Transcription:
Danielle Lee (00:08):
Hey everyone. Thanks for joining for today's session, alternatives to Staffing. The very general crux of this session is that with staffing shortages, exacerbating capacity issues, firms are looking for different ways to get the work done without having to go out and hire new employees. Outsourcing and offshoring are two of the popular ones that have emerged in recent years. So in this session we're going to talk about the pros and cons of both of them. We're going to discuss how firms can make the most of these relationships, and also whether firms should delve into outsourcing their operations. My name is Danielle Lee. I'm the Managing Editor at Accounting Today, and I'll have our great panelists today. I'll go down the line and introduce themselves and give a little bit of background.
Laurence Whittam (00:57):
Cool. So Laurence Whittam, I'm the Founder of Impact Global Solutions. I actually started this consulting firm that focuses on really helping CPA firms and accountants understand what they can actually do when it comes to outsourcing or offshoring. So I don't personally have my own back office. I've built one for the past 10 years, but now I'm published with the A-I-C-P-A and I built out the best practice toolkit around outsourcing and really I found that firms didn't have enough information to go off an educational pieces to really understand what's available to them from a model perspective down to even what country to go to. So that's where I can now come in and help.
Danielle Lee (01:37):
Great,
Hitendra Patil (01:37):
Thanks. Hi, my name is Hitendra Patil and I lead the global outsourcing operations for Datamatics Business Solutions. We are exclusively for accountants. I'm fortunate that Accounting Today has recognized me as one of the top a hundred influences for the last seven consecutive years. I have written three books exclusively for accountants. In fact, I tell my people that I don't even know how to work with anybody else other than accountants.
Kristen Keats (02:06):
Hi, my name's Kristen Keats and I am a CPA Practice Owner. I've been an accountant for a really long time, let's just say over 20 years and we'll stop there. So yeah, I founded Breakaway Bookkeeping and Advising and then I purchased a tax firm in 2020 and then in 2021 founded CCIA, which is an outsourced solution in Guadalajara, Mexico.
Danielle Lee (02:29):
Great. Well, thank you all for being here and sharing your different perspectives and insights. This is going to be a great panel. I also want to mention that if you have any questions throughout, we should have some time reserved at the end to get to some of those questions. So if you have any kind of percolating in your mind, keep those top of mind. And then before we get into some of the kind of general delve deeper into some of the issues that I mentioned at the top of the session, let's start with some kind of quick definitions and going into some of the simpler elements of it. Can you kind of talk about what kind of models there are? And Laurence, I'll start with you,
Laurence Whittam (03:03):
So I'll try and simplify it a lot. Sure that everybody in the room has had multiple conversations and you don't necessarily know the differences because they all sound very similar. But the first is a very traditional BPO model where you can go and you've got to be very restrictive on the types of process you're outsourcing to an outsourcing firm, whether it's in India, the Philippines, south America, there's South Africa as options. And for that you've just got to understand that it's very structured. They're not your employees, it's their employees that they're dealing with, but you've got to have a very strong focus on your process that you're delivering, making sure you have KPIs and reports in place to do that properly. Then there's the other end of the spectrum where you have an employment of record style, and that is where it's really like it's your captive.
(03:51):
Very similar to a PEO model over here that a lot more people are familiar with. EOR is another definition for it, but this is where it's really building out your team. And those back offices will take on certain responsibilities, but mainly the payroll and the legal aspect of actually hiring in a different country. You are responsible for all that management piece. Anything else, making sure that they have infrastructure in place, making sure that they have hardware and then you have a fine balance between the two. Now where a lot of firms are very flexible, so some of them will be more of an EOR and also offer to help with their hardware aspect. So that's where you've got to just make sure you understand yourselves as to which approach you guys would like to take and what's the best fit for you and make sure you have a plan in place.
(04:40):
That's really what we focus on. And the final is like a BOT. So that's a blend of all. And in-between right, it's where you have a three to five year approach and you go with more of a traditional model where you have less hands-on approach to it, essentially for the first year or two, then they start transferring that management responsibility to you and you should have ownership over there by the final few years. So you really have your own firm at the end of it as well. So those are sort of the three models I would say that are the best to at least simplify it into a certain stage. But you've got to understand there can be quite a big blend in between as well. So a lot of firms do it slightly differently.
