Is outsourcing the key to accounting staff shortages?
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- Practice management
This article was current at the time of publication.
Practices desperate for staff have a few outsourcing options: going through a specialist firm or outsourcing directly. Regardless, for at least the time being, outsourcing is here to stay.
Using an outsourcing agency
Marion Garlick CPA, a client manager at Connect Outsourcing, which has offices in Australia and New Zealand, says she knows of no data available on the prevalence or growth path of accountancy firms’ offshoring work, but anecdotally she believes “it’s a growth industry, spurred especially by the COVID-19 pandemic.”
In New Zealand alone, Connect Outsourcing operates outsourcing functions for more than 100 companies to a team of 1200 based in Mohali in northern India.
Garlick says: “We don’t come across firms saying, ‘we have to do it, but we wish we didn’t.’ They understand that those that do outsourcing well will be more profitable.”
She notes that for small-to medium-sized firms, outsourcing can make more sense than bearing the cost of taking a graduate from university and training them for two or three years until they’re fully productive – after which they might go to work overseas.
Outsourcing is not an instant cure, as it’s no straight labour transaction and requires a period of adjustment on the part of the firm.
Garlick says: “Developing standard procedures is essential when outsourcing work so you have a consistent result. This structure organises information, creating a streamlined workflow which everyone in the practice can navigate.
“Information gets quite structured [so] everybody knows where everything is.”
Garlick say firms thinking about offshoring need to weigh up two major models.
In New Zealand firms have favoured the business processing model where a firm contracts to a third party which is responsible for staff recruitment, training and management.
Normally, says Garlick, the provider will ask you how much work a firm will send through over a 12-month period, and charge a fixed percentage of the client fee.
Under the outsourced employment model, the third party, usually based offshore, will provide staff to an accountancy firm as part of its team, the firm assuming responsibility for training and payment of salaries.
Owning your own offshore subsidiary
Another option is doing it yourself.
Liston Newton, a practice headquartered in Melbourne, with about 50 staff also working from offices in Victoria and New South Wales, does just that.
The firm also has a subsidiary in the Philippines to which it sends an element of its client work: bookkeeping, financial statements, tax preparation and returns, ASIC compliance, general administration and superannuation.
The Philippines operation has no physical office, with all staff working remotely within a 20km radius of Manila with some in the southern part of the archipelago around Davao.
CEO Peter Antonius CPA says his firm initially outsourced to the Philippines via a BPO [business processing outsourcer], “so we already understood the culture and environment”.
Eventually Liston Newton came across a local accountant whose experience level allowed the firm to work with regulatory authorities, lawyers and accountants to establish their own corporate structure.
The firm now has an “officer in control” with Power of Attorney to act on Liston Newton’s behalf.
“It wasn’t a single process. It took quite a few months to get in place, and it wasn’t cheap. But we felt we had to do it the right way, as we wanted to build the Liston Newton brand in the market to help attract talent.”
Antonius says it’s getting harder to find Philippines staff as more countries look to supplement their home operation by offshoring.
“Outside of BPOs, it’s hard going if you don’t have a brand.”
Antonius emphasises that legal and regulatory requirements are strict in the Philippines, not dissimilar to in Australia. He estimates “close to” one Australian staff member is dedicated to managing the Philippines operation. “We look after the welfare of team members. We operate HR seamlessly across borders.”
Establishing your own operation, as opposed to using a BPO, cannot be taken lightly, says Antonius.
“My personal view is that if you’re a sole practitioner with four staff or fewer, the cost-benefit wouldn’t stack up – you’d be better off going with a BPO.
“If you have a couple of partners, 10 staff or so and A$3 million to A$4 million revenue, you could look at going it alone.”
Which models work best?
Antonius says both the BPO and go-it-alone models are effective, the choice coming down to what suits individual circumstances.
“For us, the benefits are full autonomy in managing resources, and in the selection and hiring process, and transparency from a cultural perspective.
“When you have several offices and locations, you need to create a culture that transcends boundaries, and that’s easier if all the people working for you are team members and not managed by a third party.”
Garlick has visited India several times to meet the local team and says one little-appreciated aspect of offshoring is the benefit to offshore staff.
“It provides opportunities to train and work in their chosen field they might not otherwise find, stable, guaranteed work, and the chance to connect to international networks.”
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