When one of Mike Block's largest 1040 clients walked through his door on April 8 expecting to have his personal and corporate returns completed for tax season, the CPA didn't exactly sleep.
He stayed at the office until 2 a.m. scanning in documents, some in the wrong direction, then messaged his crew in India to do what they could to piece them together and to send him PDFs of the tax return.
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By 10:30 that morning, the job was complete.
"That's when I realized there was just no substituting the fact that it could be done overnight when I was already dead and could barely scan, [let alone] calculate anything," Block says. "A chartered accountant prepared my most complex tax return 70 percent faster than expected, with 80 percent fewer errors, while I slept. Having [up] to 10 assistants help my clients and I, any day or night, on short notice, is priceless."
That was six years ago.
Today, Fort Lauderdale, Fla.-based BlockTax employs seven people in house and eight overseas, including in India, Pakistan and China.
The QuickBooks ProAdvisor owns one of a growing number of small firms taking advantage of outsourcing to help lower costs and improve efficiency.
"The dirty little secret is the big auditing firms are doing this on a gigantic level. It's the little guy who has not yet stepped into it," Block says. "Outsourcing lets accountants make friends precisely where our country needs them, while helping to end world hunger and promote world peace."
There's a stigma to outsourcing that relates to paying such low wages that it's "horrible," Block explains, but he reasons that many foreigners are studying U.S. accounting because they prefer to work in that environment, rather than out in the fields.
"I wished someone a happy birthday who had been working for me for two years. She said, 'The best birthday present you could give me is more work.' They're doing this because it's the best job you could get. This kind of thing would make every U.S. foreign aid program absolutely unnecessary," Block says. "In terms of civility, eagerness and overall respect, you can't begin to compare what you get out of the people compared to what you get locally."
That conjures up the image of America's workforce losing jobs to their cheaper counterparts in other countries ($3 to $10 per hour compared to $35 to $75 in Block's case), a topic of heated political debates in recent years. But Block says every dollar he saves through offshoring allows him to hire more help in Florida. Plus, he passes a chunk of his savings on to his clients. They all know what he's doing and he hasn't lost a single client because of it, especially when he's cutting their fees in half and still saving money himself.
One example is a client Block converted from Sage Software's Timberline product to QuickBooks Enterprise Solutions, a package that could scale to 20 users but requires companies to be in single-user mode for certain functions.
This client had entered 3,000 inventory items, and misfiled 2,500-every one a single-user error. "Changes would have had the system down for days," Block estimates. Instead, workers in India nearly 10 hours ahead of the East Coast, made the changes each night while his workers were home so that it didn't stop their productivity by requiring them to exit the system. Block paid them $10 per hour for 10 hours per day for three to four days and charged the client at his cost.
When he first experimented with outsourcing, he sent tax returns to three outsourcing firms to see how well they would do on the same return. It turned out one of them sent the work to another on his list, which helped him make the decision. Over time, he's learned to outsource a wide variety of tasks, from time tracking management (his billable time has increased 50 percent as a result) to letter writing to search engine marketing for as low as $1 per hour. Comparatively, some U.S. consultants who help firms use the best key words or phrases to work their way to the top of Google searches make $60,000 to $200,000 per year and search marketing directors at large companies can earn $100,000 to $350,000, according to an online salary list.
"I can grab any keyword and make it mine for one buck an hour and I can get the two top listings," Block says, noting that his company appears in most of the entries of the first page on a Google search for "Solve QuickBooks Problems."
The same chartered accountant who helped him with his large 1040 client six years ago also helped continue the nationwide reputation Block built within the QuickBooks community with more than 7,000 newsgroup posts. At first, Bock reviewed the messages the accountant wrote. But quickly, the articles were posted without Block seeing them.
"His $3 posts each save me 30 minutes," Block says.
Of course, none of these advantages matter if the company doing the work is stealing or compromising confidential information from its customers-a weighty argument against outsourcing overseas.
Almost all firms Block deals with work on "dumb" terminals without disk drives, so they cannot save information or download anything from his computers. In case of any doubt, most would set up Webcams to prove themselves trustworthy, he says. However, Block stresses the need for researching their policies before committing to anything.
One company he uses, Xpitax, outlines its security measures as a competitive differentiator. According to its Web site, clients' financial and tax files never leave the United States, where data center access requires biometric verification and the facilities are monitored by security guards around the clock. The company also restricts Internet and email access and printing capabilities at its India facility, requires every employee to sign non-disclosure agreements and enforces strict controls over what India-stationed employees can bring into and out of the processing center.
"India-based providers do a better job because all of their brand equity relates to security," argues Paul Roehrig, senior analyst of IT sourcing and vendor management at Forrester research.
But even if a company is not shipping work to "Outsource-istan," it should never feel comfortable when it comes to security, Roehrig says.
Most security breaches are not technology-related, they're people-related, and Roehrig says firms must ensure the processes exist to keep the environment as secure as possible, from background checks during the hiring process to continuous monitoring and restricted access, even internally.
Another thing to remember is that outsourcing is not synonymous with offshoring. Companies can dole out tasks that are not part of their key business to other firms in the states.
Some CPAs turn things around by serving as "insourcers," to whom others are outsourcing work.
George Gray of Randolph, Vt.-based Compucount, a full-service accounting firm that provides bookkeeping, payroll and tax preparation, started insourcing tax return work to a bookkeeper in Albuquerque, New Mexico two years ago when she approached him at a Public Association of Small Business Accountants meeting.
Because they both use Universal Business Computing Co.'s payroll and accounting software, they can share information more easily. He downloads files from a portal on her Web site, makes year-end adjustments and then imports the data into UltraTax by clicking on a "UBCC Import" button in less than 30 seconds.
This relationship has generated additional revenue for Compucount and takes less time than when dealing with annual clients whose information Gray hasn't monitored monthly as he does with his write-up clients.
"If she has questions, she asks us and we tell her things to ask about, like fixed asset purchases," he says. "We're as comfortable with her year-end package as we are with our own monthly write-up clients."
Ria Botzler found Gray because her bookkeeping clients at Checks and Doublechecks needed the tax work and she didn't want to learn taxes, but wanted to take care of her clients' needs without sending them off to start a relationship with someone who potentially could steal those clients from her.
"You say 'outsource' and everyone gasps. And we say, 'No, it's like insourcing.' Really what it is is resourcing," Botzler explains. "Outsourcing is a phenomenal way to support your company and not have the tremendous liability and overhead as you would if you took it into your core business. We need a new way to get into people's minds that this is a resource. We're helping other companies with the connections and specialties that we have."
Some companies outsource their entire staffs.