Danielle Lee (05:22):
Very helpful definitions. That was pretty comprehensive, but I don't know. Kristen Hitendra, if you have anything to add.
Hitendra Patil (05:27):
Yeah, I think just to add on to this, outsourcing is you can outsource, locally offshoring is different. So these two get pretty interchangeably used. And one more thing from a firm's point of view, you do as you decide as to what are you outsourcing, are you outsourcing the full responsibility of the end product or delivery or are you outsourcing, okay, you do things, you are outsourcing hands, we are going to review, we are going to manage the client relationships. So you've got to make sure you define all of that very properly, but ultimately what you are insourcing is capacity and profit.
Kristen Keats (06:00):
Yeah, yeah, I agree with that. Mean I've worked with the, and I'm kind of coming from the firm owner perspective mostly because I've worked with teams and kind of two different models, probably more the BPO model initially and then moving toward more the firm, the firm owned staff secondly. And so I think it really depends on, like they said, the stage of business that you're in and the type of tasks that you're looking at having covered depending on which model would be the best fit. Alright. And speaking of those kinds of tasks, what kinds of missing staff can outsourcing make up for? What kinds of tasks and kinds of work can you outsource? And Kristen, I'll start with you. Sure. Initially we started out with bookkeeping and when we started our team at Breakaway, we were actually working with an outsourced India team and we still work with them and it's really great because we can send them project-based work, which was fantastic and really flexible for our advisors in that space.
(06:56):
But then we also, once I had the tax firm, we got dedicated staff people for us. And now in the tax firm I have a project manager. So at admin role I have two bookkeepers and then I also have a staff accountant and we hire for admin and we actually have gone outside the accounting space as well just because kind of word of mouth has gotten out there. But I mean we primarily have accountants as clients, but we've really discovered that any role can be filled and the folks that we hire are really ambitious. They want to get to the next level. So right now, while we're kind of at the beginning stages, a lot of our folks are entry level, but the plan is that they can go ahead and move up the ranks as seniors and managers and grow just like anyone else would in our firm.
Danielle Lee (07:44):
Great Hitendra and Laurence, have you seen
Hitendra Patil (07:46):
With all sorts of epic talent shortage talks that are going on, you can pretty much outsource any position right now, right? Good time, but at the same time your client relationships are your most sacred asset and you don't want to definitely outsource that. So you're going to maintain that. You can get everything else done right up to the level where can just check and deliver. That's okay, but you talking sometimes clients do outsource to us. Okay, can you talk to my client? Can you email to my client said perfectly. Okay, I'm not doing it from my data max email, ID give me your email ID and things like that. So essentially you are maintaining your brand, you're maintaining your voice. So that's pretty important from a decision standpoint.
Laurence Whittam (08:31):
And I'll just add from it does depend on location as well, right? I mean if you go to India or the Philippines, they've been again major locations for talent for accounting firms specifically for anywhere from 40 to 20 years in that range depending on where you go. So they've got quite an abundance of talent that has been built up working with firms when it comes to South America and South Africa as well is another one that's been working with US firms for quite a number of years and they were one of the ones starting out doing secondments. But you're going to find more of the accounting and the insurance side in South Africa as an example, not as much on the tax side. So it really depends on where you are as well as to what that talent availability is. And it's not that that's a bad thing, but you have to think about that from a perspective of expectations. If you're expecting to roll out senior level work to South America and expect the same quality and high level work that you get from a seven, eight year person here on the tax side, it's probably going to be very difficult to find that type of talent. So you're going to have to look for more of a junior level talent and train them up to that. But everybody, obviously they're accountants the same. A lot of 'em have CPAs or cas that you can then groom, but you've got to have the right expectation going into it.
Danielle Lee (09:50):
Alright, so you're talking about what you look for in the type of talent. What about in terms of the type of outsourcing or offshoring partner Hitendra I'll start with you? What do you look for in those relationships?
