Currently, there are lots of issues connected to accounting firm management. No matter how good the CPAs are, they cannot handle all these increasing requests on provision of professional services, attraction of new employees in certain specialties, and solving the issue of seasonal peaks. It makes sense to delegate some routine work to overseas companies in order to spare time and effort and focus on core activities and earning money. Besides, delegation of some duties to external suppliers enables retaining control over the whole process and making important decisions inside and not spending extra money on hiring and equipping new personnel.
In this blog, we will discuss the role of offshore accounting services and answer the questions about what CPA firms can outsource, how to select a trustworthy company providing offshore accounting services, etc.
Why Offshore CPA Firm Services Are Becoming Important for Accounting Practices
Bookkeeping companies should maintain a high quality of service despite changes in their clients' needs, reporting periods, and staff strength. Offshore staffing allows for this balance to be achieved, although only if responsibilities are clearly spelled out, there is proper supervision, and communication channels are maintained.
Access to Additional Accounting Expertise
One does not have to be surprised at finding themselves needing assistance in a number of areas during the busy season. The ability to hire an offshore accounting service provider that provides flexibility in hiring staff for accounting, reconciliations, and financial reporting activities including assistance in your tax prep and accounting for your clients is one area where you could get some relief. While firms may experience difficulty in finding solutions outside of normal recruiting efforts, this gives you the flexibility to do so.
When you seek out an offshore partner, you must ensure that those persons who will work for that partner will provide value to your firm. Offshore accountant does not necessarily mean U.S. CPA. Your offshore accountant must be proficient in U.S. accounting and taxation procedures. You also need to check to see if the offshore accounting team possesses the technical expertise to complete the tasks you need done on behalf of your clients.
Greater Flexibility in Staffing and Workload Management
The workload of accounting varies during the course of the year. The tax season, monthly closing, quarterly reporting, and end-of-the-year accounting process may lead to situations where internal staff is overburdened with work. Services provided by offshore CPA firms may give additional work capacity in regard to certain tasks and help firms to allocate their work load in accordance with deadlines and available work capacity.
The above mentioned services may be especially beneficial for growing companies that are not ready yet to increase the number of their employees permanently. In different cases and depending on service providers, a firm may outsource certain tasks, delegate certain work to permanent offshore teams or vary its assistance in accordance with demands.
More Time for Client Relationships and Advisory Work
In the case where experienced professionals use a lot of time in repetitive data entry, reconciliations, documentation and routine reporting, they lack the ability to communicate with clients and perform other valuable tasks. By delegating appropriate production activities, internal accountants can give more attention to analyzing the financial performance and answering questions from clients.
Offshoring alone is not an automatic way of becoming profitable or enhancing the quality of services. It will depend on how well the firm organizes the team abroad, delegates the duties and evaluates their work. However, when done correctly, offshoring may enable partners and management to concentrate on business development and decision-making processes.
Key Offshore CPA Firm Services That Businesses Can Outsource
There will be some activities that can be outsourced based on the services offered by the company and the capability of the contractor. It will prevent duplication, confusion, and overlooking some responsibilities if the scope of work is well defined.
Bookkeeping and Financial Reporting
A typical example of outsourcing in the accounting industry is bookkeeping. Offshore personnel can record all transactions and classify expenditures, reconcile banks and credit cards, prepare supporting schedules, and organize financial records. This assists in building a proper record keeping system that will form the basis of analysis by the reviewers of the company.
The preparation of financial statements such as income statement, balance sheet, cash flow statement, and account reconciliations are examples of tasks in the financial reporting function. It is advisable for the CPA firm to set reporting forms, accounting policies, materiality guidelines, and reporting requirements before commencing any task. The final reports need to be verified to ensure their accuracy and completeness before submission to clients.
Tax Preparation Support and Compliance Workflows
The offshore personnel might be able to offer their assistance in organizing and entering the tax documents, preparing work papers, reconciling the documentation, and other permitted tax preparation services. Such assistance could help CPA firms organize their clients' data and manage production workloads at the time of tax season.
