Back in May, it was reported that the accountancy sector is facing a considerable crisis, with nearly half (45%) of firms either ‘severely’ or ‘significantly’ affected by the talent shortage.
More recently, outsourcing specialists Personiv revealed in their 2024 Finance & Accounting Talent Market Outlook report that the proportion of senior leaders facing shortages in the accountancy and finance sector has increased once again. It’s risen from 63% in 2020 to 70% in 2022, up to 83% in this report. It’s no surprise that 90% of CFOs are now outsourcing a proportion of the accounting function to address the issue.
Outsourcing can be controversial, especially where overseas outsourcing providers are used. UK accountants are legally required to ensure full transparency over their business practices and supply chains to comply with the latest AML regulations. But some worry that the nature of overseas outsourcing make it difficult to ensure ethical working practices and standards are upheld in line with UK law.
Some firms that decide against outsourcing do so as they feel they can’t rely on overseas firms to report AML suspicions in line with UK law. In such a case, UK accountancy practices would be leaving themselves open to being in breach of UK AML requirements.
It is of course, the job of the UK accountant to ensure they have sight of clients financial records, even if they choose to outsource certain elements to a third-party.
Yet outsourcing as a way to address the talent crisis remains an attractive solution for many. We spoke to UK accountants for their views on the issue.
Outsourcing creates risks around quality control, data security and AML compliance
Ellis Harris-Boulter MAAT, AAT Tutor and Founder and Director, FieCo Accountancy and Marketing
In many ways, I can see the appeal of outsourcing for accountancy practices needing specialist skillsets.
But as an AAT tutor for an apprenticeship training provider and an employer of apprentices, I’m an advocate for developing skills internally and for the long term. 67% of TV producers surveyed by ScreenSkills stated that hiring production accountants was difficult or very difficult (PDF). The only way the accounting profession will address chronic skill shortages is by building a new generation of well-rounded, experienced accountants with varied job roles in industry and in practice.
Outsourcing comes with a set of challenges, not limited to the obvious risks around quality control, data security and loss of internal capabilities. Firms can also face hidden expenses such as vendor management, a disconnect with client relationships and loss of morale among existing staff.
Overseas outsourcing creates a range of concerns on AML compliance. Firms need to seriously consider the risks. Are offshore and nearshore providers required to report suspicions of AML? Even if they do comply with UK law, is a proactive and professional scepticism culture encouraged internally?
Strong levels of due diligence, and continued monitoring, are undoubtedly essential.
Verdict: Outsourcing may seem appealing but it creates risks around quality control, data security and AML compliance.
Contracts must outline ethics and compliance, with the option to terminate if standards aren’t met
Sarah Hedley MAAT, Owner, Brickbooks and Payroll
Outsourcing can address skills gaps by providing firms with access to trained professionals without the need to hire in-house. This is especially useful for practices that struggle to attract or afford specialised talent.
However, outsourcing has its risks. In my experience, communication barriers can negatively impact the quality of work, particularly when outsourced staff are not fully integrated into the firm’s workflow. This resulted in errors and a decline in my client relationships. Outsourcing therefore must be carefully managed.
Smaller firms, like mine, may find it more difficult to maintain the same level of client interaction and personalised service when outsourcing. Larger firms, on the other hand, may find it easier to incorporate outsourced services without compromising client relationships.
I advise firms interested in outsourcing to:
- Start small: beginning with one aspect of your workload such as data entry or reconciliations, before expanding.
- Set clear expectations: have detailed documentation of workflows and quality expectations to minimise misunderstandings.
- Test communication before fully committing: frequent check-ins and an easy way to ask questions are vital.
- Evaluate integration: Ensure the outsourcing provider’s systems can seamlessly integrate with yours to ensure efficiency and reduce errors.
- Client involvement: continue engaging with your clients regularly to ensure they still feel valued, even if some work is being outsourced.
To ensure adherence to ethical standards and AML legislation, firms need to do their due diligence and research outsourcing providers’ credentials, including professional affiliations (such as AAT) and compliance certifications. They also need to ensure the provider offers ongoing staff training around AML and ethical practices.
Contractual agreements should include clauses that outline ethical practices, data security and compliance with relevant legislation, with the option to terminate if standards aren’t met.
Verdict: Outsourcing can provide access to trained professionals without need for in-house talent but it has its risks. Protect yourself by outlining ethics and compliance in the contract, with the option to terminate if standards aren’t met.
Outsourcing can relieve pressure but may lack industry-specific knowledge
Karen Feltham MAAT, Owner, Aligned Accounting
Outsourcing can provide immediate relief to the skills shortage by offering access to a broader talent pool beyond local restrictions.
Yet it doesn’t always address the need for industry-specific knowledge or the passion required to truly understand and support a firm’s clients and values. Outsourcing may provide technical capacity but could lack the cultural fit and ethical alignment.
