In the face of the U.S. accountant shortage, more and more CPA firms are turning to talent in India. Some of the outsourcing companies who provide the teams for these American clients are failing to deliver the quality the U.S. home offices expect. As a result, large and mid-sized CPA companies alike have begun opening satellite offices in India that are directly managed by the home office.
Facing an acute accountant shortage at home, CPA firms are increasingly turning to outsourced talent from abroad, with India being a prominent source. While this strategy has been a practical solution to bridge the talent gap, the quality of work received often doesn't measure up to the standards set by in-house teams. With their bargaining chips at an all-time low, CPA firms have little recourse but to continue working with unsatisfactory outsourcing companies and hope for eventual improvement.
The silver lining is that the top 20 CPA firms have found an offshoring model to combat these very issues, providing a blueprint for success. It's not just the industry giants taking note—more and more mid-size firms are now adopting these strategies.
This article aims to shed light on why CPA firms are facing quality issues with outsourcing companies and provide actionable insights on how to address these challenges to ensure that the work meets their quality standards.
To address the quality concerns that many CPA firms face with outsourcing companies, it's essential to pinpoint the underlying causes. These causes can be categorized into three distinct buckets:
Hiring Subpar Talent
A primary issue is the hiring of less skilled talent. Many outsourcing firms tend to recruit employees who may not meet the stringent standards required for high-quality accounting work. This mismatch in talent leads directly to a gap in the quality of work delivered.
Lack of Adequate Training
Compounding the problem of subpar talent, there's often a lack of comprehensive training, leaving staff ill-equipped to handle complex tasks on a level expected by American accounting firms. Lack of proper training goes beyond just technical skills. Outsourcing firms frequently fall short in training their employees in the soft skills essential for effective communication and client service. This dual deficiency in professional development is a significant factor in the diminished quality of the work they deliver.
Volume-Driven Business Model
Furthermore, the business model favored by many outsourcing firms emphasizes high-volume output, which directly benefits their profit margins. Employees in many outsourcing companies are incentivized based on the volume of work they complete, such as the number of tax returns processed, rather than the quality of their work. This quantity-over-quality reward system does not align with the expectations of CPA firms at home, who never comprise the quality of their work.
Given these factors, resolving quality issues with outsourced talent is not a matter of simple fixes. It requires a fundamental shift in both the operational and cultural practices of these outsourcing companies, a change that can be quite challenging and slow to implement. And given the ever-growing accountant shortage in the U.S., outsourcing firms have little incentive to change their ways.
Therefore, while working with outsourcing companies helps alleviate the accountant shortage at home, it is at best a stop-gap solution.
In recognition of these widespread quality concerns, the Top 20 CPA firms—most recently the accounting behemoths Armanino and Sikich—have adopted a more direct and hands-on approach to offshoring that mitigates these issues. This approach acknowledges the fact that the quality issues arise not because the talent is located outside the U.S., but because of a lack of adequate control over the offshore team.
These industry leaders have solved the offshore quality crisis by bypassing third-party outsourcing firms altogether and establishing their own operations directly in India, much the same way you would open an office in a neighboring state. This direct investment approach grants you the control needed to maintain your company’s current high standards.
By removing the outsourcing company middleman and opening a self-operated office in India, you dictate every aspect of the operation—from hiring practices to training programs, from setting quality benchmarks to upholding them. It empowers you to transplant your corporate culture overseas, ensuring that your extended team in India embodies the same values and standards as you do at home.
As a result of this hands-on satellite office model, big CPA firms such as RSM and BDO have seen tremendous growth in the face of the U.S. accountant shortage, quadrupling their India teams in the last few years.
At a glance, the satellite office approach may seem time-consuming, costly, and out of reach for mid-size CPA firms. However, setting up an office in India does not require millions of dollars or a large team. You can start an office in India with as few as five employees. A team of approximately twenty professionals can be operational in as little as three months, offering both immediate relief from domestic talent shortages and long-term strategic benefits.
As of 2023, 30 mid-size CPA firms have already established their own offices in India, tapping into the significant cost benefits and the vast talent pool available.
If you're contemplating a satellite office in India, your first step is comprehensive education. Understanding the satellite office model involves evaluating whether India matches your firm's needs, analyzing the financial outlay and potential savings, and recognizing the compliance requirements, in both the U.S. and India. Alongside financial and legal considerations, identifying and preparing for risks and challenges is key.
This comprehensive approach ensures you're not just aware of the model's broad strokes but are also prepared for its nuanced complexities. We explore all of these aspects, and many other important considerations, in our Comprehensive Guide to Setting Up a Satellite Office in India. Our Insights resource center features numerous other articles exploring different factors in more detail.
At June15 Consulting, our advisors are well-versed in the processes, pitfalls, and benefits you may encounter when establishing your CPA firm’s own office in India. We recognize that this undertaking can be overwhelming, and our team is always here to provide you with the guidance you need to thrive in this promising but challenging new endeavor.
Have a question about our services? Talk to us today to find out how an India office can help your organization.