There are certain rules that must be followed by US citizens tax returns. It is very essential that the CPA firm should develop policy regarding review of source documents, identification of any omissions from them, resolution of any differences that may arise, and finally approval of tax returns prepared. But at the same time, tax return preparation is different from signing the return, tax advice, or representation before IRS.
Accounts Payable, Accounts Receivable, and Payroll Support
The account payable and account receivable processes may involve invoice processing, transaction matching, preparation of payments schedule, update of the client’s customer records, aging of the accounts and document follow-up. Through outsourcing the above processes, companies can be able to standardize the processes and control the outstanding balance of their clients’ accounts. There should be controls for the approval process, vendor banking details change process, among others.
Some payroll services may involve payroll data collection, employee information collection, preparation of calculations, and payroll reports or payroll reconciliation. It all depends on the particular contract and the software that will be used for the particular process. Payroll data processing involves confidential employee data, therefore, there should be proper controls in terms of approval, access and escalation. The client and his/her team should understand who handles the process from the beginning to end.
How to Choose the Best Offshore CPA Firm Services Provider
Selecting a service provider offshore does not end with comparing service packages and pricing quotations only. Businesses need to consider technical skills, information security, communications, and adherence to professional standards.
Evaluate Expertise, Software Compatibility, and Quality Controls
Start by assessing the provider’s background in accounting firms, clients in the United States, and the services you plan on outsourcing to them. Consider the qualifications of their personnel, knowledge of accounting principles applicable in your case, software expertise, and their method of task assignment and supervision. A service provider that understands your workflow will be more effective than one providing you with a generalized service.
It is equally important to know the process that the provider uses to assess the quality of the tasks they have completed for you. Helpful methods include documenting the process, using checklists for reconciliation, signing off from reviewers, exception reports, and a method of correction in case of mistakes. Consider how they deal with problems caused by inadequate documentation, irregular transactions, or change of deadlines.
Review Data Security, Confidentiality, and Access Management
Accounting offshore may require handling sensitive information about finances, taxation, payroll and client identification. Before sharing any data, check security practices of the provider including security policies, confidentiality agreement, access procedures, storage of the data, incident response plan and subcontractors’ activities. Inquire about procedures for granting and revoking access when the employee no longer requires it.
There are other considerations which must be taken into account by the firm, such as privacy issues, contractual obligations, professional rules and regulations. Additional requirements will arise depending on the type of information and services involved related to cross border transfer of data and client confidentiality. Encryption and restrictions in access will lessen some risks, but there is no way to secure the data in a manner where all risks are completely eliminated.
Compare Costs, Communication, and Service Agreements
Cost is important, although the cheapest option does not guarantee the best deal. Compare the suggested fees against the total cost of the outsourcing arrangement that takes into account such items as onboarding costs, training, software access, internal review time, communications, etc. If you choose to outsource certain functions, you will save some money on recruiting or staff, but the level of the savings depends on the prices and volume of work of the supplier.
The communication policy must also be clearly stated. Specify working hours, response expectations, reporting frequency, who needs to be notified when there are problems, how much time is expected for handling, etc. The service agreement must spell out what you need to receive in return for your payments, as well as the responsibilities, confidentiality issues, and procedures for terminating the contract.
Outsourcing of services by an offshore CPA firm can assist an accounting practice to manage the work load, get increased production capabilities, and also generate space for the client-related activities. Some of the functions which may be outsourced when the provider has the required skills include bookkeeping, financial statements, tax preparations, accounts payable/receivable and some payroll processing functions.
The successful outsourcing would largely depend on finding the right provider with adequate skills, having appropriate controls and also effective communication and data management procedures. The offshore outsourcing should complement the professional judgment of the CPA firm in relation to the services offered to its clients. Through proper definition of the scope of services and constant review of the performance of the outsourced function, the firm can make informed decisions.
The Fino Partners provides outsourced accounting support for U.S. CPA firms and businesses, with services that may include bookkeeping, financial reporting, accounts payable and receivable, payroll support, and tax preparation assistance, depending on the engagement.
