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Any accounting or tax professional would support the view that firms need to provide true business advice.

Outsourcing helps this approach, but it is in no way a service that replaces the firm and the need for local delivery. Some work will and should always be retained in house due to its nature and also to provide the grounding for trainees to understand the basics.

Globalisation

Globalisation has clearly introduced opportunities to deliver accountancy services around the globe.

Technology is the key driver as is the growing pool of talent from emerging economies as education, professionalism and knowledge levels rise to UK standards.

With highly skilled staff accessible across the globe from any desktop, organisations of any size can leverage the benefits of outsourcing. Aside from the obvious cost savings, additional reasons to outsource include standardisation of procedures to ensure a consistently high quality service. Consider a situation when ten jobs arrive simultaneously and only three can be processed at the time. Access to an outsourcing service could enable all ten to be delivered on a timely basis. Professionals or businesses can then focus on running their business while keeping costs under control.

Cost and Profitability

Although cost is a key driver for outsourcing, strategic direction is a more important consideration.

Decision-makers need to bear in mind, before sanctioning outsourcing, its consistency, reliability, quality and timeliness of service, capability to deal with local compliance issues, tracking work status and, of course, ensuring data security.

Security must be maintained to mitigate the risk of prosecution and, more importantly, loss of reputation.

Efficient and expert

With a reduced intake of people at trainee grades, outsourcing offers a way of ensuring smooth delivery of compliance services, on time, with reduced time spent by more senior managers on training staff to perform basic compliance activities. This is akin to the efficiency model.

The skilled local staff should then be free to deliver value-added services thus delivering higher profitability and better service – the expertise model.

Take a firm that processes tax returns. A typical tax return may generate £65-£100 per hour in terms of billable time. Depending on your firm’s location and charge out rate, it could be even higher. If this work is performed by skilled local staff, what is the opportunity cost if there is profitable advisory work they could be doing instead?

If this advisory work is not processed due to the need to deliver tax returns, it is arguable that the opportunity cost is the differential in charge out rates. For the purpose of comparison, let us assume that such work pays £150 per hour. Therefore, there is a conservative opportunity cost of £50 per hour.

If a firm outsources say, 600 returns, which take on average two hours each, it is arguable that the firm can increase revenue by £180,000 by using the same skilled local staff more productively while the ‘commodity’ tax return is still delivered using quality outsourcing.

The true value of outsourcing

Even for a firm processing only 600 tax returns the value of outsourcing is potentially an additional profit in the region of £150,000. Such an approach can also enable staff to be paid more while adding considerably to the partners’ profits, thus retaining skilled staff locally and delivering a better service to clients.

It should be stressed that the success of outsourcing depends to a great extent on the mindset of firms and clients and the degree to which they embrace technology. In our experience, many accountants find outsourcing to be a highly efficient and effective way of delivering basic compliance work. Typically firms may outsource up to 50% of their compliance portfolio, representing up to 10% of total income. While this may grow, it certainly won’t result in an empty office.

Choosing a professional outsourcing partner is key to successful outsourcing. Those accountants who have tried it once but did not get the desired service level from their outsourcer may be tempted to give up.

Perhaps instead they should consider a different approach. Outsourcing should allow firms to prioritise time and resources to providing the higher value services and the development of higher skills.

Responsive to client needs

In the constantly evolving economic climate and increasingly competitive market for firms and clients alike, advisers need to be well positioned to be highly nimble and responsive to clients’ needs.

The need is exacerbated by the increasing prevalence of competing advisers with MBAs. Firms can only maintain success through continued credibility. It is key to the long-term success of professional firms to widen the sphere of services that require more well-rounded business advice and develop quality relationships with clients. Having highly skilled staff is essential to support this.

Well-considered strategic outsourcing can support the development of highly skilled staff by freeing up the time from the daily compliance work and re-allocating this to deliver services that clients value more highly and thus deliver higher revenue and profit to the firm.

To deliver the key benefits of outsourcing, the outsourcer must deliver a quality product compliant with local standards. It is important that the process is overseen by knowledgeable staff. It must also deliver data security.

Only a truly professional approach can deliver the benefits of outsourcing.

Vipul Sheth is managing director of AdvanceTrack Outsourcing