Outsourced accounting offers numerous benefits but can raise concerns organizations must address in order to support successful partnerships. Awareness of the pitfalls is the first step to mitigating them.

Quality Control

Outsourced accounting can lead to worries about maintaining quality standards.

Mitigation Method

Establish clear agreements and quality benchmarks with the outsourcing partner.

Regular performance reviews and the use of key performance indicator (KPI) management principles can ensure that the quality or work remains consistent.

Setting the following quality control standards can help further mitigate any potential issues.

• Clear agreements. Define the scope of work, expected quality standards, and delivery timelines in a detailed contract.
• Quality benchmarks. Set specific, measurable criteria for evaluating the quality of work.
• Regular reviews. Conduct frequent assessments to monitor performance and address any deviations from the agreed standards.
• KPI management. Implement KPIs to objectively measure the outsourcing partner’s performance and ensure alignment with quality expectations.

Security and Confidentiality

Sharing sensitive data with a third party raises security concerns.

Mitigation Method

Ensure your outsourcing partner has robust security protocols. Existing third-party vendor frameworks, like SOC reports, can streamline this mitigation.

Additional mitigation methods include the following:

• Security protocols. Verify that the outsourcing partner employs advanced security measures, including encryption and secure access controls.
• NDAs. Legally bind the partner to confidentiality through a nondisclosure agreement (NDA) to protect proprietary information.
• Compliance. Ensure adherence to data protection laws such as the General Data Protection Regulation (GDPR) to minimize legal risks and protect personal data.
• Regular audits. Conduct periodic security audits to identify and rectify potential vulnerabilities.

Communication Barriers

Outsourcing, especially offshoring, can lead to communication challenges.

Mitigation Method

Communication barriers can be a problem for organizations across operations. Mitigation methods used to manage communication between departments or stakeholders can also be used with your outsourced accounting partner.

These methods include the following:

• Proven track records. Select partners experienced in managing international projects and proficient in your preferred language.
• Collaborative tools. Utilize tools like Slack, Microsoft Teams, and project management software to facilitate real-time communication and collaboration.
• Regular meetings. Schedule consistent meetings to discuss progress, address issues, and align on objectives.
• Comprehensive reporting. Implement regular reporting systems to keep stakeholders informed about the project status and any potential roadblocks.

Cultural Fit and Alignment

Outsourcing partners won’t always align with your organization’s culture and values.

Mitigation Method

Engage in a thorough vetting processes to choose outsourced accounting partners who share similar values and work ethics.

• Thorough vetting. Conduct in-depth research and interviews to assess the cultural alignment of potential partners.
• Shared values. Prioritize partners who demonstrate an understanding and commitment to your organization’s values and ethical standards.
• Cultural training. Provide cultural training sessions for both your team and the outsourcing partner to foster mutual understanding and collaboration.
• Continuous engagement. Maintain ongoing interactions to ensure the outsourcing partner remains aligned with your company’s evolving culture and goals.

Hidden Costs

Outsourcing can sometimes lead to unforeseen expenses, making it less cost-effective than anticipated.

Mitigation Method

Conduct a comprehensive cost analysis and establish transparent pricing models to avoid unexpected costs.

• Cost analysis. Evaluate all potential costs, including transition and management expenses, before entering an outsourcing agreement.
• Transparent pricing. Ensure that the outsourcing partner provides a clear and detailed pricing model, including any additional charges that may arise.
• Contingency planning. Set aside a budget for unexpected costs and regularly review expenses to stay within budget.
• Detailed contracts. Include all cost-related terms and conditions in the contract to avoid disputes and misunderstandings.

Loss of Control

Companies may feel they are losing control over processes and decision-making when outsourcing.

Mitigation Method

Implement governance structures and maintain active involvement to retain control over key aspects of the outsourced work.

• Governance structures. Establish clear governance frameworks, including roles, responsibilities, and decision-making processes.
• Active involvement. Stay actively involved in the project through regular meetings, performance reviews, and direct communication with the outsourcing partner.
• Escalation procedures. Define procedures for escalating issues and resolving conflicts to maintain control over critical decisions.
• Monitoring and reporting. Implement robust monitoring and reporting systems to track progress and ensure alignment with business objectives.

Time Zone Differences

Different time zones can cause delays and reduce the efficiency of collaboration.

Mitigation Method

Plan schedules strategically and leverage overlapping working hours for effective communication.

• Strategic scheduling. Plan meetings and deadlines to maximize overlapping working hours and ensure timely communication.
• Time zone management. Use tools and techniques to manage time zone differences, such as rotating meeting times to accommodate all parties.
• Dedicated points of contact. Designate key personnel who can be available outside regular working hours if necessary.
• Clear communication. Set expectations for response times and availability to minimize delays and enhance collaboration.

Understanding and actively managing these aspects can significantly enhance the cost-effectiveness and overall success of outsourcing initiatives. It's not just about choosing the right partner but also about establishing the right frameworks for collaboration and control.

By addressing these common concerns through strategic planning and effective communication, companies can leverage outsourcing to its fullest potential, driving growth, innovation, and efficiency.

We’re Here to Help

If you’d like to learn how outsourced accounting services can benefit your organization, contact your Moss Adams professional.

Additional Resources

• Outsourced Finance & Accounting Services
• Strategy & Operations Consulting Services