10 Biggest Mistakes UK Accountants Make When Outsourcing to India

Are you finding it difficult to find new accounting talent in the United Kingdom, especially when you are on a path of growth? We are asking this question because, according to a recent survey, 45% of accounting firms/practices are suffering from talent shortages. So, when it comes to the talent shortage, you are not suffering alone. What should be concerning is that this problem is not going to be resolved in the near future. However, many accounting practices have found a way to deal with this challenge, i.e., outsourcing accounting work.

Why Outsourcing Accounting?

Outsourcing accounting work to emerging economies such as India is not a new innovation. However, it has gained increased traction from UK-based accounting practices to reduce expenditures. Such is the popularity of outsourcing that, as per a recent survey, the majority of accounting practices have either outsourced or are thinking of outsourcing their work to a service provider in India. There are major benefits associated with accounting outsourcing, among them cost savings.

Thanks to cost savings, multiple accounting practices are attracted to accounting outsourcing in India, but that’s not the only reason for its popularity. Among other benefits of accounting outsourcing is access to experienced and professional talent. The cost-effective and experienced accounting talent combination has worked wonders for service providers in India and UK-based accounting practices.

While practices are increasingly preferring outsourcing accounting, one has to remember that it is not without pitfalls. These pitfalls can sour your outsourcing experience, so it is important to become aware of them. In this blog, we will focus on those pitfalls and how you can navigate them.

10 Common Accounting Outsourcing Mistakes Made by Accountants and Practices

There are so many benefits associated with outsourcing accounting in India that in the excitement we forget about following the procedures, and because of that, mistakes are committed. These mistakes will impede you from availing the complete benefits of accounting outsourcing. Let’s focus on them in detail.

Lack of Research about the Outsourcing Provider

There should be no compromise on the aspect of thorough research of potential outsourcing providers. Always make it a point to check the references, reviews, and credentials related to accounting outsourcing service providers. By failing to do so, you may choose a service provider that is not up to the mark and will be unable to satisfy your accounting requirements.

For example, if you choose the wrong outsourcing provider, you will end up with inaccurate financial statements, which will create compliance problems and result in penalties.

Not Setting Priorities Beforehand

Before choosing an outsourcing service provider, make sure to set your priorities. Based on those priorities, you can choose, or a service provider will get a clear understanding of your expectations. By keeping your priorities on the table, you are avoiding a considerable amount of misunderstanding, plus it will help you choose the right service provider.

For example, if you want an accounting service provider to handle certain complex accounting tasks, then this must be clearly stated during the discussions and in the contract. If not, the task will remain incomplete on the service provider’s side, leading to further complications.

Lack of Backup Plan

It’s always good to have a plan B in life, and so in accounting outsourcing, in case something goes wrong. You cannot rule out the possibility of unexpected delays or a drop in quality from the service provider’s side. In that case, you will need to have a second option readily available, either another provider or hire and create your internal accounting team who are well-acquainted with your processes and accounts.

Compromising on Data Security

When outsourcing to a service provider, you are handing over sensitive client data to it for conducting accounting tasks. Such sensitive data can be misused if adequate precautions in the form of robust data security protocols are not in place. Hence, choosing an outsourcing service provider with impeccable data security credentials is important. Any neglect in this aspect will expose your client’s data towards unauthorised access. Once you have selected a service provider with strong data security protocols, follow up on their regular updates per the threat perception.

Lack of Monitoring

Once you have outsourced the accounting responsibility to a service provider, it is not the end of your job. You will have to monitor the progress of the accounting tasks and ensure that they are properly executed. Lack of monitoring will lead to the accumulation of issues that could have been resolved with monitoring and communication with the provider. Such negligence will lead to delays and problems in the future.

Lack of Understanding of the Terms and Conditions

Before you hand over all the accounting responsibility to a service provider, make sure you have communicated the terms and conditions with them. Once they sign on, it becomes legally binding for them to fulfil those conditions. Any negligence in making them understand those conditions can cost your reputation and your finances.

Not Focussing on Building a Communication Channel

Creating a clear communication channel between you and the service provider is vital for successful task execution, keeping track of progress made, discussing issues if they arise, and providing feedback if required. Any neglect in implementing an effective communication channel, especially during year-end, will only create misunderstandings between the two, thus compounding the issues.

Agreeing on a Fee Structure

Even if you are satisfied with the service provider’s work profile and brand, do not become carefree or lenient about fee negotiation. Go hard on the fee negotiation so that both parties can get a fair deal without compromising on each other’s qualities. Lack of proper negotiation on your side will lead to financial burden on your accounting practice, leading to an increase in your service cost, thus making your practice unaffordable.

