How to Approach Accounting Outsourcing

Different types of accounting outsourcing services offered

Accounting outsourcing firms typically offer services relating to financial management and accounting.  Although the exact services may differ from firm to firm, here are a list and description of the general services one can expect by employing an accounting firm.

  • Bookkeeping- This outsourcing service will cover areas related to bookkeeping such as manual journal entries, invoicing, general accounting, financial reconciliation, daily sales and cash receipts, accounts payable and receivable, project accounting, customer order processing, ageing analysis, and virtual accountants.
  • Tax Returns- This outsourcing service will assist in the preparation and filing of taxes. Accounting outsourcing firms typically offer advice and potential ways to save money when filing taxes.
  • Financial Reporting- Outsourcing services usually provide AP reports, financial statements, inventory reports, customized reports, accounts receivables reports, general ledger reports, bank reconciliation reports, and payroll and check registers.
  • Payroll processing- Firms will handle tasks such as completing year-end W-2 forms, time cards/sheets, attendance records, leave forms, reports and deadlines, employee earnings statements, prepare notifications of tax liabilities and deposits as well as prepare and pay all Federal, State, and local payroll taxes.

How accounting outsourcing minimizes risk for companies

Companies often use accounting outsourcing in order to minimize a firm’s risk. First off, by the company shifting accounting functions to an outside firm, they are also shifting risk. The outsourcing firm now has the responsibility to deliver results instead of the hiring company.

Secondly, outsourcing firms are less likely to make mistakes and miss deadlines because they have a reputation to uphold. Their reputation enables them to hire new clients and maintain their relationships with their current ones. Therefore, successful outsourcing firms will produce high quality and satisfying work in order to maintain their market presence.

Lastly, accounting outsourcing firm are better equipped and prepared to catch any errors. Most outsourcing firms build in multiple levels of review in the process in order to catch simple or major mistakes. Many in-house operations cannot afford the manpower and time to conduct the same review process.

Why businesses choose to outsource accounting services

Accounting outsourcing is in increasing demand as many companies seek to maximize profits and minimize operating costs. Many companies have decided to outsource for the following reasons:

  • Cost savings- Accounting outsourcing has enabled companies to save money because they do not have to hire, train, and support additional employees and do not have to purchase software and materials for the employees to use. Additionally, outsourcing firms maintain experienced, educated professionals who have the ability to save organizations money on taxes and other accounting services. Some outsourcing firms claim that organizations can save up to 40-50 % on specific services that are outsourced to firms.
  • Focus on core business- Accounting and subsequent services are usually considered a secondary role that consumes company’s resources and time. Through outsourcing these services, companies can focus on the core businesses that drive their company and revenue streams. Furthermore, the legal liability that comes with accounting services is also transferred over to the outsourcing firm.
  • Accurate and professional work- Outsourcing firms produce high-quality work that may be difficult to replicate through in-house accounting. Typical firms are up to date on ideal industry practices, skill sets, and technology. Additionally, firms can provide fair, unbiased, and transparent financial disclosures of financial reports. Another advantage ofhigh-quality work is the minimization of penalties and opportunity for tax deductions.
  • Access to resources: Outsourcing firms have accounting resources that the average company does not have access to because the firms are built around the accounting service and thus invest in a wide range of resources. These resources often include: value added workflow systems, utilization of state-of-the-art technology, modern models of management, innovative models of delivery, and ability to reengineer accounting processes.
  • Competitive advantage- Companies are seeing the competitive advantage in outsourcing accounting services. Primarily, a competitive advantage is seen in the ability of companies to provide more resources to developing new ideas and services that make up the core business. Furthermore, it allows companies to focus resources on other areas such as customer relations.

Accounting outsourcing problems/risks and how to mitigate them

Accounting Outsourcing

As with all forms of outsourcing, there are certain risks involved with handing work over to an outside firm. The risks are especially high when dealing with financial reporting and accounting for a company. However, there are ways to mitigate and navigate around the potential risks that are evident.

