June 2002

Using Outsourcing to Stay on Top

By Kishore Mirchandani and Jim Liggett

One way CPA firms can meet the challenges of the future is to focus their resources on the most important functions and outsource other areas. Done properly, this avoids the pitfalls of the traditional solution (adding more people) while avoiding the downside of outsourcing (losing control). Being a truly full-service organization is an admirable goal but rarely possible. Upon analysis, being completely self-contained may not even be desirable.

This is where business process outsourcing (BPO) services come in. BPO is the transfer of a function or service or delegation of day-to-day, nonfiduciary responsibilities to a third-party supplier. This makes best practices available at sometimes a fraction of the cost of in-house. The technological revolution of the last decade has made outsourcing more efficient and accessible than ever, while significantly enhancing the control and quality of the functions. BPO services have been predicted to grow in leaps and bounds; Gartner Dataquest has predicted that BPO of finance services will exceed $38 billion in 2004.

A firm needs to understand where its real value is and put its best people and resources there. All other processes become candidates for outsourcing. The following are common BPO candidates:

Outsourcing the bookkeeping function. CPA firms that provide accounting services to clients typically follow one of two methods: sending its accountants to a client’s office to write up the books, or maintaining the books in its own offices after calling in the base documents. Either method requires a battery of accountants to balance the books and maintain records.

With increasing costs for recruiting, training, and retaining accountants, as well as for maintaining desk space, firms can benefit from contracting with a BPO service provider to manage the base accounting work at a fraction of the cost. The CPA firms can then concentrate on value-added services while bringing clients the expertise and state-of-the-art technology that the BPO service offers. Such arrangements include the following features:

If a firm does not want to directly enter into a licensing arrangement, it could refer clients to the outsource service provider under a referral agreement. This would again allow the CPA firm to focus on providing clients with high-value services. Clients would gain access to timely financial statements without needing their own in-house accounting team, allowing them to focus on their core businesses as well.

Tax co-sourcing solutions. Co-sourcing is the sharing of responsibility for success and integration of diverse talents and strengths to increase value. In tax co-sourcing, the service provider partners with the firm in running its tax department’s processing function, including the entire tax return cycle. Every tax season brings the problems of training and retaining tax professionals, retrieving work-papers, ensuring proper storage of files, and ever-increasing processing costs. Tax co-sourcing solutions offer the following advantages:

Document management. The staggering amount of records that the average professional firm generates needs proper storage and timely retrieval. Outsource service providers offer the facilities for storing and retrieving documents in electronic formats and ensure their security, long-term viability, and availability.

Staffing requirements. Outsource service providers can both meet seasonal requirements for staff and manage extraordinary circumstances. The savings on recruiting, training, employee turnover costs, and the elimination of the administrative time therein allows a firm to leverage its trained professional staff more effectively.

IT services. The key to using current technological capabilities is to know what best suits a firm’s unique requirements. Technology carries risks, however: of breakdowns, security breaches, virus attacks, sabotage, and theft of proprietary information. Businesses need to deal with internal misuse of systems and unauthorized access to confidential information. Outsource service providers with strong IT areas can help plan, set up, secure, and monitor the IT systems.

Choosing an Outsource Service Provider

The following are key characteristics to look for when considering outsourcing a service or partnering with an outsource provider:

Kishore Mirchandani, CPA, is CEO, and Jim Liggett, CPA, is COO of itAccounts (www.itaccounts.com), a business process outsourcing firm that provides accounting, tax processing, and document imaging services, with offices in New York City and Bangalore, Karnataka, India.

This Month | About Us | Archives | Advertise| NYSSCPA

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

©2002 CPA Journal. Legal Notices

Visit the new cpajournal.com.