Not Fixing the Accurate Performance Requirements

For the sake of accountability, fix the performance requirements on outsourced accounting tasks so that progress can be tracked. This will help you identify the lacking aspects and provide inputs accordingly. For example, fix the timeline for executing important accounting tasks such as payroll, tax filing, and year-end. Without fixing the performance requirement, the service provider will be unaware of your standards, leading to unsatisfactory services from their side.

Not Taking Local Laws and Regulations Seriously

Apart from complying with HMRC regulations and UK tax laws, you will have to take local laws seriously, such as Council Tax. Failing to do so will automatically lead to hefty fines and penalties, which will damage your reputation. Make sure to choose an accounting outsourcing service provider that is well-informed of the UK’s national and local tax laws and regulations.

What questions should you ask when selecting an outsourcing partner?

Choosing the right outsourcing partner is a game-changer for your business operations – it can make a huge difference in how efficiently things run, whether you’re hitting all the compliance marks and whether your business is set up for growth. If you’re a UK accounting firm needing help with payroll, bookkeeping or tax support, there are some pretty important questions you need to ask. Here are the key ones to guide your decision:

1. What Do You Know About My Industry?

When looking for an outsourcing firm, you want one that really gets the ins and outs of your sector – that’s the only way they can start to understand the specific challenges you face, like the HMRC regulations that UK accountants worry about or the special reporting requirements for accounting.

2. Have You Got Any Success Stories or Case Studies to Share?

Get your potential partner to show you real-life examples of how they’ve helped similar businesses in your field. A solid partner will be happy to share these sorts of stories, because they’ll be proof that they really can help you save time, cut costs or get your finances more accurate.

3. How Do You Keep Client Data and Compliance on Lockdown?

Security is not something to mess around with – so make sure your potential partner has a top-notch approach to data protection, and that they’re fully on top of compliance with things like GDPR – that’s the EU’s General Data Protection Regulation for you – and have procedures in place for transferring data safely, giving secure access and making sure they can recover in the event of a disaster.

4. What’s the Onboarding Process Like – Does It All Feel a Bit More Complicated Than It Has to Be?

The earlier stages of a new partnership can be pretty confusing – that’s why it’s worth asking about just what to expect. Can they give you a rough idea of how long it will take to get everything up and running? What help and support will you get during that time? It’s all useful to know.

5. How Often Will You Be Keeping Me Informed and What Will I Be Getting in the Way of Reports?

You really need a clear picture of what communication is going to look like. Who will be my main point of contact, and how often will they be checking in? What sort of reports will I get, and what tools will they use to make sure we’re all on the same page.

6. How Do You Make Sure Your Quality Control is Up to Scratch?

Take a look at their internal processes – how do they go about reviewing work? Do they have regular audits and what sort of error correction do they have in place? A top rate quality control system is the key to stopping things from going wrong down the line.

7. Are You Able to Scale With Me – If My Business Takes Off, Can You Keep Up?

Last but not least – can your outsourcing partner grow with your business? Whether you’re onboarding new clients, expanding services or just experiencing a surge in demand, they need to be able to handle whatever comes next.

Conclusion

In conclusion, outsourcing offers immense benefits, including cost savings, access to expertise, increased productivity, and improved decision-making. However, to maximise those benefits, you will have to understand the potential pitfalls/mistakes while outsourcing and learn how to avoid them.

By carefully vetting outsourcing service providers, setting priorities and requirements correctly, creating channels of communication, and monitoring progress, you can ensure a smooth accounting process for your clients. We are also sure that through careful vetting, you will find Corient UK and choose us as your outsourcing provider.

We are a rising star among accounting outsourcing service providers and are slowly becoming a first choice for many accounting firms based in the UK. Our expertise is in offering a wide range of tech-savvy accounting services, from bookkeeping, payroll, year-end, VAT, and audit and management accounts services. Through our services, we have been able to bring significant improvements for our clients and can perform the same for you. State your doubts and requirements on our website contact form, and our executive will connect with you as soon as possible.

Looking forward to a long-term and fruitful association.

Sachin Jain

Sachin is the Director of Operations and New Business at Corient. For more than 19 years, he has worked with world-class consulting and services companies, such as BDO International, PricewaterhouseCoopers, and Serco Plc, across different client verticals. He has led several six sigma projects, quality assurance projects, risk projects, and internal controls projects and has set up greenfield projects, particularly payroll, finance, and accounting.

LinkedIn