There will come a time for each CPA firm when client demand exceeds the supply of manpower. Expectations are high for quick closings, advisory expertise, and perfect compliance while the availability of capable accountants becomes increasingly scarce. Outsourced accounting services provide firms with a tangible means to increase capacity without bloating staffing or overtaxing their star talent.
In this blog, you will learn why capacity is becoming the key factor of limitation in CPA firms throughout the US, how outsourcing accounting services eliminates that limit, what you should consider in choosing your delivery partner, and how to implement this service without losing clients' trust.
Those firms that view outsourced accounting services as part of their strategy and not a bandage solution for the problem, are destined to prosper in a controlled fashion.
Why CPA Firms in the USA Are Struggling With the Accounting Capacity Challenge
Capacity issues do not typically present themselves in one moment of crisis but rather through a gradual erosion of capacity by way of late nights, deferred deliveries, and declined commitments, until growing becomes a cause for concern. Identifying the causes can assist firm managers in determining the best uses of outside assistance.
The Talent Shortage Behind the Capacity Gap
The accounting profession in the US faces an ongoing issue of thinning talent pipeline. There are fewer graduates joining the field of public accounting, and the pool of experienced accountants is retiring. As a consequence, there are fewer accountants on all levels, from entry-level employees to senior reviewers.
This issue directly affects the firm since the position of a staff accountant stays vacant for weeks, with each of those weeks putting additional burden on employees who are already busy. There are increased costs of recruiting, as well as increased competition from larger firms and corporate finance departments.
With such shortages in the talent pipeline, a firm is not able to offer what it promises to its clients. Without the guarantee that the firm can staff up a new project, the growth projects are rejected or postponed. This is the lost opportunity of earning money.
Seasonal Pressure and the Limits of Busy-Season Hiring
Workload imbalance in the CPA profession is legendary. From January to the middle of April when individuals file their tax returns, and March when partnerships and S corporations file, a tremendous amount of work is squeezed into a very short period. A second smaller peak comes in the fall with extension deadlines.
Temporary hiring might seem the natural solution, but it does have its drawbacks. The temporary hires will need to be trained on the firm’s processes and procedures, and by the time they become productive, it will be too late. Training takes away the productivity of more senior professionals.
The Hidden Cost of Staying at Full Stretch
The costs of running teams at full capacity for extended periods will manifest themselves in areas not typically reflected in a profit and loss statement. People get burned out and leave, mistakes become more likely to happen due to time pressures, and management ends up firefighting all day instead of mentoring.
Customer relationships do not escape being harmed either. Clients value discussions about planning and budgeting, but partners will have no time for such things after spending most of their day compiling, reconciling, and fixing things.
How Outsourced Accounting Services Help CPA Firms Scale Without Adding Fixed Overhead
To scale a business is to hire more employees, and to hire more employees is to incur payroll costs, fringe benefits, software licenses, space, and management. An alternative is outsourcing, an approach that increases production without incurring fixed costs. The benefits listed below show why businesses are increasingly relying on it as a central business strategy.
Turning Fixed Staffing Costs Into Flexible Capacity
Outsourcing enables the firm to increase its dedicated workforce prior to deadlines and reduce it thereafter, thus paying for capacity that the firm utilizes. Instead of having to make guesses about the number of employees that will be hired each year, outsourcing accounting provides an alternative approach which follows the natural client demand pattern.
In addition, this flexibility helps mitigate risks when trying out new services. An accounting firm can start hiring capacity incrementally for such things as monthly bookkeeping packages and outsourced controller services for small businesses, without having to hire permanent employees beforehand.
Freeing CPAs for Advisory and Higher-Value Work
A lot of the work that needs to be done on a daily basis at a firm consists of repetitive tasks, which include transaction coding, reconciling of banking and credit card transactions, payables and receivables accounting, payroll assistance, and monthly reporting preparation. All of these tasks are important, but they do not always require the involvement of a licensed accountant.
