But what does the future hold for outsourced accounting firms? How will technology, globalisation, and specialisation shape the industry and the services it offers? In this blog, we will explore some of the key trends that are transforming outsourced accounting and the opportunities they present for businesses.
Data Security: A Top Priority in the Digital Age
This is especially true in the digital age, where cyber threats are increasing and evolving. According to a report by IBM, the average cost of a data breach in 2020 was $3.86 million, and the average time to identify and contain a breach was 280 days. These figures highlight the risk and impact of data breaches on businesses and their reputation.
Therefore, data security is a top priority for both outsourced accounting providers and their clients. They need to implement robust data security measures and protocols, such as encryption, authentication, backup, and audit. They also need to ensure transparent and ethical data handling practices, such as data minimisation, consent, and deletion. These measures and practices can help build trust and ensure client data protection.
Outsourcing 2.0: Technology and Automation
Some of the technologies and automation tools that are transforming outsourced accounting are:
- AI and Machine Learning: AI and machine learning can automate mundane and repetitive tasks, such as data entry, invoice processing, and anomaly detection, freeing accountants for more strategic and analytical tasks. AI and machine learning can also provide insights and recommendations based on data analysis, such as cash flow forecasting, budgeting, and financial planning. For example, Xero, a cloud-based accounting software company, uses AI to automate bank reconciliation, categorize transactions, and suggest invoices.
- Cloud-based platforms: Cloud-based platforms can facilitate collaboration and communication between outsourced accounting providers and their clients, as they allow real-time data access and sharing from any device and location. Cloud-based platforms can also improve transparency and accountability, as they provide a clear and consistent record of transactions and activities. For example, QuickBooks Online, a cloud-based accounting software, allows users to track income and expenses, manage invoices and payments, and run reports from anywhere.
- Robo-advisors: Robo-advisors are AI-powered financial advisors that can provide personalised and automated financial advice and guidance to clients. Robo-advisors can also execute transactions and manage portfolios on behalf of clients, based on their goals and risk preferences. Robo-advisors can potentially disrupt the traditional role of accountants and financial advisors, as they offer lower fees, higher returns, and 24/7 availability. For example, Wealthfront, a robo-advisor platform, offers services such as automated investing, financial planning, banking, and tax optimisation.
Going Global: The Rise of Offshore Outsourcing
The main driver of offshore outsourcing is cost pressure. Offshore outsourcing can offer cost-effective solutions, as the labor and operational costs in overseas locations are lower than in domestic markets. According to a report by Deloitte, offshore outsourcing can reduce the cost of accounting services by up to 50%.
Another driver of offshore outsourcing is talent acquisition. Offshore outsourcing can provide access to a wider pool of skilled and qualified professionals, who can offer specialised expertise and niche industry knowledge. This can be especially beneficial for businesses that have specific or complex accounting needs, such as healthcare, e-commerce, or startups.
However, offshore outsourcing also comes with some challenges and risks, such as:
- Security and compliance: Offshore outsourcing can expose client data to different legal and regulatory frameworks, which may not offer the same level of protection and privacy as domestic laws. For example, some countries may have weaker data security standards, or may require data localisation or disclosure to government authorities. Therefore, it is important to ensure that the offshore outsourcing provider complies with the relevant laws and regulations, and has adequate security measures and safeguards in place.
- Communication and coordination: Offshore outsourcing can create communication and coordination issues, due to factors such as time zone differences, language barriers, and cultural differences. These issues can affect the quality and timeliness of accounting services, as well as the relationship and trust between the provider and the client. Therefore, it is important to establish clear and frequent communication channels, and to align the expectations and objectives of both parties.
Specialisation: Catered Solutions for the Modern Business
Some of the examples of specialisation in outsourced accounting are:
- Industry-specific solutions: Some outsourced accounting firms are focusing on specific industries, such as healthcare, e-commerce, or startups, and offering solutions and services that cater to their unique accounting challenges and opportunities. For example, Pilot, an outsourced accounting firm, specialises in serving startups, and provides services such as bookkeeping, tax preparation, and CFO support.
- On-demand services: Some outsourced accounting platforms are offering on-demand services, which allow clients to access accounting professionals or firms for short-term projects or specific tasks, such as audit, payroll, or tax filing. These platforms can offer flexibility and cost-efficiency for businesses, as they can choose the service, duration, and price that suit their needs. For example, Paro, an outsourced accounting platform, connects clients with vetted and experienced accountants and financial professionals, who can provide on-demand services for a fraction of the cost of hiring a full-time employee.
Beyond Numbers: The Shift towards Strategic Services
The shift towards strategic services is driven by the increasing demand and expectation of clients, who are looking for more value-added and proactive services from their outsourced accounting providers. Clients want their providers to help them with strategic decision-making, business growth, and performance improvement.
Some of the examples of strategic services in outsourced accounting are:
- Financial analysis: Financial analysis is the process of evaluating the financial performance, position, and health of a business, using various tools and techniques, such as ratio analysis, trend analysis, and forecasting. Financial analysis can help clients identify their strengths and weaknesses, assess their risks and opportunities, and plan their future actions. For example, Ignite Spot, an outsourced accounting firm, provides financial analysis services, such as cash flow analysis, profitability analysis, and break-even analysis, to help clients improve their financial performance and achieve their goals.
- Business consulting: Business consulting is the process of providing expert advice and guidance to clients on various aspects of their business, such as strategy, operations, marketing, and innovation. Business consulting can help clients solve their problems, optimize their processes, and enhance their competitiveness. For example, GrowthForce, an outsourced accounting firm, provides business consulting services, such as business strategy, process improvement, and KPI development, to help clients grow their business and increase their profitability.
- Advisory services: Advisory services are services that provide specialised and independent advice and assistance to clients on specific matters or transactions, such as mergers and acquisitions, restructuring, or valuation. Advisory services can help clients navigate complex and critical situations, and achieve their desired outcomes. For example, BDO, an outsourced accounting firm, provides advisory services, such as transaction advisory, valuation and business analytics, and risk advisory, to help clients manage their risks and opportunities, and create value for their stakeholders.
Outsourced accounting is a dynamic and evolving industry, that is influenced by various trends and factors, such as technology, globalisation, and specialisation. These trends offer many opportunities and benefits for businesses, such as cost savings, efficiency, and access to expertise.
However, these trends also pose some challenges and risks, such as data security, communication, and competition. Therefore, it is important for businesses to carefully evaluate their needs and goals, and choose the right outsourced accounting provider and solution for their situation.
If you are interested in exploring outsourcing options for your accounting needs, please contact us or visit our website for more information. We are a leading outsourced accounting firm, that offers a range of services, from bookkeeping and reporting, to financial analysis and consulting, to help you achieve your financial and business objectives.