcing certain areas of work can lower costs, free up resources and fill skills gaps.
At the same time, outsourcing brings challenges – from the risks of miscommunication and data breaches to ensuring quality control and compliance.
We explore what outsourcing means for accountants with the help of some experts.
Why are accountants turning to outsourcing?
“2024 was an exceptionally demanding year for accountants and this year is shaping up to be even more intense,” says Paul Lodder, VP accounting strategy, Dext.
“Firms are facing growing pressure to keep up with client demands, particularly for regular insights.”
More often, clients are expecting accountants to be available 24 hours a day.
“[However], the limited structured support or training on how to manage this workload effectively significantly impacts [accountants’] ability to maintain a healthy work-life balance,” says Lodder.
Firms that can’t manage the growing pressure and face an avalanche of work demand may risk falling behind and struggle to set effective boundaries.
Which areas of work are accountants outsourcing?
As a rule, outsourcing is best for repetitive, transactional tasks, says Alistair Roman, chartered accountant and founder, Cost Optimisation Consultancy.
“[These] form the bedrock of an accountancy firm’s work but offer limited scope for differentiation.”
Such tasks include bank reconciliations and book-keeping, accounts payable and receivable, general ledger maintenance, financial reporting, payroll, and VAT returns.
That said, the use of outsourcing for more sophisticated tasks is becoming more widespread.
“I’ve also seen firms outsourcing management accounts, month-end closing procedures, data entry and validation, and invoice processing,” says Roman.
What are the benefits of outsourcing?
One of the main reasons accountants outsource is to lower costs.
“Outsourcing hotspots include South Africa, India, Philippines and Malaysia – all of which enjoy lower labour costs and a lower cost of living than the UK,” says Roman.
By reducing expenses, accountants leave themselves with more time and resources for strategic tasks, such as identifying growth opportunities and launching products.
“[This] can be very valuable for wellbeing, by increasing job satisfaction and productivity,” says Russell Gammon, chief solutions officer, Tax Systems.
“[It gives] skilled professionals [opportunities to] work on stimulating and rewarding tasks, putting their years of training into practice,” says Gammon.
Such improved wellbeing can help reduce the risk of burnout.
Another benefit of outsourcing is that, as business expands (or contracts), scaling is easier.
“The outsourced provider can adjust its services and costs to keep in sync with the firm’s changing needs,” says Roman.
“This enables the firm to maintain greater stability and flexibility in a changing landscape.”
What are the risks of outsourcing?
Accountants attracted to the benefits of outsourcing should also be aware of its challenges.
Among the most concerning is the risk of data breaches.
“If the provider does not adhere to relevant security protocols, there’s a risk that sensitive client data could be exposed,” says Roman.
Further, quality control and compliance may be threatened.
“Firms must carefully vet outsourcing partners to […] ensure they align with regulatory standards and maintain the same level of client service,” says Lodder.
This could require paying attention to communication.
“Outsourced providers are often located in a different time zone – and may speak a first language different to that of the client,” says Roman.
“The resulting communication challenges can lead to errors, misunderstandings and delays.”
Roman says that, to mitigate these risks, accountants should:
- implement robust data security protocols, such as data encryption during transmission and storage;
- select reputable outsourcing providers by performing rigorous due diligence;
- agree on communication channels;
- agree on a baseline for quality and speed; and
- review work regularly.
What are the ethical implications of outsourcing?
In addition to considering the risks, accountants might need to work through ethical implications.
“The first question that must be addressed is the welfare of workers in the outsourced company,” says Roman.
“Employment conditions in low-cost locations may be very different to those in the UK, but the accountancy firm must ensure that nothing it does encourages or enables the exploitation of outsourced workers.”
Another ethical implication is the potential for conflicts of interest.
“It’s also important to remember that outsourced providers often work for multiple UK firms, including competitors,” says Roman.
“This raises the danger of potential conflicts of interest, especially when they deal with sensitive information.”
It’s good practice to inform clients of outsourcing.
“This becomes even more important where sensitive data is involved, and especially when the outsourced work is done offshore,” says Roman.
“Such proactive transparency helps maintain client trust and compliance with data privacy regulations.”
What should accountants do before outsourcing?
The first step is deciding which areas to outsource.
“The decision tends to be a trade-off between risk, effort and budget,” says Gammon.
“Outsourcing is unlikely to make accountants obsolete. In fact, by freeing them from repetitive tasks, it allows them to focus on more value-adding activities.”
Alistair Roman, chartered accountant and founder, Cost Optimisation Consultancy
A cost and productivity audit can help determine where to reduce costs and increase efficiency, says Roman.
Next, accountants should adopt a project management approach.
“Over the years, [outsourcing] has become a specialist area, so it’s best delivered as a project as opposed to a business-as-usual activity, which risks delays,” says Roman.
The project manager should work through the business case, determine how vendors and locations will be managed, decide on an operating model, and oversee change management.
What are the alternatives to outsourcing?
After conducting an audit, an accountant might decide against outsourcing – yet still want its benefits.
Fortunately, there are alternatives.
One is co-sourcing.
“This allows accountants to offer best-of-breed expertise across different areas, without being locked into expensive and lengthy contracts,” says Gammon.
“They only use and pay for an advisor’s work as and when they need it, so it allows for scalability.”
Another is automation.
“Using artificial intelligence (AI), or machine learning (ML), can also remove repetitive tasks from the workforce,” says Gammon.
“Better still, using software that supports the outsourcing of specific tasks can give accountants the best of both worlds.
“There are intelligent solutions that can process huge quantities of information – gathering and inputting it at speed for professionals to interrogate and analyse, with access determined by role rather than location.”
This means that control remains with the accountant.
“[Automation] not only delivers the operational benefits of increased speed and efficiency of managing increased workloads, but ensures full oversight of the process remains in-house, reducing any potential exposure to external parties,” says Lodder.
Will outsourcing make accountants obsolete?
“Outsourcing is unlikely to make accountants obsolete,” says Roman.
“In fact, by freeing them from repetitive tasks, it allows them to focus on more value-adding activities.
“It also provides the client with better value for money if their accountant is not mired in the detail of transactional work and better able to see the wood through the trees.”
Gammon agrees, “Rather than replacing [accountants], outsourcing elements of their workload will, instead, enhance accountants’ roles by allowing them to perform activities far more suited to their level of skill and expertise.”
More information on the IFA’s Future Proofing your Practice series here.