The first major risk that companies foresee in accounting outsourcing is the release of confidential financial information for the organization. This information is often strictly confidential and has the potential to harm the organization if used in the wrong way or released to the public. However, there are strict privacy regulations in the U.S. that protect company’s financial information. In addition, hiring organizations can choose outsourcing firms that only allow accountants to see raw information, which is prohibited from being downloaded or printed. The information is password protected, and all the data remains in the U.S. It is recommended that companies identify what functions can be safely outsourced and then have a lawyer allocate risk between the hiring organization and the outsourcing firm.

Secondly, most hiring companies are concerned with choosing the correct amount of work to outsource. Often, companies either underestimate or overestimate their accounting and financial outsourcing needs. Companies should clearly define their scope of services and work with the outsourcing company to decide how much to outsource. The outsourcing firm will be able to consult companies on what is their contracted responsibility and what functions the customer still needs to conduct on their own. It is important for hiring companies not to outsource upper executive positions such as CFO or comptroller.  These positions will be able to accurately manage the workload among the partnership.

Thirdly, hiring companies often worry about software compatibility between the firm and their organization. Hiring companies consider if they have to change operating procedures in order to accommodate the firm.  However, most firms will work with the hiring organization to use technology that is already used or that can cheaply and easily be incorporated. Nonetheless, companies may have to upgrade their software once the transactions become large and complex.

How to transition the workload

Once an organization decides to outsource, they must deal with transition costs and responsibilities to the outsourcing firm. The learning curve involved depends on the time it takes to make the transition and the criticality of the outsourced functions. Three factors should be considered when making the transition:

  • Timing– the average time it takes to transition bookkeeping and other accounting responsibilities for a medium-size company is 3-4 weeks. Depending on the workload it may take as little as 2 weeks or up to a year.
  • Transition planning– Hiring companies should fill out questionnaires and documents in order to inform the outsourcing firm of business expenses. They should also provide a “toolkit” that outlays the daily functions of the current accounting services.
  • Restructuring- As responsibilities of employees are handed off to the outsourcing firm, the company must decide what to do with the employees. Companies must decide if they should be re-assigned or let go.

Tips for Outsourcing Web Design

Types of web design outsourcing

Web design outsourcing encompasses a broad field of possibilities, and many organizations may not be entirely sure of what services can be completed through a partnership with outsourcing firms and freelancers. The following list provides the typical services that organizations can expect to receive from web design outsourcing.

  • General website design services:  These services include unique website design or redesign of an existing website. Companies also usually offer design for smart phones and mobile sites. Outsourcing firms generally will provide responsive web 2.0 xhtml and CSS to the designing of sites. Furthermore, a good web design outsourcing company will be able to use Ajax, Jquery, Prototype, MooTools, and PSD to XHTML conversion. Additionally, outsourcing firms can offer website maintenance and support.
  • Graphics and image design: Besides general website design, outsourcing firms will often can offer artistic abilities such as business card designing, brochure designing, corporate logo creation, graphics design for print and the internet, corporate digital brochures and c CDs. Typically, an outsourcing firm will be able to provide flash services for intros, banners, and animated logos.
  • CMS customization services: Outsourcing firms will provide these services, which can include customization for Joomla, WordPress, Magento, OSCOMMERCE, Prestashop, Zen Cart, phpld, PHPbb, template monster, and VBulletin. Firms should also be able to provide help with any mssql/php open source script and proprietary systems.
  • Dynamic web development services: Dynamic web development services include E-commerce website development, custom payment gateway integration with the clients CMS, custom web application and CRM development with languages such as php, mysql, ajax, xml, and SOAP. These services also include portal/ social networking integration, and Facebook application development.

How to determine if outsourcing web design is necessary

In those cases where web design is not being outsourced out of necessity (individuals or firms that simply do not have the skills to do it themselves), an outsourcing analysis needs to be done to determine what components of web design services that should be outsourced. The first step in the analysis is to create a budget that accurately reflects how much money the organization can spend in order to accomplish their goals. Next, the organization should conduct financial analysis on how much it would cost to conduct the project in-house. The organization should factor in overhead costs such as hiring, maintenance, and employee support. The organization should compare this analysis with multiple estimates from various outsourcing companies.

