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Accounting Services

Five Key Challenges when considering outsourcing accounting (and how to overcome them)

Are you thinking of outsourcing all or a part of your accounting?  Knowing what questions to ask your prospective accounting service provider will be the difference between a disappointing and a successful accounting outsourcing experience.

Every successful service business will claim that they are great at:

  • being available at all times,
  • problem solving,
  • agility and adaptability in all kinds of unforeseen situations, and
  • business continuity.

When it comes to outsourced accounting, these points are all the more important in order to allow a client to entrust this critical part of its business to another firm.

It is for this reason, call it the TRUST FACTOR, that an outsourcing provider must continually prove itself.   They need to be accurate, timely, reliable, focused on details, able to manage complex tasks, and overcome many other challenges.

If you are thinking about outsourcing a part or all of your accounting you need to consider the most common potential problems and learn how to avoid them.

Inspect and Adapt, Accounting Outsourcing Challenges

1. Adapting to Client Needs

There are three golden rules of a successful client-approach:

  1. good process discipline,
  2. agility, and
  3. receptiveness.

Sadly, these often happen to be the weakest points for an accounting outsourcing business.

If the provider is unable to adhere to a client’s processes and procedures it will invariably result in errors and hold-ups.

A service provider needs to be agile and adaptable as the market / competition will not wait for anyone. If the provider cannot respond quickly, time and money may be lost.

In the end, the problem known as “the black hole of shared/ outsourced services” is one of the most painful issues any customer could experience. We have all dealt with the endless telephone calls with large banks or credit card services, where everyone passes the buck and no one takes ownership of your issue.

It is always someone else’s problem or “another department” that is responsible.

SOLUTION

When a client shares its business processes, a good service provider should be able to recommend improvements, relying on their experience and know-how in order to perform these tasks more accurately and efficiently (e.g., using daily reports to allow the client to respond faster to any potential business issues).

The team providing outsourced accounting services needs to be constantly attuned to you, to catch your signals, decode them in real-time and eliminate barriers.  Make sure your objectives are aligned with your provider’s by using an open-flow of communication and transparency.

To stem the lack of ownership challenge, the service provider’s staff should be encouraged to think for themselves, develop their own ideas, come up with useful solutions, and finally implement them in coordination with the client’s management.

Sharing knowledge, ideas, and information transparency throughout a corporate hierarchy is desired, along with the clear responsibilities and process ownership.


WHAT TO LOOK FOR:

  1. Does the provider appear comfortable in creating procedural workflows that create an efficient framework for accounting work
  2. Does the provider demonstrate a desire and capacity to go beyond the contractual framework if a client needs that kind of assistance?
  3. Are the employees of the service provider thirsty for knowledge and new challenges (professional training and pilot projects)?
  4. Is it a company with an efficient decision-making process, closing the gap between placing requests, making and approving decisions, and executing requests?
  5. Does the provider seek “one-on-one” communication with the employee in charge of particular sets of tasks?

 

Language and Communication, Accounting Outsourcing Challenges

2. Language and Communication

If the accounting services provider is an offshore company, which is very often the case today, language barriers can often be a problem. Of course, many accounting professionals claim to speak English however, the question is how well?

Customers often experience misinterpretation, or a lack of alignment, between what is requested and the service provider’s execution.

In addition to language communication issues, there are cultural differences. Difficulties may arise from differences in the corporate, national, and/or ethnic cultures, including the style of doing business, the speed of decision-making, and unfamiliar company structures.

As noted above, poor communication is generally bad for business. However, lack of proactive communication is even more problematic. In back-office businesses environments; communication with clients should be proactive and preemptive. This means providing answers before the questions are asked and handling problems before they arise.

SOLUTION

To bridge the language gap, outsourcing companies should have constant language improvement training and lectures for their staff.

This means foreign language instruction on a regular basis, at least once a week, and expanding the staff’s vocabulary in the domains of accounting, business and customer support.

Furthermore, the provider’s staff must be able to adapt to different business and socio-economic environments. This implies accumulating background information about a client’s corporate practices, the business customs of a particular country and its everyday way of living.

When it comes to the lack of proactive communication, the solution lies in information. Some time ago, accountants were just bookkeepers, but today they must be consultants and analysts too. They have to be proactive, rather than reactive.

They also have to be information-hungry, listening attentively to what the client has to say, requesting and gathering additional information, and then analyzing and acting upon it.


WHAT TO LOOK FOR:

  1. Does the provider show evidence of investing in its employees’ language training (i.e. completed course certificates or evidence of in-house language training programs)?
  2. Is the quality of language used in written and verbal communication adequate for your business needs?
  3. Request from the service provider that more of their staff members with various specialties join meetings and participate.
  4. During the initial meeting, does the other party show interest in learning more about the specifics of your business culture and the systems you currently use?
  5. Is this an outsourcing company whose employees will use every piece of information you provide, for your benefit?
  6. Will this team anticipate your needs rather than wait for your requests or your complaints?

Ownership and Availability, Accounting Outsourcing Challenges

3: Overstretched Portfolio and Staff Unavailability

When they have too many clients in their portfolios, some providers tend to overload their workforce, putting too much pressure and unreasonable performance expectations on their employees.

