Outsourcing vs. AI for Accounting and Taxes

I don't get it! Are we at a place in the world right now where a business, even at the smallest scale, can work to eliminate their business processes such as accounting, taxes, payroll, or stuff like that? I guess not! But is it incoming? I have my doubts on that. Let's find out together with me writing and you reading!

Need to Change!

Why are we even talking about it? Why is there even a need to change, to take the effort and transition to from the good old traditional methods? To be honest, it's very vital! If your business is capable enough to evolve to modern methods, taking these steps become very much crucial.

Also, there's already a big chunk of accountants and auditors in the US leaving their profession and somebody or something has to fill in that gap. In between 2019 and 2021, more than 300,000 accountants quit their jobs, while as per an employment data provider "Live Data Technologies", a staggering 83% of U.S. accountants having minimum 6 years of experience had quit in 2023.

So what is driving this change?

• Costs - Of course, the biggest driver. Skyrocketing inflation in developed countries is resulting in cutting down on non-value adding functions. The average salaries of CPAs is around $120,000 while a CPA equivalent in India can perform the same functions in less than 1/3rd of such cost. This allows businesses to allocate their resources more effectively and invest in other areas of their operations.

• Access to expertise - A big pool of highly skilled professionals who are well-versed in the latest financial practices and regulations is available and accessible now. Indian teams, in particular, have a strong reputation for their expertise in finance and accounting. AI as well is quite advanced and can handle data entry work easily.

• Scalability - Growing businesses have their own financial needs, and as they become more complex and demanding, offshoring allows them to easily scale their operations to meet these evolving needs.

• Focus on Core Competencies - This is what every entrepreneur wants, no? To free himself from the nitty gritty of such works and build his valuable time into something concrete and desirable for his customers and stakeholders. Instead of being bogged down by administrative tasks, companies can redirect their energy towards strategic initiatives and business development.

The Rise of AI in Accounting

Globally, the market for robotic process automation (RPA) in finance and accounting is expected to reach a staggering $12.2 billion by 2027.

• US Adoption: A 2022 PWC report reveals that 72% of US accounting firms are already using or plan to use AI for tasks like data entry, bookkeeping, and basic tax preparation.

• Global Trend: The trend isn't limited to the US. A 2023 Deloitte report highlights the global adoption of AI in accounting, with firms using it for audit automation and risk management.

Although one doesn’t have “control” over how the AI works, you do have a say on whether it’s correct or not when entering the data. However, assumptions and analysis can be different from the reality given the wide range of data AI normally has make it lose specialization in a situation. Still, to a limit, it gives you control over the quality of the task at hand while eliminating communication errors.

Choosing the Right Overseas Team

While offshoring financial functions can offer numerous benefits, it is essential to choose the right overseas team to ensure a successful partnership. Here are a few factors to consider when selecting an offshore team:

• Expertise and Experience - Look for a team that has a proven track record in handling financial functions similar to what your business requires. Consider their experience, qualifications, and any industry-specific knowledge they may possess. This will help ensure that they can effectively meet your business's unique needs and requirements.

• Communication and Language Skills - Effective communication is crucial for a successful offshoring partnership. Look for a team that has strong language skills, particularly in English, as this will facilitate seamless communication and collaboration. Clear and open lines of communication will help prevent misunderstandings and ensure that your expectations are met.

• Data Security and Confidentiality - Financial data is highly sensitive and must be handled with the utmost care. When selecting an overseas team, inquire about their data security protocols and measures to ensure the confidentiality of your information. Look for teams that have robust security systems in place to protect against data breaches and unauthorized access.

• Cultural Compatibility - Working with an overseas team means navigating cultural differences and nuances. Look for a team that is culturally compatible with your business to ensure a smooth working relationship. Understanding and respecting each other's cultural norms and practices will help foster trust and collaboration.

Outsourcing vs AI: Weighing the Options

• Cost: AI can be cost-effective at first, but most likely it will not completely serve the purpose which will give rise to hidden fees. Outsourcing might take some effort at first, but it will streamline business better.

• Security: Data security is a major concern with outsourcing. AI solutions can provide secure cloud-based environments for financial data.

• Expertise: Outsourcing firms are mostly KPOs which employ experts and professionals. On the other hand, AI is still constantly learning but cannot be trusted completely as of now.

Conclusion

Could be said that the age of AI has arrived now, however as of today, I feel offshoring holds the key to a better.

Even better is the hybrid approach! Outsourcing can handle routine tasks, while AI automates repetitive processes. This frees up skilled accountants for strategic analysis and client service.

Let's conquer the world of business processes together, one step at a time! You can reach out to the Numbreylla Team for any assistance for any outsourcing requirements.