In Bookkeeping, Accounting, and Information Technology: The Value of Outsourcing
The small-business market, unlike the mid- and enterprise markets, utilize the general services of public accountants in much greater volume and typically for more fundamental business services – such as business bookkeeping and daily process support.
Larger organizations typically employ accounting and bookkeeping departments and/or in-house personnel, and rely on outside accounting professionals for higher-level work. Small businesses, on the other hand, want to hand off much more of the core bookkeeping and checkbook management functions to their public accountant.
This creates a volume of fairly mechanical work which can be burdensome and not terribly profitable for many CPA firms. But this level of work is of significant value to the small business owner, and thus the value of outsourcing to the accounting professional should be clear.
Around the 1980s or so, CPA firms started to step away from bookkeeping activities, reserving their time for compliance, audits, and other engagements referred to as the “higher level work”. As business accounting became more complex (largely due to advances in information management technologies as well as accounting and tax regulations, which generated a LOT more detailed information to "account" for), many professional firms saw a need to focus on their core offerings, and not on the lower level bookkeeping and record keeping activities. As a result, the emerging cottage industry of bookkeeping service providers grew in power and numbers, and came to represent a critical intermediary between the CPA and the small business owner. Truly, bookkeepers and software consultants are often the folks who help to automate the processes, capture the information, and organize the data so that it is useful to the accountant.
The issue that revealed itself was that small businesses started to pay more attention to the technology and business solution advice and direction of their bookkeepers and consultants than the advice of the CPA. In a lot of cases, the CPA kept an arm’s length from the business, concerning themselves with their tasks, and not paying significant attention to how the data is collected or controlled. As long as they got the data, that was OK. As the reality started to set in, that bookkeeping and information management consulting also delivered the “higher level” accounting work, CPAs once again sought a means to gain more direct participation in the client business… but through a somewhat less direct manner than previous. Now, partnering was revealing itself as the means to more fully engage the business, and the bookkeeper or consultant, in the overall accounting value chain, resulting with the delivery of work as well as value back to the accounting professional.
The enabler of this value chain, where the accounting professional, the bookkeeper, and the business owner can all work in concert without limitations in systems or based on location, is the cloud. Providing standardization in terms of data platforms and integration, offering mobility and device independence, and combining resource management and access into a comprehensive approach to solving business problems is enabled through cloud technologies and connected solutions and services.
For many, this concept of fully technology-enabled business seems frightening, like a loss of control or individual accountability. But it’s important to recognize that, as things become more complex, the opportunity for specialists is always created. In the ever changing world of technology, it’s a dangerous approach to believe that you can be all things to all people, just as in accounting or tax. You can’t be a specialist in every area, so you specialize in your niche, do it better than anyone else, and outsource/partner to get the rest done. This is a philosophy of the cloud, and it’s working.
The true value of outsourcing, whether it is a small business outsourcing their bookkeeping and accounting to a public accountant, an accounting professional outsourcing bookkeeping work to a bookkeeping provider/partner, or those businesses outsourcing information technology management to cloud solution providers, can result in improved focus on the core business, greater agility in embracing and adjusting to new strategies, improved quality of information through attention to process and control, and a much higher level of value delivered to all participants in the value chain.
this article was originally published on my blog
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Joanie Mann is a recognized authority in the areas of ISV cloud enablement and ASP service delivery, and consults with application and platform hosting companies worldwide. Her extensive work with accounting professionals worldwide has also positioned her as an expert consultant and adviser to professional practitioners seeking to leverage...