Outsourcing is increasingly considered a viable solution for many firms. Perhaps it’s the post-pandemic shift to remote work that has opened more companies to the idea of outsourcing, particularly for specialised tasks, a temporary solution whilst finding an employee or simply to cover overflow work.
Some firms remain hesitant due to concerns over quality control, communication challenges, or ethical standards – particularly in a field as regulated as accountancy. It’s essential that firms weigh the pros and cons based on their own values, client base and long-term goals.
For those looking to outsource, I’d advise:
- Be clear on objectives: Define exactly what skills or tasks you need help with and what success looks like for your business. Outsourcing should be a strategic choice rather than a quick fix.
- Vet potential providers thoroughly: Check qualifications, industry knowledge, and references to ensure the service provider can handle the complexities of UK accounting standards.
- Start small and test the waters: Don’t be too quick to hand over any critical tasks right away. Begin with smaller projects or trial periods to gauge the provider’s competency, communication style, and reliability.
- Communication is key: Establish regular check-ins, set your preferred communication methods and ensure that the provider understands your deadline expectations, quality standards and compliance.
- Cultural fit matters: Find an outsourcing partner who understands the culture and values of your firm. This alignment ensures smoother communication and consistent work ethics.
- Perform due diligence: Research the provider’s experiences, qualifications, and reputation within the industry. Ensure they are well-versed in UK regulations, particularly around anti-money laundering (AML) and data protection.
- Ask for certifications and compliance evidence: Request relevant documentation and internationally recognised standards.
- Monitor and audit their work: Establish periodic audits to ensure that ethical and legal standards are being met.
Verdict: Outsourcing can provide some relief but may lack industry-specific knowledge or passion to truly support a client’s values.
This is no longer a temporary fix, but an important business strategy
Vipul Sheth, Managing Director, Advancetrack
Outsourcing has transitioned from being a reactive solution to a proactive strategic choice. Previously, outsourcing was often viewed as a temporary fix for overflow work, it’s now becoming an important part of operational models, especially for firms facing severe talent shortages and increased demand for sophisticated advisory services.
According to our recent Accounting Talent Index, over 65% of firms have embraced outsourcing and offshoring as part of their strategy to navigate the skills gap.
As the skills shortage deepens, particularly in regions like the UK, US and Australia, firms are struggling to meet increasing client demand while facing skyrocketing salary costs and recruitment difficulties. By outsourcing non-core but essential tasks like bookkeeping, compliance, tax preparation and more complex financial analysis, firms can shift their focus to high-value, client-facing advisory services.
For firms considering outsourcing, it’s important to conduct thorough due diligence to assess the provider’s track record, ensure compliance with (AML), verify certifications like ISO for data security, business continuity and quality.
I’d recommend starting with smaller tasks or a small batch of work as a pilot to evaluate the provider’s performance, and establish clear communication channels to align workflows and expectations. This needs to be with a view to that strategic partnership discussed above.
Equally important here is cultural alignment. Firms should seek outsourcing partners who understand their market and share similar values in ethics and compliance. Regular audits and independent reviews can maintain transparency and trust, ensuring that outsourcing becomes a valuable part of a firm’s strategy, all while upholding high standards.
Verdict: Outsourcing is no longer a temporary fix: it’s become an important part of business strategy for firms dealing with long-standing talent shortages.
Outsourcing has been a godsend – local talent is virtually non-existent
Sharon Wray FMAAT, Director, Sharon Wray Accountancy Services
In our industry, it’s become difficult to find a good bookkeeper or qualified accountant. Even with the lure of a decent salary and benefits, there is very little out there.
There seems to be a surge in bookkeepers and accountants setting up on their own, which presents a problem in itself. However, a lot of these individuals are open to outsourcing to other accountants which can help to fill the gap.
In my firm, we have outsourced for the last three years and it has been a godsend: we have been able to grow organically without putting our reputation at risk. The advantages are lower staff turnover, no NI, holiday pay or pensions to pay which in itself is an incentive to outsource.
For anyone looking to outsource, speak to other accountants who outsource, because if done right, it works well.
There are several reputable providers out there, based in the UK or overseas. It’s finding the right fit for you. Always ask for a trial period so you are not locked in to lengthy contracts.
Ask what their AML policies and GDPR policies are and carry out due diligence to assess the risks that may be involved.
If outsourcing overseas, request a VPN in place and find out how they protect and save data.
Our team have access to our systems, so ensure that 2FA is in place and have weekly meetings.
It’s worked well for us. It’s a shame that we cannot support our local community, but the talent just isn’t there.
Verdict: Outsourcing has been a godsend for us – local talent is virtually non-existent. Speak to other accountants who outsource if you’re considering it.
This article is sourced from the following link:
https://www.aatcomment.org.uk/audience/members/can-outsourcing-solve-the-talent-shortage/
