The current landscape of the accounting industry is experiencing a significant shortage of professionals, leading to delays in financial reporting. As one of the founding members of Experity CPA, I often deal with corporations who resort to outsourcing and have developed a number of views on the matter – some which I will seek to share here today.
As a firm, considering outsourcing your accounting tasks may become a necessity. Here’s why it could be a crucial move for your survival:
Filing Delays: An Indication of a Bigger Problem
When companies fail to meet their reporting deadlines to investors, they are required to fill out a specific form notifying their delay. Recently, several corporations have had to do so, attributing their tardiness to a lack of adequate resources in their accounting departments due to a nationwide accountant shortage.
A Pervasive Issue: Understanding the National Accountant Shortage
Researchers argue that great resignation has come to a number of industries, including accounting. This shortage of accounting professionals isn’t limited to a few corporations. Businesses, large and small, are grappling with this issue, which originates at the educational level and subsequently affects the operational efficiency of these organizations.
A Perception Problem: Accounting’s Image
One key factor that contributes to this shortage is the perception of accounting as a career. Young professionals often opt for seemingly more exciting jobs in finance, leaving a void in the accounting field.
Rising Competitors: The Allure of Data Analytics Jobs
A contributing factor to this problem is the rise of alternative professions that offer similar skill sets. Data analytics jobs are becoming increasingly popular, attracting potential accountants with the promise of working in a more specialized setting.
Decreasing Interest: A Decline in Accounting Degrees
Over the last decade, the number of students obtaining accounting degrees has dropped by 9%. The traditional path of accounting, which often involves long working hours before yielding high returns, is less appealing to the modern workforce, driving students to explore other options.
The Industry’s Response: Adapting to Modern Needs
Accounting firms are attempting to adjust to these changes, offering more flexibility with remote work and improved remuneration packages. These changes aim to attract and retain more professionals in the industry.
The Need for Diversity: Building a Better Future
There is a recognized need for diversity within the industry. As more students enter the accounting field, the demographic of accountants will inevitably become more diverse. Despite recent progress, with more women and Latinos entering the profession, a large majority of new hires remain white.
The Solution: Considering Outsourcing
In light of these challenges, your firm might consider outsourcing its accountancy needs. Such a strategy could help navigate the accountant shortage, ensuring your financial tasks are handled efficiently and effectively, without being subject to the ebbs and flows of the national accountant situation.
Tips to Safely Outsource Accountancy to Domestic Firms
Outsourcing accountancy tasks can be a smart move for many businesses, especially in the face of the ongoing accountant shortage. Here are seven tips to help you safely outsource these tasks to firms within the United States.
1. Do Your Research
Before you outsource, ensure you thoroughly research potential firms. Look at their track record, client testimonials, and areas of expertise to ensure they align with your needs.
2. Check for Qualifications and Certifications
Ensure the accounting firm holds the necessary qualifications and certifications. They should have certified accountants on staff and adhere to Generally Accepted Accounting Principles (GAAP).
3. Prioritize Communication
Clear, frequent communication is crucial when outsourcing. Make sure your chosen firm values open communication and uses reliable tools to facilitate this. Regular check-ins and updates will ensure you stay informed about your financial status.
4. Assess Data Security Measures
Accounting involves sensitive financial data, so it’s crucial to ensure your chosen firm takes data security seriously. Inquire about their data protection protocols, encryption methods, and how they plan to maintain the confidentiality of your information.
5. Understand the Pricing Structure
Cost is a significant factor in outsourcing decisions. Ensure the firm provides a clear and detailed breakdown of their pricing structure. This can help you avoid unexpected costs and ensure their services align with your budget.
6. Ask About Their Adaptability and Scalability
Your accounting needs may change over time, especially if your business grows or diversifies. Ask potential firms about their ability to adapt to your evolving needs and how they handle scalability.
7. Get Legal Advice
Before signing any contracts, seek legal advice. Ensure you understand all the terms, conditions, and obligations included in your agreement with the accounting firm. This can help protect your business and ensure a beneficial outsourcing relationship.
A Cautionary Tale: Offshore Outsourcing Woes
For our concluding remarks, let me share a story about a business owner named Jane who was trying to navigate the accountant shortage.
Jane was the owner of a thriving small tech firm, with business growing faster than she could have imagined. As the company expanded, so did the complexity of her finances. Finding herself in need of an accounting solution, she began considering outsourcing as an option.
Attracted by the significantly lower rates, Jane decided to outsource her accounting needs to an offshore firm. The firm promised proficiency in English, proficiency in US accounting standards, and secure data handling. Everything seemed perfect.
For the first few months, all went well. The offshore firm handled the influx of work adeptly, and Jane was pleased with the significant cost savings. However, as the saying goes, “if it seems too good to be true, it probably is.”
One fateful morning, Jane woke up to an email notification that rocked her world: a data breach notification. Unbeknownst to Jane, the offshore accounting firm had suffered a significant data breach. Confidential financial data, employee information, even customer details – all were exposed.
In the following weeks, Jane had to notify her staff and customers about the breach, which was a severe blow to her firm’s reputation. She had to invest significant resources into damage control and recovery efforts, including identity protection services for those affected and an expensive PR campaign to try to salvage the company’s reputation.
The cost savings she had enjoyed from outsourcing offshore were quickly dwarfed by the financial and reputational damage inflicted by the data breach.
This sobering incident made Jane reflect on her decisions. She realized that if she had invested in a domestic US firm that prioritized secure data handling and adhered to stringent US data security regulations, she might have avoided this disaster.
Jane’s story serves as a reminder to all businesses considering outsourcing their accounting needs: it’s not just about finding a service that can do the job. It’s also about ensuring that they can do it safely, securely, and in compliance with all necessary standards and regulations.
