By Michael Splittorf, president of Vaco Managed Services
The accounting industry is in crisis—and not because of artificial intelligence (AI). For all the talk about AI destroying accounting jobs, we’re reminded of the longstanding shortage of certified public accountants (CPAs) and by the number of college graduates entering the accounting field that continues to plummet as well as the number of retiring accountants that continues to persist. As a result, many companies are experiencing longer audit timelines, higher costs, greater risks of error and lengthy delays in filings to the Securities and Exchange Commission (SEC).
One solution: managed services. Here’s what managed services means in simple, practical terms and why many companies are turning to it to solve their accounting issues.
What are managed services?
Managed services are another way of saying outsourcing. Companies typically use managed services to hire third parties—sometimes in other countries (offshoring) and sometimes elsewhere in the U.S. (onshoring). These third parties then take responsibility for building teams and managing parts of their business. When it comes to accounting, organizations can outsource a wide variety of services, from bookkeeping to financial reporting to payroll to accounts payable and accounts receivable.
How can managed services help companies deal with the accounting shortage?
Instead of recruiting accountants to work full-time, a company could outsource the hiring and management process to a third party. Doing so is significantly cheaper because of the difference in wages and the risk transfers from the company to the outsourcing partner. In other countries such as Trinidad, India or the Philippines there is a litany of talented, English-speaking certified CPAs, Chartered Accountants, and accounting graduates, who do fantastic work and cost significantly less than their U.S. counterparts. And that price gap has only risen due to the accounting shortages in the U.S., making the offshore and nearshore options much more attractive for companies looking to stay within their budget and avoid disruptions in their daily operations.
What are the risks of managed services?
Some business leaders may worry that outsourcing will lead to logistical problems—from time zone confusion to creating a team in a foreign country that doesn’t mesh with their current teams. But there are some easy ways to deal with these issues. Some companies, for instance, have outsourced their accounting department to countries in Latin America or the Caribbean, which are in similar time zones as parts of the U.S. Others have shifted to a follow-the-sun model allowing them the benefit of 24/7 coverage that has work being done in all time zones.
What are some other ways to mitigate these risks?
There are two keys to success in managed services. The first is to find a trusted, capable partner. The second is to create a strong service-level agreement that works in your favor.
What to look for in a partner depends on what you’re trying to accomplish. Find a company that has experience executing on similar projects on a similar scale.
Doing so will ensure that the quality, time and type of activities you need to be done are actually completed. More importantly, it helps your company get back to what it does best: solving your customers’ problems and advancing your strategic initiatives.
Are managed services right for your business?
Simply put, any company trying to reduce costs and increase efficiency can benefit from managed services. In my experience, businesses undergoing major organizational changes—such as a private equity sale, IPO or capital infusion—tend to see the most significant gains. Organizations trying to optimize their business while meeting customer expectations can ease this pressure by joining forces with a managed services partner to fill the gap.
More specifically, as the U.S. CPA shortage continues, companies are putting themselves at risk of being harmed by it. It’s in their best interest to explore alternate ways to get the job done. Because if they don’t, they might fall behind.