Hitendra Patil (10:02):
Yeah, so I think the first and foremost thing is you decide whether you need to outsource. So I have a whole list of, I call dirty dozen drug mass that if you're facing those problems, that's a telltale sign that you must explore outsourcing. But that's like inside out, first time you make a decision, yeah, I need to explore outsourcing. And then comes the thing, where do I go? Do I go to this country, that country? What are the geopolitical risks in that country? What's the talent availability every year? How much talent comes in the labor force, those kinds of things. You're pitting one country against another and then you're looking at, okay, who are the vendors that I should explore Now that's where all the problem can start because everybody looks the same. It's almost a commoditized market and everybody claims to be the same.
(10:52):
That's another problem. So how do you evaluate a vendor? So I got a 28 point checklist on what should you look at basic things in terms of experience of the vendor, the expertise levels of people, what's the process, how do they work, how do they deliver, what are the timelines? What time are they available for you to talk to because they're working in the night hours, is there two hour overlap time enough for you to get handoff and then you do your stuff, all of that stuff. And of course beyond that goes the biggest thing is how technologically secure they are. Now it could seem like, okay, it's all good, but do they have certifications? You have SOC twos and GDPs and ISOs and all of that stuff. Despite all of that and potentially after Covid, everybody started working from remote and what are the controls there?
(11:44):
Can an employee sitting in India go to Starbucks equivalent there and just connect to your cloud? What happens in that case? How are those companies controlling these accesses? Can they download something? Where is your social security number going and all that? So certifications alone are not enough. You must do your due diligence and the next thing that comes in, what's the mindset? Do you kind of gel well culturally with that company? Are they looking at cutting corners and giving you lower rates? Typical you go lower the rate scale, you're going to be very sure that they are cutting corners and they're possibly hiring students and part-timers and all that stuff for your type of work. Is that going to be enough? Then what are their review processes? Is somebody just processing work and just delivering you directly and then you're supposed to check everything or are you getting near audit ready or tax ready or books ready work that you're going to get?
(12:43):
So there are plenty of these things that you go through. Doesn't mean that you have to take six months to evaluate. There are processes that are very well established now and most of the good outsourcing companies will actually tell you. And in fact some of the outsourcing companies will actually tell you, look, you should have asked me these three questions you didn't ask, so this is for your benefit. So those are the things that I would look at in terms of overall evaluation and then if you want to compare different providers with each other. So obviously you've got to have your metrics and whatnot. And then comes the decision is not the price driven decision for sure, it's about how well you can relate to that vendor. Some of them can come across as very professional. Only when the work starts coming in is the real test. So that's when you go into, okay, let's try a couple of clients work and see what comes back. You need to make adjustments and things like that. So those are the things that you always take baby steps in any new relationship and I think that's very critical, important for anyone starting off outsourcing.
Kristen Keats (13:51):
Yeah, I mean I would just add to that for me personally, it was important to have a provider that aligned with the culture and core values of my firm. I mean, going from what you said, the next extension of that, but for me it was important to know that the people were treated well. I want to do a really deep dive on the companies and understand what it was like for the employees that work there, what their working conditions were like. And also to Hitendra's point, I would also want to know how do we solve problems because they're human beings and problems are going to come up that much we can guarantee you. So what's the method for resolving some of the issues and problems that come up? I think that's a really good question to ask on the front end.
Laurence Whittam (14:35):
And I think just the term you use just to ask the question was partner. They're typically not just a vendor, they're a partner. You want to, because you're going to then go through them to hire individuals, you're going to be recruiting those individuals, you're going to be hiring them just like you would team members onshore. So you're going to have that element of you can actually vet those individuals as well. In a lot of cases. There are some models where they don't do that, but a lot of them, it fits better with accounting firms traditionally where you can look into the talent and actually do that hiring stage and be involved in it, but it's finding the partner that will then work with you when those challenges come up as well to make sure that they're retaining that talent to make sure that they're advising, yes, we should put a bonus scheme in place, or this talent really needs to have a career path in mind because right now you're just delivering us for the past year it's been the same type of work. If you really want to retain this type of talent, we've got to do X Y, Y Z to uplevel them as well. So it is really thinking about 'em in that way. And that's where again, as both of them mentioned it is finding that partner to make sure that you have a proper plan in place as well and that you can work with.
