Could your practice save money using an overseas accountant?

More and more accountancy practices are outsourcing part of their accounting or bookkeeping to an overseas third party. But what should smaller practices think about when considering this – and is outsourcing for you?

No longer the preserve of large corporates, smaller companies are now looking at outsourcing as a way of reducing costs and freeing up time to grow the company.

“The main advantage is cost saving,” says Nicola J. Sorrell, MD of Effective Accounting Solutions in Milton Keynes.

“For your small business, the costs of a qualified accountant overseas can be much lower, and because you’re paying for a service, you don’t have to think about holiday pay, sick pay or National Insurance.”

The provider, Sorrell says, will handle all this – “they will take care of HR, looking after staff and employment law.”

The other key advantage is flexibility.

“You might need lots of support in December and January and not elsewhere in the year, for example. As it’s a flexible resource, you don’t have to pay out for it at quieter times.”

This gives you the opportunity to do several things:

• grow the business with the resources you have
• move more into advisory or higher-paid areas than basic bookkeeping
• and increase the flexibility of your own offering.

Further benefits of an accountant overseas

Additionally, consider the benefits for digital-only accountants or start-up businesses.

“Any firm wishing to scale using digital methods might find that outsourcing overseas is a great way to find the required resources, without having to invest at the front-end,” says Rezaul Hoque, Director of Assurance Accountancy in Swansea.

“The accounting subcontractor market in the UK is virtually non-existent and what is available is expensive,” he says. “This might make direct recruitment and training a more attractive option, but then the costs of employment can be so expensive that a cost-conscious or cost-sensitive firm might want to look overseas instead.”

Risks with overseas accountants

Using a third party in this way gives you a series of potential risks to think about however:

• data security
• ethical choices
• and assessing whether outside firms have enough understanding of your clients’ needs.

“All countries are different,” Sorrell advises, “but you need to think about whether your chosen host is complying with the same levels of data protection that we have. What technology are they using – is it secure? Are they confident they won’t have data breaches on that technology?”

Beyond data security, “think about the anti-money laundering regulations that we have here. Do they comply with a similar level of care?”

Within Europe, all of these conditions are likely to be met, and indeed Ireland is increasing as an outsourcing destination of choice. But the advantages of Ireland are mitigated by the fact that cost savings will not be as significant as India, the Philippines or Brazil. 

What will your clients think?

As well as thinking of pros and cons for your practice, you also need to consider what clients will think about the fact that you’re outsourcing.

“Will clients be comfortable with it?” says Sorrell. “I’m not convinced that practices who do this are making their clients fully aware of the fact and that doesn’t sit easily with me. My clients have a personal service either from me or from my team, and I think there is a trust factor there. This is private financial data and if I’m being entrusted with it, clients want to know where it is, and they want to know it’s safe.”

Does this mean that outsourcing becomes more of an ethical issue than is perhaps realised?

“There’s nothing wrong with outsourcing, but if you’re not upfront about the fact you’re doing it, that seems underhanded to me. And you don’t really know whether the staff in the host country are all being looked after as well as you want them to be.”

Moral concerns

Finding the right balance “can be tough,” says Rezaul.

“In India, the Philippines and Bangladesh, a British pound is strong and a relatively modest wage can sustain a family for a month comfortably. The largest challenge for outsourcing countries is that there are large populations and insufficient jobs.”

If jobs can be created from the UK, it appears to be a win-win for both countries, Rezaul says. “But is that detrimental to the UK workforce? There’s a balancing act to be done here.”    

Sorrell adds, “I personally think clients should be aware of where their data is and who holds it. Bank statements, what money they earn, NI numbers, private addresses – all this is the kind of information I think clients have a right to know; who has access to the data, and what systems it’s on.”

Additionally, “you want to give your clients great service. Will you know them as well as you should do, if the numbers have been crunched by someone else?”

But as outsourcing increasingly becomes a visible and well-understood element of accounting, it’s worth considering the flexible options it could give you.

“Accountancy is more than just crunching numbers,” concludes Rezaul. “There’s a lot more to be done than can be achieved by someone working remotely, thousands of miles away.”

Outsourcing is also not for everyone, he says, “and it doesn’t fit well into the operational model of the traditional high street firm.”

And yet, “it does have lots of potential to make your life easier,” Sorrell acknowledges. “Particularly if you tend to overwork as I do!”

In summary

1. Know the advantages. If you’re looking to expand the business without taking on full-time staff; if you want to move into advisory and reduce your bookkeeping services; if you have staff shortages or problems with cash flow; then outsourcing might be for you.  
2. Choose the host country that most meets your needs. Different locations will offer different benefits. Is the objective to save costs, or increase flexibility at busy times, or grow in new directions? Knowing exactly what you want the outsourcing to do, will help inform your decision.
3. Know the drawbacks. India and the Philippines are significant hours ahead and there are language barriers; but increasingly, these are being accommodated. Ireland is inside the EU, but more expensive. If the UK leaves the EU as planned, data flows are likely to become an issue.
4. Bear in mind data security. Research the company you’re planning to use for your outsourcing. Are you confident they have all due diligence in place? Ensure you have a non-disclosure agreement – do all you can to ensure that client data is protected.
5. Consider your clients. Can you give them the attention to detail needed if the nuts-and-bolts work is being done elsewhere?

Read more about outsourcing and saving money in your business:

• How to save money when running your own accounting business
• In versus out: bookkeepers and outsourcing
• How to make money while you sleep

Mark Blayney Stuart is Business Journalist of the Year, Wales Media Awards 2017 and Former Head of Research at the Chartered Institute of Marketing.