What Services Do Finance and Accounting Outsourcing Companies Offer?

Accounting firm owners like Juliebeth Melone of J B Advisory Group have chosen to reserve high-level projects for in-house, US-based staff while outsourcing the rest.

What would your outsourcing strategy be? Before you answer, you have to understand what can (and can’t) be outsourced in the first place.

Here are the most common finance and accounting services firms outsource and how they do it.

Overview—Why Outsource Finance and Accounting Services?

The supply of finance and accounting talent has declined over the last few years. You must find qualified professionals to balance your firm’s workload to meet evolving client needs and deliverables. Outsourcing your finance and accounting services is the most reliable way to do that.

Here’s why:

• It Reduces Labor Cost

Being a trusted adviser to business organizations, you know what it means to be profitable.

Outsourcing your service allows you to use qualified professionals from other countries, most of whom have lower labor costs.

• It Connects You with Experts

Using third-party service providers allows small and big firms to tap into external financial and accounting experts without going through the long and stressful hiring process or committing to a long-term relationship.

Core Accounting Services Typically Outsourced

• Bookkeeping

Outsourced bookkeeping services project transfers transaction tracking, bank reconciliation, and ledger maintenance to an external bookkeeper, ensuring accurate record-keeping for your clients without using your in-house resources.

Once the bookkeeper is onboarded and set up in your systems, transfer all relevant data to them in your file-sharing system. If you use practice management software, you can see all bookkeeping projects assigned and all the files and information needed to complete them.

This also enables you to monitor their work and collaborate with them where necessary.

• Accounts Payable (AP)

Outsourced AP professionals will handle invoice processing, vendor payments, and aging analysis to ensure your client’s vendors get paid on time.

Using their technology skills, these professionals will do 2 or 3-way invoice matching to ensure accuracy and fraud prevention.

Here’s what you’ll need to do in accounts payable outsourcing:

• Transfer your client’s invoices to your outsourcing partner.
• They use software tools to:

1. Extract and validate data.
2. Route invoices through customized approval workflows.
3. Once invoices are approved, the vendors will be paid using the applicable payment method (ACH, card, etc.).
4. The AP dashboard centralizes this payment information, keeping everyone involved up to date on vendor payments.

• Accounts Receivable (AR)

When you outsource your accounts receivable projects, your outsourcing partner takes over the management of your client’s receivables from invoicing to payment.

Combining technology and human touch, these professionals will use their expertise in customer relationships to manage collections (using creative follow-up strategies) to improve Day Sales Outstanding (DSO).

Here’s how it works:

• Your outsourced AR partner receives your client’s receivable data.
• They create invoices using QuickBooks.
• Automate receivable collections with a receivable collection management software solution.
• Implement personalized follow-ups that align with client communication preferences.
• Track customer payments.
• Match incoming payments with invoices.
• Reporting

• Tax Preparation & Filing

You can also outsource your corporate, sales, and personal tax projects to external experts knowledgeable about your client’s tax laws and all other relevant regulations.

By outsourcing this aspect of your tax work, you can channel your in-house resources to the more advanced work, like tax planning.

Here’s how it works:

• Data Transfer: send the client data (or provide access to it) to the external tax preparer.
• Document Processing: The financial data, like income and expenses, is entered into the tax software. Tax software like DrakeTax is used here to save time and avoid errors.
• Return Preparation: The preparer enters the financial information into the right forms. Deductions are applied and liabilities are calculated according to relevant regulations, like the IRS.
• Review and Approval: Your in-house team can review the return here for accuracy and compliance.
• Delivery and Filing: The client receives the returns for approval before it is filed.

• CPA Support & Controller Services

Outsourced CPA support or controller services can also be outsourced. In this case, the outsourcing service provider will adjust your client’s financial strategy to help them achieve their business goals and manage their financial operations to ensure compliant financial reporting.

Here are some of the tasks involved in CPA outsourcing services:

• Reconciliations: using relevant software to reconcile accounts, such as a bank, credit card, ledger, etc.
• Financial Forecasting: Using technology to forecast budgets and cash flow to help your clients make more accurate decisions.
• Compliance Management: Manage your clients’ financial processes to ensure compliance with relevant standards.
• Real-Time Reporting: Using business intelligence tools to create trial balance, adjusting entries, etc.

• Audit Support Services

Outsourced audit services allow you to use third-party financial auditors for your audit projects. These professionals are skilled in asking the right questions, verifying the right data, and testing controls to help clients understand their risks and make timely decisions to address them.

By delegating these projects to external professionals, you can focus on monitoring the process while you ensure effective client communication.

This service is in three main stages:

• Pre-Audit Preparation: This is where you help your outsourcing partner collect the financial data needed to identify risks and prepare schedules.
• Documentation: Your outsourcing partner compiles financial documents to account for the procedures, evidence, and conclusions collected during an audit.
• Year-End Reconciliation: This is where they use tools like NetSuite to reconcile accounts and resolve discrepancies.

