In-practice accountants in the UK are actively looking to outsource their tax preparation workloads in the hope of streamlining their practice, meeting deadlines and reducing costs. Outsourcing tax preparation tasks is one of the most sought after accounting and bookkeeping services. Accountants are seeking offshore bookkeeping in the UK to focus more on their core revenue-generating activities due to benefits such as lower workforce costs and efficient work performance. Let’s take a quick glance into the various nitty-gritties of outsourcing accounting and bookkeeping services and tax preparation tasks, and the numerous advantages and challenges associated with it.
Outsourcing is a simple, uncomplicated process
As opposed to what most people think, outsourcing is in fact a very simple process that doesn’t include a lot of hassles or complications. Accountants place tax documents (in the form of pdf files) in a shared network folder. These scanned documents are then uploaded by an outsourced bookkeeping service provider through a data centre. Finally, offshore workers download these documents, prepare the tax returns and send the documents back electronically to the accountants, who can then review them for accuracy.
Cost savings and quick turnaround time are driving outsourcing
Cost management is the primary reason many accountants are opting to outsource their accounting and bookkeeping services and tax preparation tasks. Countries to which these tasks are outsourced usually have cheaper labour available, which makes it profitable for UK-based accountants, despite the outsourcing costs involved. On average, in the UK, a staff accountant gets paid $30-35 per billable hour. However, if the same work was to be outsourced to a bookkeeping service provider based in India, it would cost around $20 per billable hour.
Another primary reason driving the trend of outsourcing accounting and bookkeeping services is the quick turnaround time. Accounting practices outsourcing their tax preparation tasks and the bookkeeping service providers to whom these tasks are outsourced usually follow a time difference because they are situated in separate countries. This time difference becomes a factor of profit. For example: A tax return assigned in the evening from an accountant based in the UK to an outsourced Indian company can be delivered back to the UK accountant the very next morning because of the time-difference factor between the two companies. Moreover, this can be extremely beneficial during the peak accounting season when workload increases by manifolds. High workload can be reduced by outsourcing tax preparation to a specialised bookkeeping service provider, as a quick turnaround will assist in efficiently managing more clients during peak periods.
Data privacy concerns related to outsourcing
That said, there are also some pretty concerning challenges related to outsourcing accounting and bookkeeping services. The very same quick turnaround speed that makes outsourcing attractive also makes it liable to security concerns. When confidential financial data is outsourced and handed over to an external bookkeeping service provider, the privacy of the documents is put at stake. Moreover, not all in-practice accountants are confident about using third-party services even after data encryption and other security features are employed. They are always fearful that private and confidential financial data of their clients may fall into the wrong hands, and miscreants could exploit the information. And this fear is not simply limited to in-practice accountants, even CPA firms are equally worried about data exploitation. As per a study conducted by Accenture in 2003, 52% firms outsourcing their processes were concerned about proprietary data being illegitimately accessed and misused by competitors. This concern is because it is the responsibility of not just service providers but also accountants to ensure their clients’ confidential personal and financial information is duly protected. These terms are in fact outlined in a written contract, and accountants even have to monitor the work of all third parties involved in tax preparation. They are also required to disclose to their clients that they are using the services of third-party vendors. Whether accounting is outsourced or handled in-house, in-practice accountants are still liable for data confidentiality and protection.
In-practice accountants also have to spend time in administrative work for setting up new clients, including client training and setting up account-indexing documents. Outsourcing gradually reduces the amount of work spent on these administrative tasks, which ultimately results in lesser costs and higher operational efficiency.
Offshore bookkeeping in the UK has gained widespread acceptance. Outsourcing accounting and bookkeeping services has its own share of profits and concerns, but it is completely up to accountants to decide whether they find the practice safe enough to adopt or not. With technology advancements and even government mandates, most outsourcing companies, these days, are following strict regulations to ensure data protection and confidentiality. However, it cannot be denied that many in-practice accountants have found their success in outsourcing.