The benefits of outsourcing have been accepted across the world with the biggest advantage being how it frees up the time of the top management to focus on the core activities of the business. However virtual collaboration was a hindrance that prevented organizations from hiring offshore accounting service providers. Now that the pandemic has almost banished the idea of physical co-location of resources, workplace norms have changed drastically, and companies are becoming increasingly comfortable hiring an offshore outsourcing provider.

But selecting a suitable accounting outsourcing service provider is tricky and the following factors should be taken into consideration before engaging one:

Identifying the scope of work

The first step for the company is to arrive at the exact work that needs to be outsourced and the work that needs to be kept in-house. The next step is to clearly articulate the key performance indicators of work that is being outsourced, in terms of timelines, outputs, etc which needs to be captured in the RFP document.

Screening and shortlisting

You can start your hunt for an outsourcing partner by searching for them online or reaching out to your contacts. The shortlisting process must begin with screening the outsourcing firms most compatible with your firm. If the service provider is too big or has many customers, the attention that they may be able to provide to a first-time or small outsourcer might be limited.

Once you make a shortlist, it would be a good idea to set up meetings with them to understand the company and its method. You will get a better sense of compatibility. There could be lapses and errors during the transition, hence, it is better to select a service provider whom you are comfortable with.

Reputation and experience

Like any other services business, the reputation and combined experience of the people in the outsourcing partner should be a key factor in selection. You may want to evaluate the firm based on the kind of work done and the customers they have worked for. A good method to evaluate is to seek recommendations and references from existing clients. In case the service provider is not an experienced player, then the quality and past experience of the management is something one should evaluate.

The expertise of the service provider

While one may start with outsourcing the basic accounting work, it might be useful to evaluate the expertise of the service provider to handle multiple tasks. In case the firm provides a resource who is an expert in handling more than bookkeeping, then it is an overall value addition to the client because he is getting the services of a financial analyst also at the cost of an accountant. Hence, it is better to engage a service provider who can scale up and handle the entire gambit of finance, accounting, tax, and compliance.

Cost-effectiveness

Though cost is one of the most important considerations it must be balanced along with all other criteria. All the costs from the hiring of an accountant, salary, other benefits, office space, the infrastructure provided, training, etc must be compared against the price quoted by the service provider. However, it is important to note that a service provider with a low price does not necessarily translate into the best option. A safer approach would be to perform additional checks on quality – a sample output or a paid pilot project.

Processes and systems

It might be worthwhile to understand the maturity of the process and systems that the service provider uses. This will help to assess the ability of the service provider to scale up the operations without disruptions or affecting service levels.

Relationship and access

You should get access to the team who manages the client relationships from the service provider in addition to the sales team. The Relationship Manager or Service Delivery Manager would be responsible to ensure quality, SLAs, etc and the client should gauge their comfort level with this team or person. The client should also ask for access to management to escalate any service-level issues not getting resolved.

Confidentiality

Outsourcing of accounting services exposes private and sensitive information to the vendor and therefore protection of the data and information is essential. Ensure that the service provider has robust data protection practices and secure information technology systems. It is good practice to bind the service provider with a confidentiality agreement.

Conclusion

The above process should help you select an accounting outsourcing service provider that meets your requirements and your budget. And like any other relationship, the amount of time spent with each other, particularly at the beginning, would also go a long way in a successful long-term association. Over time, the company can move to a completely outsourced accounting function with only some key members in- house.

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