• Financial Reporting & Analysis

Outsourced finance and accounting professionals also produce financial statements that help your clients understand and disclose the health of their business.

This involves:

• Management Reports: creating customized reports that show financial KPIs and using variance analysis for risk management and strategic planning.
• Cash Flow Forecasting: projecting the inflow and outflow of cash from your client’s business.
• Profit and Loss: Gathering and comparing revenue and expense data to measure your client’s profitability.
• Balance Sheet: reconciling assets, liabilities, and equity to show what businesses are worth.

• Virtual CFO Services

This service lets you capitalize on the wealth of experience of an external chief financial officer (CFO) to enjoy financial leadership through forecasting and other advanced financial processes.

This provides your clients with insights that guide their financial decisions and business goals.

• Strategic Advice: An outsourced CFO will create a strategic plan that helps you meet your business goals.
• Budgeting: using their expertise in financial management tools like NetSuite, they will help you budget your resources from your cash flow projections.
• KPI Tracking: monitoring important metrics to provide financial insights for business growth.

How These Services Work When Outsourced

Engagement Model (project-based, retainer, FTE)

Using outsourced financial and accounting services starts with defining the way you want to engage with your outsourcing partner. This could be:

• Full-Time Engagement: This gives you a dedicated outsourced professional who works exclusively for your firm.
• Monthly Retainer: This gives you a set number of work hours at a fixed monthly fee.
• Project-Based: This gives you a professional who comes in to perform a specific task.

How to understand which model will work best for your firm:

Examine Your Workload to identify which services you need external help with and how frequently (weekly, monthly, or seasonal) you need the help.

Projects like bookkeeping require ongoing work, so a retainer engagement is fitting.

For a one-time project like financial audits, a project-based engagement works well. If you need as many as 30 or more hours weekly for services like those of a CFO, you should consider a full-time engagement.

Tools Typically Used

You don’t need additional software or tools when outsourcing your services.

Your outsourcing partner will use the tools you already use for client work, which include:

• QuickBooks Online, Xero, Etc.: tracking income and expenses and organizing financial information.
• Financial Cents, Karbon, Etc.: practice management software to track projects, client information, and team capacity.
• Bill.com: managing accounts payable (AP) with invoice matching and payment schedule.
• SAP: financial management (AP, AR, and tax) for your enterprise clients.
• Drake Tax: tax preparation with portals for secure document exchange.
• NetSuite: an integrated system for managing financial processes for your clients.

Sample Workflow from Intake to Reporting

I assume you have done your partner selection and successfully onboarded them. If not, click here to see how to understand how the process of hiring outsourced accounting professionals works.

Here’s how to start using your outsourcing partner to meet your client deliverables:

• Intake: The first step is to assign projects to the professional by sharing work information and documents with them. This is where they get access to every relevant software solution.
• Processing: The outsourcing partner starts executing the tasks needed to complete the project.
• Service Delivery: When done, the review (most likely your in-house team) reviews the work and flags errors for correction (if any).
• Reporting: The outsourcing partner shares a weekly or monthly work report, including relevant metrics and documents.

Who Typically Uses These Services?

• Bookkeeping, Tax, and CPA Firms Needing to Scale

Firms want to scale their operations for different reasons. One, it enables them to tap into external resources to provide services that their in-house teams may not be so good at.

It also allows them to focus on the services they are most passionate about without sacrificing the opportunity to generate revenue from other services.

• MNCs with Global Accounting Operations

Operating in different accounting jurisdictions, it can be hard for multinational corporations to manage their financial and accounting needs from their headquarters.

Foreign experts trained in relevant reporting standards will help them comply with all financial requirements across the board while also keeping labor costs low.

Final Thoughts: How to Choose the Right Services for Your Needs

Outsourcing is resourceful, but knowing what to outsource is more beneficial.

Here are key questions to ask yourself to outsource as intelligently as the Big 4:

• Is it cheaper to outsource?
• Is direct control over the task crucial?
• Can the outsourced provider guarantee quality?
• Does the task require specialized technology that you don’t have in-house?

Once you’re sure of what to outsource, don’t assume your processes and technology are effective enough for an outsourcing relationship.

Use our Outsourcing Readiness Checklist to adjust your firm and get the most out of your outsourcing partner. Click here to get the checklist.

For more information on outsourced finance and accounting services, book a free consultation with our outsourcing expert.

Maanoj Shah

Maanoj is Co-founder & Director of Growth Strategy & Alliance at Finsmart Accounting. He is an Outsourcing Expert, a People Champion, and a Dynamic Leader with strong Business Strategy and Scaling-up experience. He has incubated businesses, sold & exited ventures; helped build strong enterprises in very diversified verticals like Fintech, HR & Consulting spaces in various CXO capacities over the last 20 years.