What is the cost benefit of outsourcing accounting?

How does a firm outsource accounts data entry to India? Top questions.

When it comes to outsourcing data entry for accounting functions in your organisation, the reason ‘why’ is probably obvious. You will save costs, save labour overheads, save real estate rentals, power costs, reimbursements, employee benefits.

Further, there will be no cost for appraisals & training, no capital expenditure on computers & software and related costs for non-essential people, and no extra charges for quality control, employee insurance and paid leave.

What’s more, as a UK based company you will have a better turnaround time thanks to the time difference with India. They start the day earlier and are thus able to deliver faster. There will also be reduced workload on the accounting & HR Departments as they don’t have to worry about retrenchment in bad times, work continuity in case of high employee turnover. Further there are supervision and training costs and headaches.

As outsourcing involves an external party in addition to yours, there is thus better quality of accounting output due to well defined process & SLAs. But the practical questions are…

What size of organization would benefit the most from these services?

It is observed that small and medium enterprises in the UK, having an accounting department with headcount of between 5 & 20 people benefit the most by outsourcing 60% to 75% of their accounting jobs.

What is the process for signing up with an offshore accounting data entry partner?

Typically the process can be outlined in five steps:

1. It begins with the signing of the Agreements & NDAs
2. Then documenting the process, as would work on a daily basis.
3. You must next provide the Data Entry Manual
4. Training of offshore personnel (Online / On Site / Telephonically)
5. And finally conduct a trial / pilot run before you go live with daily data

What is the process for regular work flow?

The process for regular work flow is as follows:

1. You (being the client) scan & email source documents to the offshore data entry service provider
2. They print out the documents and enter data into the system
3. The data entry is reviewed by a Supervisor and posted
4. They confirm the data entry posting by email at end-of-day
5. Insist on Weekly / Monthly MIS reports on pre-determined formats

This apart, there might be questions relating to training, service levels, quality and confidentiality. These are obviously decided on a case to case basis.

 

Should small sized companies outsource accounting?

Why should small and medium firms in UK outsource accounting data to India

A lot of industries outsource data entry jobs to India. But outsourcing of accounting data entry work... that too from small and medium companies in UK? Not many instances of this, are there? Have you wondered why?

India is the hot bed for English-speaking hard-working talented people. Accounts is a pivotal function in enterprise functioning. Ordinarily, submitting a critical function to the best people only makes the most sense... but when it comes to accounting data entry, there are issues of sensitivity.

Now in any company, as far as accounting goes, there are some routine tasks like data entry and some non-routine tasks like data analysis and preparation of variance reports.

In most companies... and for an example, look at yours... the number of people hired to do the routine tasks often exceeds those on critical tasks. Moreover, the lack of distinction between individual roles towards each of the tasks makes the whole team far les productive than it can be.

So is the solution outsourcing? Well, some obvious benefits are cost savings, better turnaround time (due to the 5 hour time difference) and reduced workload on the accounting & HR departments.

Intangibly speaking, companies outsourcing these functions do not have to worry about retrenchment in bad times... or about work continuity in case of high employee turnover.

Furthermore, when UK firms outsource data entry of accounting activity to India, better quality of accounting output can be expected due to well defined process & SLAs and better quality control on accounting data that form part of the offshoring contract.

And as a client, if you insist the data be stored on your server, and all passwords be shared strictly on a need to know basis, integrity and confidentiality will be non-issues.

You could also insist that quality control be built into the offshoring process at both ends of the passage, with audits. Outsourcing would not mean losing control over the process or the data... Conversely, it would mean better control by way of well defined service agreements.

Actually, outsourcing the accounting data entry work is about a new way of thinking that transforms the way accounting is done at the back-office. Confidentiality levels of the accounts data are the same as they would be if the accounting data entry were done in house. And in India, the experience and qualifications of the personnel entrusted with the task would be equal to or better than their British counterparts.

How does the work flow in the process of accounting offshoring?

How to make offshore accounting data entry work for UK based small and medium size companies?

Offshoring the entry of mundane accounting data like voucher entry, statements preparation of monthly or quarterly management accounts, annual accounts, cash flows, year end returns such as P35, P11D, P14, invoicing sales, aged debtor reports, creditor lists, payment picking lists, bank reconciliation and others certainly sounds nice. But is it practical?

India might boast of experience and qualifications of personnel equal to or better than their British counterparts. Accounting data entry companies might also harp on the extreme cost savings, lower wages, zero recruitment and personnel management costs involved, and lack of overheads in outsourcing.

But wouldn’t the main issues be about quality control and confidentiality? Here’s what you must watch for if you are a UK based small and medium enterprise planning to outsource accounting data entry work.

First, make sure your outsourced data entry service provider gives you 240 hours per month per head instead of the usual 160 hours per month per head. This will ensure they double check their outputs as part of the SLA.

Second, at the start of each assignment, set up training sessions with the provider (either online or on site or telephonically) to orient its personnel on the accounting software used by your company. This training must be adequately documented by the accounts data service provider. This document would be used for further referencing.

Third, make sure the data is stored on your server. All your passwords could be shared with the outsourced entity’s employees strictly on a need to know basis and these passwords must be regularly updated to maintain integrity.

Fourth, build quality control into the offshoring process as it adds another dimension to the output. Normally, when the accounting data entry is done in-house, quality control is conducted only at the end of the period, during audits. Offshoring would not mean losing control over the process or the data… rather, it would result in better control by way of well defined SLAs and quality control.

Fifth, look into the specifics of the company you are outsourcing accounts to. Ideally they should be young and energetic and currently doing some work with a select few quality conscious clients. They should be willing to give you a copy of their agreements with other clients. Also ensure that the principal contact person is a Chartered Accountant with over 20 years of experience. Their former corporate experience will make sure he/she drives the team in the direction best for you.

And finally, prepare your organization for a new way of thinking that transforms the way accounting is done at the back-office. And you can be sure to enjoy the offshoring experience.

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