After that, the company should consider the possibility of outsourcing other aspects to include website maintenance and support. Criteria that should govern this decision are:

  • Finances- Future planning that takes long-term expenses into account should be considered when deciding which operations will be cheaper to do in-house or to outsource. These long-term expenses include infrastructure (office supplies, space) and employee support (health care, training, etc.).Outsourcing Web Design
  • Security- An organization may not want an outsourcing firm to build certain aspects of a web service because they might be concerned with the ability of the firm to build web sites that are secure and protect confidential user information.
  • Privacy- Companies may not want certain company information in the hands of an outside entity. Such company information might be necessary in order to build the service that the company wishes to have. In this case, the hiring organization should consider whether the outsourcing firm could complete some part of the service that does not require the information.

If an organization decides to outsource some or all of their web design needs, then they must decide where to send their outsourcing work.

Where companies can find web design outsourcing

For an organization to find web service outsourcing, they should look into a firm in the native country or abroad. Either way, companies should get proposals from multiple firms in order to receive the best deal possible. Another option is to hire individual freelancers.

  • Outsourcing domestically- Sometimes, it may be more beneficial to hire a domestic outsourcing firm from the native country. These are often referred to as consulting firms. They provide the benefit of good service and the ability to communicate easily with the hiring organization. There are almost no communication barriers that inhibit instruction and cooperation. However, these firms may be more expensive to hire.
  • Outsourcing firms abroad- A cheaper option is to hire firms from foreign countries. It is a growing trend because of the cost saving benefits. However, there may be communication barriers between the hiring organization and the outsourcing firm. In addition, the time and cultural barriers as well as distance may negatively affect work progress and communication.
  • Freelancers- Organizations should also consider hiring a freelancer through freelancer websites such as,, etc. A lot of different freelancing websites can be found using a simple search engine query for “web design services freelancing.” Write professional job postings and post the same on multiple sites in order to attract the best freelancing talent possible.

How small business can benefit

Outsourcing often enables the small business to succeed. First off, a good web design outsourcing company will also be able to provide a marketing program to help a small business succeed online and to generate new leads. Leads are generated through various online marketing, professional interface design, yellow page listings, advertising through pay per click, and search engine optimization. Furthermore, the design and services should give an edge over the competition through affordable and scalable solutions.

An outsourcing company will also be able to provide experience and consulting on a wide range of web services. They can combine expertise so small businesses don’t have to individually consult different outside entities. For instance, an outsourcing company can build, launch, and maintain the website.

How to Go about Application Outsourcing

Those looking into application outsourcing should perform the following tasks before they look into where and what they will outsource.

First decide what parts of a project will be outsourced and then to create a realistic budget to avoid cost overruns and other problems. Long-term planning is necessary in order to know what to do when the application is finished and who will take control of application maintenance. Lastly, an organization must decide where to send their outsourcing work.

Where companies go for application outsourcing

Outsourcers should either look into individual freelancers or an outsourcing firm that specializes in application programming.  In order to find freelancers, first go to freelancer websites such as,, etc. A lot of different freelancing websites can also be found using a simple search engine query for “application freelancing.” Write clear and professional job postings in order to attract top freelancing talent and try different sites.

An alternative to freelancers is choosing an outsourcing firm. Top firms include Accenture, Tatvasoft, Unisys, and CSC. Get proposals from multiple firms in order to receive the best deal possible. It is extremely important to look at the service level agreements that the firms provide in order to find one that best suits the need of the hiring organization.

How to attract top outsourcing freelancers

More money, not surprisingly, will attract better freelancers. Top freelancers want professional projects for both the financial rewards and as resume builders. Therefore, work terms and expectations should be written for the freelancer. Finally, companies that reply to all those who bid on a project will build a good reputation and attract more people the next time they post.