Danielle Lee (15:46):
So speaking of that, what should firms plan to do for their partners? And Laurence, I'll go back to you first.
Laurence Whittam (15:52):
So I always say really the big missing piece to a lot of this and what I've seen firms over the past 10 years do is they've said, we have the need now let's go and hire somebody and let's try it out. But they haven't even worked on themselves and looked at themselves properly to say, do we have the right processes in place to even outsource? Have we looked at our processes and come up with a standard operating procedure for it and said, you know what? These two pieces in here we don't want to outsource. So we know that there's only these areas that we want to do. So now we're looking for this type of talent, right? Offshore and also having a plan for them and thinking about it from that employee perspective. If you go into it blindly and just go try and hire somebody, that employee is going to have the same problems as the same employees over here where if you don't have a path for them, they're probably going to leave in a year or two because they're going to need to be trained properly.
(16:50):
And that's another thing is training, is that we generally, I've seen that they won't provide the same training to the offshore team members as they do the onshore team members. They don't provide the same onboarding structure, so you can't expect to have the same results if you're not providing them the same resources to do that. Right? So it's really actually, it's not complicated, but it's mindful thinking about what you're doing and making sure you guys have a proper strategy and plan in place and really involving if you've got a chief people officer, if you've got somebody that handles the HR, you should be involving them to make sure that that employee that you're taking on offshore has the same type of support that they would necessarily as an onshore team member to.
Hitendra Patil (17:33):
Yeah, I think I'll just add on to that, carrying it forward is when you outsource, if you have a perception in your mind that I am hiring or engaging an outsource vendor versus I'm hiring my own global team managed by that vendor, there's a big difference. The moment you say they're part of my team, then everybody's almost equal. You are taking care of that knowledge gaps you're making sure, okay, you sent an email internally, Hey, here is a law change and you got to know about it. Make sure it goes to the outsource team as well. So as long as they become that seamless part of your team, I think you should be all good. And basically it ensures that there are no surprises.
Kristen Keats (18:14):
Yeah, I agree. Your outsource team is your team. I mean for our team, we have them on our website. Our clients know when they get an email from them that they all have to sure what tax emails that it comes from. The thing I would like to add is a piece of advice that I give folks when they want to interview with us is be as specific as you possibly can on your job descriptions down to if you can really just have a picture of a great employee that you have that you want to replicate that job and your outsourcing company that helps them to go and recruit and find the person that's going to be the best match for your firm.
Danielle Lee (18:49):
Absolutely. There's been a lot of talk about culture already and even in this track for staffing and talent. Culture obviously is a big issue. We touched on it a little bit and even just talking about treating your offshore team like your onshore team, that's a big part of it. Is there other advice you have for firms and maintaining that culture and making sure that culture is strong and enhanced when they have these offshoring or outsourcing teams? I'll throw that out to anyone that, yeah,
Laurence Whittam (19:17):
I'll start and just say travel. Find somebody in your firm that likes to travel, right? I mean it is very difficult, and I'm sure you're all aware during covid to maintain relationships, being on video is fine, but to start new relationships with team members that came on board, it was very difficult during that time to really have a proper structure in place to engage them the same as you did people that you've been in the office with for years. So you've got to think about that going into that training side as well and making sure everybody gets the same thing. I would highly recommend visiting the office because for yourselves as leaders, like you will have a completely changed mindset and you'll be able to pass that down. But also you'll find that managers, directors, when they go, they'll have great experiences, they'll realize they're real people in a lot of cases where it sounds silly, but it's true.
(20:14):
But getting everybody involved in that, and it's not about going all the time, but taking that trip is fun. You get to do some hands-on training and vice versa, right? Again, there's certain complications with certain countries visas and things, but when you find the right talent, invest in them to come over. I can tell you it's a little bit different going out to India specifically or the Philippines, it may not be as attractive to everybody here. I can tell you that 99% of the talent offshore, if you gave them an opportunity to come on shore to the us, 99% of them are going to be like, yes, I would love to do that. So you could even have again, an incentive program to bring them on shore if they're hitting the one year mark and stuff. So there are different ways to really tighten the culture by really getting to know them in person. It doesn't need to be everybody, but somebody in the firm should be responsible for doing that.
