IT (Information Technology) outsourcing has been a significant trend globally for more than two decades now. US have been a leader in the world in outsourcing due to the combination of high overhead costs and strong cultural affiliation between the US and Asian technology companies. Most of the accounting outsourcing work started with requirements of companies worldwide to provide services to accountancy firms in the world.
As the business model proved successful, a lot of companies outsourced their Customer service, data entry and financial services later. If the US has been at the front to outsource the work, then it is India which has been a significant service provider. At present, it is estimated that at least 285 out of Fortune 500 companies outsource some of their work to countries in Asia.
So where is the need for a firm to look for accounting outsourcing its work?
Like all businesses, accountancy firms are there for profits and long term sustainability. Some of the major issues confronting the firms are:-
- Staff Costs form a significant part of the operational costs.
- Small firms and startups have difficulty scaling their resources to meet the fluctuating needs of the business.
- Tougher competition in a slowing economy.
In the midst of all this accounting outsourcing services in UK are growing every year. Most of the top 100 firms are either actively involved in the process or are on the lookout. The primary mode of operation of these firms has been to set up captive centres in India. Apart from large accounting firms, large companies like BT and even some government councils etc. actively outsource their finance and accounting work to India.
However, it has been seen that only a small percentage of small and medium practices have hired outsourced accountant. There are apprehensions about various issues like staff non-cooperation, software licensing, security issues, work quality, fear of redundancy of essential work etc., and these firms are trying to find a way out of these concerns. Many firms are just testing the waters and selectively indulging in the practice of accounts outsourcing to take care of the busy season.
What have been the significant benefits of outsourced accounting services ?
Operational costs are a significant draw as it decreases. There is also an increase in the total chargeable time of the existing staff, which allows them to concentrate on high-end work. Otherwise, even savings from the outsourcing funds an additional full-time person with analytical capabilities for generation of consultancy work, business valuations, acquisitions, forensic accounting etc.
There are other hidden advantages also as you move from papers to scanned documents, some document management system comes into place. Moreover, as you interact with the service provider through emails, it forces the firm to be more precise and more disciplined in their communication.
We do feel that outsourced bookkeeping shall continue to grow in the UK at a faster pace than earlier and it shall be a significant trend for the coming years for the reasons as summarised below:-
- Firms that don’t consider accounting outsourcing as an option will be at a competitive disadvantage in the near future.
- Significant cost savings are possible by moving the online bookkeeping to non-UK locations like India, where the talent is capable and cost-effective.
- Using emerging technologies and finance function services will reduce headcount, producing even more significant savings.
- Firms will need to develop internal systems and discipline to achieve these changes.
- Cost is not the only motivator. So is flexibility and the ability to change.
By: Kawitansh Khanna CA (Director, info@米6米乐体育 Info Solutions (P) Ltd .)