Application outsourcing problems and solutions

As with almost forms of outsourcing, there are various problems that hiring organizations will encounter. However, for the most past, there are always ways of mitigating or avoiding possible problems.

  • Communication– To reduce the number and severity of problems, it is important for the two partners to clearly establish the expectations and requirements of the application service in order to avoid the pitfalls of communication barriers. Hiring organizations should make sure that the outsourcing firm will be able to make the software vendors deliver (since much of it is vendor based). It can be accomplished by establishing a service level agreement that will ensure compliance to a set level of expectations.
  • Security– Hackers often will try to break into an application’s code and access sensitive, valuable data or cause other problems. Thus, it is important to research how secure outsourcing companies make their applications. Applications with even minor bugs are under serious threat of being hacked. It may be necessary to hire another firm to check application security and fix errors. Outsourcing firms that specialize in application security should offer services to include run-time scanning, source code reviews, advanced manual testing, ethical hacking, application security assessments, identity management, secure authentication, and SOA security services.
  •  Application maintenance– One of the main concerns for hiring organizations is who will be responsible for application maintenance after the application is built. The application will most likely need to have bugs fixed and other patches, and how this will be done must be spelled out in the SLA. Keeping the same organization for maintenance and updates offers the advantage of having people who are familiar with the workings of the software throughout the whole process without added training.

What services are provided through application outsourcing?

Application OutsourcingApplication outsourcing is a broad term, and many organizations may not be entirely sure of what services it covers. The following list provides the typical services that organizations can expect to receive from application outsourcing.

  • Application Development – This service involves the outsourcing firm providing skills for application development in a managed service environment. Often, the outsourcing firm will develop and enhance a packaged application software for clients. A good outsourcing firm will offer a wide range of support throughout the entire life cycle of application development. Outsourcing firms should have well-established System Development life cycles (SDLC) but often can adapt to the processes and deliverables that clients use.
  • Application Support and Maintenance – Outsourcing firms can provide support and maintenance in addition to building an application for a client. The outsourcing firm will help resolves problems, incidents, and bugs that are almost always be present in all new, modified, and existing applications.
  • Customer Program Management –This involves outsourcing firms devising a solution that uses one point of accountability (usually a manager) for service and contract phases of delivery. Often, the outsourcing firm will dedicate a manager and supporting team for program management to will work extensively with the client through all phases of the transition process. This is beneficial to organizations because one person manages a contract, provides flexibility, and allows changes to be added as the application process continues.
  • Application Operations – Application operations involve day to day services in relation to applications. This includes monitoring of applications, performance testing, application patching, application access level control, functionality, and performance.  The support offered by outsourcing firm should include all aspects of an application life cycle.

Successful outsourcing stories that companies can relate to and imitate

If an organization is still unsure of how they can benefit from application outsourcing, there are plenty of examples of how organizations had an application need and got it solved through outsourcing. Here are some examples that should be imitated by other organizations.

  • Edcon– Edcon is a South African retail group with more than 1,000 stores across southern Africa. Edcon was having trouble keeping its IT infrastructure in check with the allotted budget and had significant business challenges in regards to application development. Edcon decided to outsource in order to avoid the costs of building applications in house.  The outsourcing firm standardized services and developed new applications and capabilities. The new applications include a supply chain management solution, a Microsoft based business intelligence solution, and a credit management system.  Overall, the outsourcing firm helped Edcon reduce IT costs and helped them cope with the rapid integration of newly acquired companies.
  • Canadian Satellite Radio– Canadian satellite radio is the XM radio for Canada. It offers subscribers 120 channels of radio programming.  The radio was having trouble managing the entirety of its customer base as well as building applications in order to support core business systems. The satellite radio station decided to turn to an outsourcing firm. The outsourcing firm helped build applications for the satellite radio to manage their clients, built new billing/ customer care systems, and helped reduce IT costs associated with operating core business functions.