Let's face it: outsourcing is one of the best ways to generate a higher return on investment in projects in the accounting domain. This is mainly because the in-house resources are better utilized in driving other revenue streams via advisory services, budgeting, forecasting, virtual CFO support, and others.
Moreover, a large part of the work is outsourced to an expert outsourcing firm that handles and manages critical business functions such as payroll, bookkeeping, and taxation.
Although accounting outsourcing is an option that many CPA firms now turn to, it is essential to have an understanding of how an accurate return on investment can be generated from it. The QXAS team attempts to decode the same in this article:
1. Know the difference between the cost of operations and investments
Most CPA firms often confuse the two, thinking they are the same thing. Operating costs are the necessary costs incurred in any given project based on its requirements. Investment is either an added cost to the actual expenses, or it is likely an executive decision made by the CPA firm for improving profitability and return on investment.
Before outsourcing accounting work to India, CPA firms must understand the difference between the two. Lowering the cost of operations by outsourcing only means that the CPA firm has reduced the cost of doing business. This does not contribute to the ROI in any way.
2. Have a sit down with the outsourcing team and define the scope of work
A majority of companies, irrespective of sector and size, outsource functions as a means to bring in more significant ROIs or to reduce the costs of operation. But having a clear objective for outsourcing enables them and the accounting outsourcing companies in India to deliver accurate results promptly without going back and forth.
The arrangement radically increases productivity and performance, both of which are necessary for raking in higher ROIs. Therefore, clarify everything that you can before signing the contract and starting work with the outsourcing partner.
3. Optimize your processes with the help of an outsourced accountant
When CPA firms take help from the outsourced accountants, they must carefully consider which aspects of the job or which functions must be outsourced, and which ones can be picked up in-house. Let us explain this in detail.
There are quite a few parameters that come into play before making the decision. For instance, CPA firms could compare costs of undertaking bookkeeping for clients in-house versus outsourcing it.
Not only is the function a time-consuming and low-margin job, but also it cuts the time of the in-house staff to drive other services (such as budgeting and forecasting) that could generate higher revenues for the CPA firm.
It is important to measure such parameters before and during the outsourced job.
4. Do a comprehensive cost analysis of the outsourced job
Before outsourcing accounting work to India, the CPA firm must understand the costs involved in doing so. Because there is no one-size-fits-all approach in this particular situation, the CPA firm must consider hidden costs and unforeseen expenses as well. For example, one type of hidden cost could be the cost of the transition of the function to the outsourced accountant.
Once all costs are determined, a cost comparison should be carried out to understand, which is the best option to generate higher ROI. That enables the CPA firm in better decision-making and also helps to avoid any unnecessary expenses.
5. Always remember to track the real-time costs of the outsourced function
Frequently CPA firms tend to go over the estimated budget either due to poor decision making or because they didn't keep track of the costs. That is why they must have a system in place to maintain a record of operational costs.
When a function is outsourced, cost estimates are added to it. Therefore, it is vital to keep track of such costs because it provides an overview of how the resources are being consumed by outsourcing accounting work to India.
6. Find an outsourced accountant committed to delivering quality work
Whatever the reason may be for outsourcing accounting work to India, the most important thing to remember is that the quality of work is what ultimately matters. CPA firms outsource work to reduce operational costs and improve business performance at the same time.
Because the aim is to achieve higher ROIs, the quality of work must not be compromised in the process. Therefore, it is crucial to make an informed decision before outsourcing. It is necessary to understand if the outsourcing accountant is as committed as you are to the project.
The outsourced accountant's credibility will decide the fate of ROI for the CPA firm, and prove whether it’s the right choice.
Working with outsourced accountants is not just an efficient tool; they also offer a sustainable strategy that can help CPA firms scale up rapidly. Not only does that help them achieve business goals by reducing costs and improving efficiency, but it also contributes to the firm’s profitability and client satisfaction levels.
If outsourcing accounting work to India is something that interests you but the question of ROI stops you, get in touch with Team QXAS, and we will help you out with your queries!