Figures reveal ‘enormous’ rise in firms choosing accountancy outsourcing as industry faces ‘pivotal’ moment

Figures show an significant rise in firms choosing to outsource their accounting services, with a near 40% increase in global spend and a 20% surge in interest over the last five years.  

Vipul Sheth, Managing Director of AdvanceTrack, one of the UK’s fastest-growing outsourcing accountancy firms, likens the rapid ascent of the outsourcing industry to the revolutionary impact of generative AI in 2023.

“The surge in popularity is because people are looking for high levels of service at a cost-effective price point,” Sheth explains. “Add to this the lack of a strong pipeline of talent coming through, and it’s understandable to see outsourcing swiftly gaining momentum.

AdvanceTrack’s figures illustrate the mounting demand, with enquiries about accountancy outsourcing more than doubling in the past year alone. The company has achieved an impressive 60% year-on-year growth, and Sheth predicts that by 2034, over 50% of companies will outsource some or all of their accounting tasks.

Research conducted by AdvanceTrack corroborates this trend, showing a 19% increase in Google searches for “accountancy outsourcing” in 2023. Additionally, data from consumer survey firm Statista reveals that global outsourcing spend has skyrocketed by 41% since 2019.

“It’s no surprise to see interest in accountancy outsourcing increasing,” says Sheth. “We know first-hand it’s a booming sector. The enormous rise in global spend, coupled with our year-on-year growth and increase in enquiries, indicates a potential shift in the future of our industry.”

A recent Clutch report further underscores the popularity of outsourcing, with 37% of small businesses already outsourcing accounting or IT services. Nearly a quarter of these businesses cite boosting efficiency as the primary reason for outsourcing, followed by increasing available expertise (18%), flexibility (16%), and allowing employees to focus on other tasks (15%).

Benefits and pitfalls

While outsourcing presents numerous advantages, it is not without its challenges. One of the primary benefits is cost savings, as firms can leverage skilled labor from regions with lower operational costs. Additionally, outsourcing allows businesses to access a vast pool of specialised expertise, enabling them to complement their in-house teams with highly skilled professionals without the overhead of full-time employment.

However, concerns surrounding data security, communication barriers, and quality control persist. Entrusting sensitive financial information to third-party providers raises valid concerns about data privacy and compliance risks. Cultural differences and time zone disparities can also hinder effective communication and collaboration, potentially leading to misunderstandings or delays.

Despite these challenges, the stigma surrounding outsourcing within the accounting industry appears to be dissipating. As more firms embrace this model, they are implementing robust security protocols, establishing clear communication channels, and implementing rigorous quality assurance measures to mitigate potential risks.

Moreover, the ongoing talent shortage has prompted a shift in perspective. With a dwindling pipeline of accounting graduates and escalating labour costs, outsourcing has emerged as a viable solution to access specialized expertise and maintain a competitive edge. Firms are recognizing that a blended workforce, comprising both in-house and outsourced talent, can enhance operational efficiency and drive growth.

What to look for in a partner?

When evaluating potential outsourcing providers, top accounting firms should prioritize several critical factors to ensure a successful partnership. Data security and compliance should be at the forefront, as firms must safeguard sensitive client information and adhere to industry regulations. Thoroughly vetting the provider’s security protocols, certifications, and track record is essential.

Additionally, firms should assess the provider’s expertise and experience in the specific accounting domains they intend to outsource. Specialized knowledge and a deep understanding of industry best practices are paramount to ensuring high-quality deliverables.

Cultural compatibility, communication proficiency, and robust quality assurance measures should also be carefully evaluated. A provider that aligns with the firm’s values and can seamlessly integrate with existing processes is crucial for a smooth transition and ongoing collaboration.

5-Step Process for Securing an Outsourcing Provider:

1. Define Scope and Objectives: Clearly delineate the specific accounting functions or processes to be outsourced, as well as the desired outcomes and performance metrics. This will help identify providers with the relevant expertise and capabilities.
2. Conduct Thorough Due Diligence: Thoroughly research and evaluate potential providers, including their security practices, industry certifications, client testimonials, and financial stability. Request detailed proposals outlining their service offerings, pricing models, and quality assurance procedures.
3. Assess Cultural Fit and Communication: Arrange meetings or site visits to gauge the provider’s cultural compatibility and communication proficiency. Evaluate their ability to seamlessly integrate with your firm’s processes and communication channels.
4. Negotiate Contracts and Service Level Agreements (SLAs): Once a suitable provider has been identified, negotiate detailed contracts and SLAs that clearly outline expectations, performance metrics, data security measures, and contingency plans. Ensure that the terms align with your firm’s objectives and protect your clients’ interests.
5. Implement a Transition Plan: Develop a comprehensive transition plan that outlines the migration of processes, data transfer protocols, and staff training. Establish clear communication channels and feedback loops to monitor progress and address any issues that may arise during the transition phase.

By following this rigorous process and carefully considering factors such as data security, expertise, cultural fit, and quality assurance, top accounting firms can increase their chances of securing a reliable and effective outsourcing partner. A well-executed outsourcing strategy can unlock significant cost savings, access specialized talent, and drive operational efficiency, positioning firms for long-term success in an increasingly competitive and rapidly evolving industry.