Over the course of the last five years, outsourcing within the accountancy sector has expanded rapidly due to numerous different contributory factors. The most prominent of which are the following aspects:

  • Increased internal costs
  • Technological advancements
  • Difficulties in aligning various accountancy needs.

The primary driver of the growth of outsourcing has been the impact of technology, which has considerably simplified the gathering and disseminating of information to a great degree. In the process, this has allowed accountancy professionals in developing countries to perform work tasks at a more cost-effective rate than domestic workers.

In spite of this, it’s incredibly important to have a strategic plan addressing crucial deployment issues in place if you are to fully benefit from the implementation of outsourcing. Otherwise, any potential cost reductions will eventually be lost if the necessary precautions aren’t taken. Continue reading as we take a closer look at the main cost factors that accountancy firms must assess in order to make an informed decision on whether or not to outsource.

Estimation of time

The time devoted to generating revenue undoubtedly takes preference over the amount of time spent on administrative duties. So, it’s worthwhile tracking time in order to keep an accurate record of the productivity of the workforce. At the same time, you’ll also be able to receive a precise measurement of the amount of time spent on chargeable work.

Furthermore, it’s possible to gain a deeper insight into the accuracy of a firm’s estimation process when recording the amount of time that is spent on fixed price work. As a result, this will allow a firm to determine whether tasks are taking too long – a situation whereby profit would be lost. On the other hand, a business may begin to lose work if tasks are completed too quickly, which will occur as a result of uncompetitive bids when compared to rival firms.

Cost of support services

When bringing additional resources on board, it’s inevitable that you will need to invest heavily in support services; most of which relating to essential facility and IT requirements. As an example, hiring new accountancy professionals will require investment in terms of equipment such as software, internet access, a desk, and a computer. 

Plus, it may even be the case that you don’t have enough space to accommodate for new members of your team. If so, there may be a need to rent additional space which obviously comes at a premium. On the other hand, firms which have room for expansion and aren’t at full capacity will find that the cost difference will often not amount to much.

Difference between fixed and variable costs

The ability to convert normal fixed costs that absorb available capital to variable costs is one of the main reasons to outsource accountancy services. With the potential to add significant economic value by utilising this tactic, it’s clear that it can benefit your company considerably.

To put things into perspective, potentially underutilised resources and the facilities needed for continuous fixed asset support can be replaced by a variable cost – allowing you to use the accountancy service as and when it is needed.

Cost of utilisation

When it comes to utilisation cost, it’s safe to say that it can be difficult to time things perfectly. This is hardly surprising when you consider the fact that there are a number of different phases throughout the year in which the functional needs of your business will vary greatly.

On the one hand, it’s important to have an appropriate number of professional staff on hand for when you need them the most. This is why outsourcing work could be a great option for many firms who only require additional help at certain points of the year. On the contrary, having certain professionals around during quiet periods will mean that their services will be underutilised, potentially leading to a rise in costs.

To begin with, it may appear that outsourcing services is the most expensive option when compared to paying a permanent member of staff an hourly rate. But, when taking into account the utilisation cost of keeping an internal professional on board year-round, you are likely to experience significant cost savings.

The utilisation rate of internal staff can be determined by using an accurate time reporting system to identify exactly which tasks are associated with a particular position. Another area which needs to be assessed is the reduced training time needed to get new resources up to speed. In doing so, this ensures that the underutilisation of resources can be determined accurately.

Time and cost of recruitment

In the current day and age, many firms underestimate the costs of recruiting personnel. While filling an open internal position can take up to six months, an inexperienced accountant may be trained and employed in at least half the amount of time. But, in an effort to reduce the amount of time that it takes to fill positions, many accountancy firms keep readily available candidates on file.

Either way, a reduction in the time it takes to recruit new staff members ensures that a firm stands a better chance of delivering quality work to any clients they may have.

Taking control of services

When it comes to determining whether to outsource some or all of your accountancy services, there are numerous cost factors which are essential for consideration. Once these have all been taken into account, it will become easier to evaluate an appropriate approach to outsourcing, while also determining which services should be retained by your firm. 

Once you have evaluated each of these areas, you’ll be able to make an informed decision on which is the best option out of outsourcing your services and internal development.


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Lanop Outsourcing Chartered Accountants and Tax Advisers for Small and Medium Accountancy firms.

We are your local Outsourcing Chartered Accountants and Tax Advisers based in Putney, London. We are expert XERO Accounting advisors and trusted business advisors in UK.

While we are based in South West London and Central London, our clientele is quite global and our staff is currently working remotely to serve our clients through active Zoom accounts all over UK.

As always, you can reach out to us anytime to discuss any financial, business or accountancy issues you may have in this coronavirus pandemic.