Compliance is essential across all industries, and accounting is no exception so outsourcing compliance is a solution for this. Tasks such as preparing financial statements, tax returns, GST, and PAYE must be completed annually. Firms can manage these tasks in-house or outsource compliance to specialised third parties. A range of firms, from the Big Four to Mid-Tier firms to boutique firms, choose to outsource their compliance to reduce costs, access specialised expertise, improve efficiency, and ensure regulatory adherence.
Outsourcing compliance has become increasingly common in the accounting industry. Although this practice offers various benefits, it also presents challenges. Therefore, understanding these aspects is crucial to navigate this complex landscape ethically.
Recently, CAANZ updated their Engagement Letter tool to require firms to disclose their use of third parties, which includes outsourcing compliance. Consequently, how will clients receive outsourcing compliance? How do you outline its value to them?
As with any practice, there are pros and cons. Let’s explore a few of them.
Pros for Clients
Increased value: Outsourcing compliance to countries with lower labour costs can significantly reduce expenses for firms. This allows the firm to add more value by interpreting what the numbers mean. Additionally, you can add value by increasing their efficiency and improve their bottom line by making positive change to their business.
Pros for Firms
Attracting talent: It is a candidate-short market on the BAS side. Offering meaningful advisory and consulting work captures the highly desired Senior Accountant. Generally speaking, Seniors don’t want to prepare compliance. Instead, they seek to add value and truly partner with clients, which aligns with the work you will be offering.
Pros for the Accounting Industry
Increase of awareness: When I started in this industry in 2016, only 10% of firms outsourced their compliance. Today, that number has risen to around 30%. The growing adoption of outsourcing sets new industry norms and raises awareness of its benefits.
Pros for the Outsourcing Companies
Economic growth: There’s a benefit to those overseas countries such as India, Philippines, Fiji, Cook Islands, and Samoa. Not only does this boost their economy, but it also encompasses job creation, increases skills, generates local investment, and business expansion. These benefits contribute to sustainable development in these regions.
Cons for Clients
The feeling of loss of control: This could raise concerns about the quality and accuracy of their compliance. To mitigate this risk, set clear expectations with your client, your outsourcing provider, and your staff. Additionally, conduct regular audits and performance reviews to ensure the provider adheres to compliance standards.
Cons for Firms
Finding the right fit: Common feedback from firms indicates that it takes time to find the right company. The quality and ongoing support will also be determined by the amount of work sent to these third party providers. For those with larger workflows expect contunuity of personnel. Those with smaller work flows there may be some discontunuatiuon of knowledge per project allocated due to staffing change.
Even when you find the right company and team, it takes time for both parties to find their rhythm. Some clients need just three months, while others need 12 months to get into the swing of things efficiently. This makes you wonder: Is it worth the effort, or would it be cheaper and easier to do the compliance in-house?
Cons for the Accounting Industry
Skill gap in New Zealand: If compliance is prepared overseas, how do new graduates get experience with preparing compliance? The Big Four, Mid Tiers, large internationals, and some boutique firms hire graduates and train them in the industry. However, what happens when more firms outsource their compliance? What impact will that have on the basic compliance knowledge we expect accountants to have practical experience with? There will also be a wider discussion on how AI will effect the sector for Accounting.
Cons for the Outsourcing Companies
Brain drain: What happens when accountants from outsourcing companies move to New Zealand to get paid more because of their transferable skills? This movement of talent creates skills shortages, impacting operations. Consequently, this can affect the firms using them as well as their home countries.
Effective communication is crucial for ethical outsourcing of compliance. Engage openly with clients, retain talent by offering meaningful work, and stay informed within the industry. Additionally, provide constructive feedback to outsourcing partners to ensure successful outcomes.
About Me
I am a Specialist Recruiter within the CA space which means I help Chartered Accountants / Certified Public Accountants and those studying toward their CA or CPA qualification.
My clients are Public Practice firms and Accounting firms and the roles/accounting jobs are within Business Advisory Services (BAS), External Audit, Tax, Corporate Finance, Risk Advisory, and Insolvency.
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