Danielle Lee (21:05):
Kristen, do you use any of these strategies?
Kristen Keats (21:07):
I absolutely agree with all of that, and in fact, for the larger firms, we always recommend that they have a firm champion to really be the advocate and that person can go. But I like the idea of rotating that through too, because really you've got to have buy-in throughout your whole organization that this is the right way to go. I think the other value of the travel is some of the outsourcing partners will put on conferences and things because connecting with other firm owners who are also in the same boat is super valuable as well because you can share best practices, you can say what's working with, and they're working with the same type of team that you already are. So I think that can be hugely valuable to interact with those other firm owners. We also have folks come to the US and that's been great.
(21:53):
It is such a thrill for them and it's a thrill for everybody because it's like to finally meet the folks that they've only seen on a Zoom call before and have them come and experience our favorite restaurants and our things that we do, and then vice versa when we go there as well. It just makes it fun. I think it kind of improves us just as humans overall to be able to expand our minds past our little world that we're in. It's kind of how it feels being at conferences like this pieces to names and being able to, it's very, very crucial. Do you have anything to add to the cultural?
Hitendra Patil (22:22):
Yeah, they watch some Indian movies with English subtitles or go and attend an Indian wedding. I'm just kidding. You actually go to US embassy websites and they do have these cultural sensitivities for each country. I find that to be pretty accurate. So that gives you a little bit of a flavor instantly. But when it comes to work, those practices that become a company culture, work culture is something different than a general culture. So for example, here in the US, we might be very transparent, okay, here's what happened. Here's a mistake that happened in Asian countries that might be seen as a loss of face concept. So they might want to actually try and solve the problem themselves, and after some time if they cannot, the problem is already become big. So sometimes you have to sensitize them, Hey, this is anything. There's no harm in letting me know that this is an exception or this is what I assumed and did. Again, that no surprises rule should be there.
Danielle Lee (23:20):
So beyond the strategy and the strategic initiatives that go into it, the education is very important obviously for those very much cultural differences. So Kristen, you set up your own offshore team. We did. So can you talk about what led to that and who would you recommend that to?
Kristen Keats (23:38):
Well, who would I recommend it to? That's a good question because it's funny how it evolved. So my business partner and I, we had both worked at a firm that had an outsource team in India, and so I already got to see the power of that and what the leverage could do for that. So when we started our own firm, we definitely knew that outsourcing was going to be a part of how we built it out. But we came across another firm owner who had a team in Mexico and he's Mexican American and he had a CPA firm in our town.
(24:08):
And so he invited us to come to go visit his team and see how they work. And we were just blown away by the talent, the cultural alignment, just the ease of getting there because it was just like a four hour flight compared to, I've been to India twice and it's amazing, but darn, it's hard to get to. And so it was just the ease of getting there. And so we were originally looking at partnering with that firm, but they really just were interested in serving their own clients where we thought we felt like we could do something bigger. So we had heard that Guadalajara was the Silicon Valley of Mexico, there's a lot of tech there, there's a lot of universities. And so we knew that that was where we were probably going to focus on being. And we did what we thought was kind of the easy route to partner with a staffing agency.
(24:51):
And so we first worked with a staffing agency and we really just were looking at supporting our firms and then once we grew, we were able to start our own entity. We have this philosophy through all of our companies that we say crawl, walk, run. So we just wanted to crawl at first because we knew we wanted to do this, but it was hard to think about starting a Mexican entity that was too hard to think about. So we just partnered with the staffing agency and then once we grew and knew a little more, then we could have the Mexican entity. So I think that looking back, it seems daunting to see how far that we've come to start that up. So I wouldn't necessarily recommend it to a firm owner when you could potentially have an easy button through partnering with people who have already done all the hard work of setting up the entities. Because I mean, once you have a company, then that's a whole another thing to manage. It's a whole additional. So unless you have that kind of capacity, which I think most firm owners don't, that it's better just to try to find a partner that does the work that you need to do, aligns with your values and can kind of check all your boxes and what you need to have done within your firm. That's great advice.
