Some observers believe outsourcing has already stopped growing. Others believe outsourcing will have a profound impact on the organization of accounting firms. August Aquila ([email protected]) says as more firms outsource, others will be forced to do so to be competitive.

Economics isn’t the primary reason to outsource tax returns. In fact firms are finding the cost savings are not nearly what they expected. Staffing is driving outsourcing. Staff don’t want to do this work. Marc Rosenberg, of The Rosenberg Associates in Wilmette, Illinois, says tax season is the reason young people give for leaving the profession.

Outsourcing low-level work means partners will have fewer people to manage. Consequently, there will be less need for partners.

Many partners like to do tax preparation to keep up their billable hours. Whether or not this is outsourced, it can be done more efficiently, changing the allocation of partner hours.

Gary Shamis, CEO of SS & G Financial Services in Cleveland, says outsourcing is more than sending tax returns to India. SS & G has been sending general ledger and back office work to U.S. companies for a long time. The firm has a niche in franchise restaurant work. It out sources (to U.S. and Indian firms) much of the back office work for these clients such as payroll, general ledger, accounts payable, and data gathering. Since implementing this process, SS & G has reduced the number of employees serving restaurant clients from one for each 10 restaurant clients to one for each 50.

Shamis says his firm sent 800 personal returns to India during the 2006 tax season. He says tax preparation detracts from the firm’s principal business.

On the other hand, according to The Rosenberg Associates’ survey of 280 accounting firms, only 7.6 percent plan to outsource next year. Most of these are larger firms.

Rosenberg’s sees a “leveling off” of outsourcing for these reasons, according to the survey:

• Fourteen percent of firms have adequate staffing.
• Twelve percent are concerned about client attitudes.
• Some have concerns about confidentiality.

Some firms are concerned about the turnaround time, not because the Indian companies’ turnaround is slow, but because so many clients bring the information in so close to the filing deadline.

Some firms think outsourcing is unethical, especially if clients are not informed.

From CPA Practice Management Forum, CCH Incorporated, 800-449-8114, August 2006, p. 5.