This frequently used approach precludes their employees from optimum performance, limiting them to a basic level of communication with their clients, ultimately resulting in an elevated margin of error.

Overloaded and overworked employees have difficulties concentrating, need more time to complete tasks, and are unable to handle multiple tasks. The end result is a notable negative impact on their accuracy and their overall quality of work.

Another problem that arises from this practice is limited availability of the provider’s staff. In a service business, one idea must be held sacred: The client always comes first. A string of missed calls and an inbox full of unanswered e-mails are very bad signs.

In an outsourced business model, web or video conferencing, phone and e-mail conversations, are the substitutes for face-to-face meetings and physical contact and they cannot be ignored.

SOLUTION

As a customer, you are in charge of structuring your working relationship with your provider in every way. Make sure that you have a measurable set of Key Performance Indicators (KPIs) in your service level agreement (SLA). If these KPIs are not met, you should have a reasonable way out of your agreement.

As to availability of provider’s resources, the solution lies in dedicated and committed employees who will answer their phone calls regularly and check their e-mails at reasonable intervals.

If there is a time-zone problem, which often happens in offshore outsourcing deals, the best solution is establishing clear-cut communication and adaptive work hours, finding the optimal time window for both the client and the service provider.

This means that only the most important information should be exchanged via phone calls and live chats. The rest can be sent by e-mail and tended to the next business day, ensuring that the service provider’s dedicated staff is available to the client at the most convenient possible times during their work hours.


WHAT TO LOOK FOR:

  1. Perform a thorough due diligence. Most dissatisfied customers tend to leave comments about their experiences with their service provider.
  2. As a part of your due diligence checklist, ask about the number of clients your future partner is already serving, and ask the size of their businesses.
  3. Do they show the ability to act quickly in case of extended scopes of work? Do they create a new team for a new client, or expand the team serving an existing client that has increased their workload?
  4. Take into account how quickly you can reach the outsourcer’s staff. Do they regularly answer your calls, and in what time frame are your e-mails answered? Include some of these performance indicators into the SLA.
  5. During initial meetings, observe the service provider’s reactions to your needs. Are the people you are talking to patient and receptive to your input? Do they tend to lose focus and patience, and/or cut short the conversation?
  6. Is this a provider who adjusts their working hours to the client and their time zone (especially in the case of urgent tasks)? These should also be included in the SLA.

Skills and Know-How, Accounting Outsourcing Challenges

4. Skills – Generalists, Specialists or a Combination

An Accounting Professional is similar to any other Professional; they are either a Generalist or a Specialist.  Not every Customer needs a Specialist however, certain industry verticals or categories of business require them.

For example, does your company fall under the New Revenue Recognition Standards (FASB ASC 606 or IFRS 15)?  Are you prepared? The upcoming ASC 606 revenue standard changes, with an effective adoption date of December 15, 2017 for public companies, aren’t just a back-office issue. These changes have the potential to heavily impact your sales, marketing, compensation, contracts, pricing strategies – almost everything.

The majority of accounting tasks require general accounting knowledge, but when a task calls for a particular knowledge unique to their Client’s industry vertical the provider might need some time and resources to augment their skill set and expertise to rise up to the challenge.

SOLUTION

A provider should have both types of accounting resources, the senior staff accountants possessing general industry knowledge and highly specialized Subject Matter Experts.

An alternative solution would be hiring external experts or accountants with specific industry experience to avoid any slowdowns due to unforeseen situations which your outsourcing provider may be unable to manage.


WHAT TO LOOK FOR:

  1. Get references. What do current and former customers say about the provider’s service and dependability?
  2. When evaluating providers, what is the track record of results and success in various industries?
  3. Does the outsourcer have clients similar to your company in terms of the economic branch and your specific type of business?
  4. Request work histories of employees who will be engaged with your work.

Whose Software Yours or Theirs, Accounting Outsourcing Challenges

5. Software Platform – Yours or Theirs?

These days, most Outsourcing Service providers want you to utilize their ERP or the financial software platform of their choice. This could spring from the fact that the provider is unfamiliar with a wider range of platforms. Moreover, it could indicate an incapacity or even lack of desire to support different platforms.

While you do own your data, you should ask yourself if this is the best approach for your company. Ask yourself the following question: “if you were to insource your accounting processes would you change your software platform with each Controller or Accounting Manager that you hire?”

SOLUTION

The provider you should be looking for would be experienced in a variety of software platforms, and would not shy away from learning new ones.

Your service provider’s flexibility in supporting your needs is crucial to a long-term partnership such as Accounting Outsourcing.  Make sure that your needs come first.


WHAT TO LOOK FOR:

  1. Has your Outsourcing Service had experience with your financial software platform of choice?
  2. Are they certified or do they have experience with any others?
  3. Which enterprise resource planning system do they prefer and is it compatible with yours?
  4. If they insist on using their own platforms, would it have a negative impact on your business (migration of data, loss of information, etc.)?
  5. Does the service provider have a proprietary accounting software platform, and if so how can it integrate with any established software that you are already using?
  6. If in the future you decide to use another provider can you directly “acquire” any number of licenses on the platform you are running?

What else is important

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