Outsourcing is not new since ‘theory of comparative advantage’ was established way back in late 1700 by an English economist. Accounting industry in the UK has followed the path of outsourcing due to fruitful results of it. However, the directors, owners, CEO, partners, CXO of the accountancy practice/firms in the UK started thinking about outsourcing a lot lately than other service industries like IT and HR.
Due to the much growth in the developed world including the countries like the USA, the UK, Europe, Australia; which eventually exhibited growth in the businesses due to which accountancy as a profession has always been considered as top notch and registered a good growth since 80’s. Although Internet has not been prevalent then and thus accountants could not consider it as safe option to outsource to the other parts of the world where accounting of developed world like the UK and the USA are easily available due to their powerful influence.
Since last two decades, the growth in the developed world has not been much encouraging, and thus has almost become stagnant. Due to this not so encouraging growth, the pressure in accounting practices has been looming and, therefore margins are being impacted. Eventually to optimise costing, accounting practices are in favour of outsourcing. And at the same time, the growth in other part of the world, which are considered as developing such as India, where the number of English speakers are more than the combined population of the UK and the USA, showing very encouraging number, almost 8% GDP growth. India in the current world politics enjoys favorable position, since it is the world’s largest democracy and has easy availability of the required talent pool in the finance and accounting industry.
Accounting firms in the UK and the USA are saving as much as 50% while outsourcing transactional work like VAT & bookkeeping, year-end accounting, taxation, payroll and other compliance work. However, besides the mere cost cutting, accounting firms should take care of below 3 points before signing agreement with their potential outsourcing partner:
1. Check the professional background, qualifications of the management of your outsourcing partner: Just to earn the margins, lot of outsourcing partners in India are running their businesses while proving accounting services to the UK firms without having much experience in the accounting world. This gives a potential risk to your business and valued clients.
2. Ask for the testimonials – video is better than email. Just giving the email address of the current clients of outsourcing partner is not enough these days. It may be real but not fully transparent. Video testimonial exhibits the clients’ trust, satisfaction and happiness of their outsourcing partner.
3. Do not get lured by cheap rates. The major motivation of outsourcing comes from the cost cutting. However, the lowest/cheapest rates are not always best. Outsourcing is about perennial relationship with your outsourcing partner, thus, to provide you the quality, costs of the outsourcing company will be invested and therefore it could beckon that your outsourcing partner is willing to give you more than just saving the margins. On the contrary, lower rates are not thought of long-term relationship with the accounting practices and thus fails most of the time in delivering quality.