Outsourcing such production activities will allow the firm’s staff members to focus on analysis, planning, and discussions with the clients. An accountant employed by the firm, who was previously occupied with reconciliations for hours every day, can now spend his time identifying trends and advising the clients. This will help the young accountants who have just joined the firm grow professionally.
What to Look for in Accounting Outsourcing for USA Businesses Your CPA Firm Serves
All providers are not equally ready to assist American customers and the organizations who counsel them. Accounting Outsourcing for USA Businesses Since the work of accountants includes important financial information and legal responsibilities, the process of choosing should be equally responsible as the one for choosing a senior member of the team.
U.S. GAAP Expertise and Platform Familiarity
A competent partner must have practical knowledge of U.S. GAAP, compliance requirements of the government at both federal and state levels, and reporting requirements of American clients. Inquire about training programs in place for the team and whether employees have experience with your particular industries, like construction, health care, real estate, and/or ecommerce.
The proficiency in the technology should not be underestimated as well. Most accounting firms work using software like QuickBooks Online, Xero, Bill.com, or Gusto. Such a vendor would adapt to the system quickly and require less oversight.
Data Security, Confidentiality, and Compliance Safeguards
Security must be a determining factor, not just an afterthought. Some things to look out for include role-based access control, multi-factor authentication, file transfer encryption, confidentiality agreements, and clear data retention and disposal policies. SOC reports can provide further assurance as well.
If the tax return information will be provided to a provider located outside the US, one will have to ensure compliance with applicable laws regarding disclosure and consent. Consulting your attorney and professional liability carrier before going live would be prudent.
How to Implement Outsourced Accounting Services for CPA Firms Without Disrupting Client Relationships
What separates a good implementation from a frustrating one is typically the planning process. Outsourced Accounting Services for CPA Firms Those firms which take their time, ensure clarity in role definition and maintain constant communication with their clients are able to realize the advantages of increased capacity without adding any danger. Phased implementations are usually effective.
Start With a Defined Scope and a Pilot
Start with choosing the task that is high-volume, repetitive, and has low-judgment input, like bookkeeping clean-up, reconciliation, payables, or first-pass tax return preparation assistance. It is always advisable to document this process before delegating it to avoid any misunderstanding in the future.
Initiate a pilot program with a limited number of clients or even a single service line. This allows the parties to fine-tune the instructions and the process of communicating before increasing the scale of the project.
Communicate Transparently With Clients and Staff
Internal communication is just as crucial as client communications. Educate your team members that the provision of accounting outsourcing services is done in order to alleviate stress and free up time for more meaningful tasks and not as a job replacement strategy. Participation of employees in developing processes of handovers helps in gaining their support and finding out improvements.
Transparency regarding how tasks are being handled and which people have access to the information of the clients is needed in professional practices and, at times, even mandatory according to federal regulations. Clients appreciate transparency when it is combined with appropriate security measures.
Highlight all the advantages they will get from using your services. They will include quick processing of tasks, consistent reports and more time spent with their CPA discussing the strategy.
The accounting capacity problem is not a temporary situation. The current state of affairs, including tough competition for talent, high seasonality, and growing client demands, has resulted in this becoming a permanent issue for all CPA firms in the country. Those who are using only the approach of recruitment and overtime will continue to bump up against the same barrier.
Using outsourced accounting services is the way forward since this approach turns fixed expenses into variable capacity, allows licensed staff to concentrate on consulting activities, and makes the process more consistent. It is essential to find the right partner with deep knowledge of U.S. GAAP and security measures and implement it through pilot projects, proper review processes, and honest communication.
Those who choose to act now with an appropriate strategy will be much better prepared for expansion.
Work with The Fino Partners, an outsourcing partner with a reputation for providing clients with dependable financial and partnership services. Whether you are gearing up for the next rush period or scaling up your practice, their team can assist your firm in easing the burden of work, maintaining the quality of work, and concentrating on the advisory relationship that will make growth happen.
