Bookkeeping is a critical element for each client of a CPA firm, but it also may take a lot of time from the CPA firm employees' schedule. Transaction classification, bank reconciliation, payment processing, billing processing, month-end closing processes, and preparing financial statements all need consistency and regularity, but most of those actions are routine and process-oriented.
When the number of clients increases, it becomes difficult for CPAs and senior accounting professionals to handle all bookkeeping tasks, and that is the reason why many CPA firms consider using offshore bookkeeping services for CPAs as an opportunity to increase capacities without growing the domestic staff.
Why Routine Bookkeeping Becomes a Challenge for CPA Firms
Bookkeeping may seem easy on a client-by-client basis. The problem arises in handling numerous clients at once.
Different clients may have varying volumes of transactions, different structures for their chart of accounts, different reporting needs, different payment cycles, and different deadlines. With too many routine tasks, CPAs could end up doing transactions and not taxes and other advisory services.
This is a matter of capacity.
The hiring of more full-time bookkeepers may help resolve this problem, but hiring, training, payroll, turnover, among others, may make this process hard. In addition, the fact that the volume of work varies with the different seasons makes hiring even harder.
Offshore delegation provides another alternative.
What Bookkeeping Tasks Can CPA Firms Delegate Offshore?
Bookkeeping tasks which are best suited for offshoring tend to be repeatable activities based on written processes.
Categorization of Transactions and Maintenance of the General Ledger
The offshore bookkeeper will categorize transactions based on the established accountancy rules of the CPA firm and maintain the general ledger.
The reviewer from the CPA firm can then look into unusual transactions, any adjustments, or anything that requires professional judgment.
Bank and Credit Card Reconciliations
Reconciliation activities tend to take up a lot of time especially where the firm handles many clients' bookkeeping services.
The offshore team will then match transactions, identify any discrepancies, do the reconciliations and raise anything unusual for further review.
Accounts Payable and Accounts Receivable
The offshore bookkeeping staff can assist in billing entries, invoices, payment applications, maintaining customer balances and accounts receivable aging report.
However, payments approval, material adjustments and client relationship management should be done in the firm under its internal controls.
Month-End Close Activities
The offshore team can go through the checklist, prepare the supporting schedules, organize the reconciliations and assist in preparation of financial statements.
The senior CPA firm team will then perform any reviews, adjustments, analysis and reporting.
These types of execution-heavy activities are commonly included in outsourced bookkeeping arrangements for CPA firms.
How Offshore Delegation Can Free Up CPA Staff
The biggest benefit is not only in the transfer of bookkeeping operations but in the manner in which the time of professionals in the company is being used.
As a result of outsourcing repetitive actions, the CPAs and senior accountants can do more valuable work, such as tax planning, consulting, analyzing, communicating with the client, doing business development, and accounting decision making.
It is crucial. Outsourcing does not mean that the professional liability is outsourced to another party. On the contrary, it means a clear separation of actions' implementation and supervision/evaluation.
The client relationship and the product remain with the CPA firm, and the offshore firm executes the accounting actions.
Build CPA Workflow Automation With Offshore Teams
The outsourcing of bookkeeping gets even more efficient with the use of standard technology and workflow.
CPA workflow automation with offshore teams can include cloud accounting software, standard task list, automatic bank feeds, standard reconciliation process, document management system, and review checklists.
An example would be a monthly bookkeeping workflow which could include the following steps:
- Transactions get into the accounting system
- Transactions are coded by the offshore bookkeeper
- Accounts are reconciled (bank accounts and credit cards)
- Suspicious transactions are reported
- The offshore team finishes the monthly closing checklist
- Monthly reports and schedules are prepared
- Review is performed by an accountant or a CPA
- Necessary corrections are made for the final report
The technology doesn’t substitute for professional review but rather serves as an opportunity to build a repeatable process in which routine tasks pass smoothly through different steps.
Why Standardized Processes Matter
It is optimal to outsource accounting operations when the CPA firm does not simply dump a lot of work to the other party without giving instructions.
It is important to outline how each activity will be performed.
Standard Operating Procedures could include:
- Onboarding clients
- Chart of account guidelines
- Classification of transactions
- Reconciliation policies
- Closing of books of accounts
- Documentations process
- Audit trail process
- Exception handling of transactions
- Report due dates
Checklists and review processes have been frequently advised to be used for consistency in outsourcing bookkeeping.
It is also easier to train new members of the offshore team when the client base increases.
Virtual Bookkeeping Support Can Scale With Client Demand
One of the advantages of virtual bookkeeping support for CPA firms is flexibility.
An organization would require more accounting capacity at tax time, year-end close, client onboarding times, or post acquisition of a bunch of new clients. Rather than recruiting employees every time there is a spike in workload, it is possible for the organization to leverage a virtual team to gain more capacity on a need basis.
This will be especially beneficial for organizations that have inconsistent workloads.
In a systematic offshore model, it will also become feasible to begin operations with just a few clients and then expand afterwards. The current best practices in the industry also advise starting out with a process or pilot project prior to expanding to an offshore model with a larger clientele.
How Offshore Bookkeeping Can Improve Client Capacity
When the process of bookkeeping takes up less internal capacity, the CPA firm may be able to accept more clients without expanding its domestic staff as rapidly.
The connection is rather simple:
Greater capacity of routine bookkeeping → less internal pressure → more time for review and advisory services → client capacity increases.
It is important to understand that merely outsourcing does not guarantee growth – the firm should utilize the capacity that it acquires.
Thus, a CPA firm might utilize the gained capacity in the following ways: better client onboarding, advisory services, faster responses to clients' demands, and improved tax-planning relationships.
Why Hire a Bookkeeper Offshore Instead of Adding More Internal Staff?
The question of why hire a bookkeeper offshore should ultimately come down to capacity, flexibility, and workflow requirements rather than cost alone.
There might be an advantage in having offshore bookkeeping when the firm loses time performing routine bookkeeping tasks, when local hiring takes too much time, or when demand outstrips supply capacity within the firm.
Offshore bookkeeping becomes the extension of the firm’s delivery process within the framework of well-defined processes and standards of review.
Additionally, there needs to be a model that allows the firm to manage communications, review process, and final output.
Offshore bookkeeping can be an option when there is the need to scale the operations with the assistance of well-developed processes and use of proper technologies with solid quality controls and security of the data.
What is the best practice here? It is definitely not outsourcing the bookkeeping task offshore. What it is about is to create a well-built delivery model where virtual bookkeeping becomes the extension of the CPA firm workflow while the team of CPAs retains professional management.
Offshore bookkeeping, complemented with the processes and automated workflow of CPA firms with offshore teams at The Fino Partners, can then be a scalable solution for CPA firm's operations.
