Thursday, January 15, 2009

Accounting for Small Business Goes Online

Early stages of marketing the online accounting model involved professional accountants selling bookkeeping services to small business, but offering a greater level of performance and cost-efficiency than the business could experience alone. The online technology model facilitates a closer and real-time working relationship between the accountant and the client, and results in better and higher quality information for the client. By using the online application model, accounting professionals are able to increase staff levels at reduced operating costs by allowing operators to work from home or other locations. Further, the elimination or reduction of time spent traveling to client sites, manipulating client data sets, and other similar activities helps to reduce the cost of delivering bookkeeping and accounting services to the client.

The Impact in India
India was one of the first countries to visibly enter the smb outsourcing market en masse. Large numbers of business people and accounting professionals from the US paid visits to groups in India, discussing the market opportunity and potential around smb outsourcing, and to enlist processors and head count to prepare for the deluge of inbound work from US businesses. In many cases, the participants in India were required to pay heavily for the privilege of participation spending thousands (hundreds of thousands, in some cases) of dollars in training and education, building infrastructure, buying software and services only to find that the return on investment was not going to come any time soon if at all. The US accounting market was not yet ready to ship its work offshore in wholesale. And, in reality, the outsourcers weren't ready for the business anyway.

Road shows, seminars, presentations, free offers, email and fax mail and junk mail of all flavors - all have been employed to attempt to convey the value of offshore outsourcing to the business market and to accounting professionals. This marketing was, in many cases, the use of funds from the investments made by the offshore entities. Those promoting the opportunity in India were garnering funds from participants there (while promising that work would be coming in immediately), and then returning to the US only to spend the money on trying to get the business that was already promised. Needless to say, this did tremendous harm to many of the offshore start-ups, and ran some of them out of business before they ever had an opportunity to perform. Certainly, some of these businesses were simply ill-prepared and were not ready for operation, but there were many which were, and some of these positioned themselves with partners that took advantage without delivering anything of value in return.

There were other models employed, as well. Postings on open job boards, offering e-Accounting work for a fee, and with a promise of huge returns, are prevalent. The representation is that, if the offshore processor would pay into the model, then the work would be forthcoming. Many paid into the model; few received any real revenue-earning work.

As with any new business model or technology, the �early adopters� are essentially the beta testers for the rest of the market. Models which are believed to be fully developed are found to be lacking in significant detail or insight. And many approaches are simply not realistic when applied to the larger part of the market. Having worked through a period of trial and error, many outsourcers are now finding their niche, and are delivering (very successfully and profitably) valuable services to their business and professional clients. This working model has not yet matured to the point where offshore (or domestic) outsourcing is an automatic solution for any practice, and there is no cookie-cutter model to follow to success. Accounting professionals understand the unique nature of each of their client businesses, and it is this unique aspect which represents the challenge in creating standards in processes and systems which are an absolute requirement for any successful outsourced engagement.

The question is not whether or not your client should outsource their work - the answer here is obviously yes, and that's why your client works with you. But whether or not YOU should outsource certain processes or functions remains a question. There are significant benefits to be derived, not the least of which is an improvement in workflows and controls to measure performance. The cost-of-service benefits may, for some, remain elusive. The primary reason many companies initiate outsource arrangements is based on the assumption of handling the existing work using the existing processes, but at reduced labor rates. In truth, the benefits more frequently arrive in the form of enhancements to workflow and control processes, and the development of a greater and more in-depth understanding of the work being performed on the clients' behalf.