Laurence Whittam (25:55):
Yeah, I would say to add on to that, again, there's a staged approach to it. Again, Kristen had experience doing it at a prior entity as well. So she was used to working with people internationally. She was used to the process side of things. If you've never done it, and again, I talked to very large firms, like some of the top 100 firms in their gungho about going into it for the first time themselves. They've only tried a few. They've tried a thousand returns offshore and they're like, you know what? We really want to put this in place now. And it's like, guys, it's not the time. It's put a plan in place for the next three to five years to get there, and that's fine, but work with a provider in the first stages because you're going to have a lot of cultural challenges that will come up and a lot of process challenges and a lot of things that this firm specifically is 10 offices.
(26:48):
Each office runs on different software, different processes for different industries. They're going to have, some are going to work, some are not going to work as well. So it's where they haven't done any assurance yet. They haven't done any accounting yet, they haven't tested it. So you really got to go through a testing process first before you should start running and own your own firm offshore. In a lot of cases, if you really want to do it, partner up with an employment of record style that offers additional help that is there, that has been there, that has been in Christian shoes, has been in a firm or is at least there to help with the infrastructure and hardware. Don't send stuff offshore from your office. Just partner with them and say, these are the requirements we have for our hardware. I've been in the outsourcing side, I've had clients send stuff to India, for example, and it just never arrive.
(27:40):
So you don't want to start doing it with hardware. That was with Virginia Peanuts as an example in a care package, when a care package could get sent from India to the team member within a couple of days for a fraction of the cost, but they really wanted their Virginia peanuts in there. So they're pretty good, even small elements, but they were looking at the cultural side. I mean they were trying to do that, but there are things where it sounds silly, but now they had a headache internally because now they're tracking a package. A partner's time is not worth tracking a package going to India. So having a partner that you can rely on to put together those for every employee you take on is a lot easier. So that's where it's definitely crawl before you start running in a lot of cases, take it a step at a time, but it's great to have the mindset of, especially if you want to grow a big team of over there offshore, wherever you go, yes, you want to have some ownership down the line, but start talking to the vendor that you're working with as well to figure out how can I do this?
(28:41):
Is there a way to actually build my culture in there compared to having an imbalance between, and again, just using an example, could NCIA and my firms culture because again, sometimes that may be difficult to merge between each other, but you need to have those conversations upfront to figure out who that right provider is and wasn't saying Kristen's model is like that. That was just an example. But you've got to have those conversations and you should have a plan in place if you want to do that.
Danielle Lee (29:10):
Yep. Do you agree with that incremental approach?
Hitendra Patil (29:12):
Yeah, absolutely. So we do get clients who when the recruitment model and they went and hired themselves, now you're managing that world team and office and all that. And if you don't have the bandwidth as a smaller firm, you get into trouble very soon and then it's okay, we just cannot manage it. Let me find a vendor or a partner. That happens all the time, but at the same time, when you're going to be going to a vendor and trying to outsource something, you got to first know, okay, what am I expecting out of this? What is it that I must say, okay, this is non-negotiable below this. I'm not going again, the same story. If I'm going to be reviewing the work of an employee 10,000 miles away, I don't have much of a time. Then you're just going into emailing. And I've had situations in my previous organizations where people say, okay, whatever mistakes you do, we'll just correct it.
(30:05):
I'm not going to tell you what we did. So that means that gap exists again. So this is a little tricky thing. If you want to really grow this relationship and you are growing your form, then you better have all the processes really. Well-defined means I have clients that have, let's say six people on shore and 20 people at my end. So those six people are just client facing people. They exactly know what has been done inside the systems. They know based on what we communicate to them, here is what the inside that came in here is what needs to be. This is an exception for that matter. So if that communication is not there, you're going to be, okay, I got this. Okay, they all went to sleep in India. Now who do I talk to? Right?
Kristen Keats (30:45):
Yeah. We find that doing, when we've worked with our India teams like doing a loom video or doing any kind of things like that has been a great tool in really giving that feedback because yeah, otherwise you're just going to see they're going to make the same mistakes. And it's interesting, what we do with clients is, so we've got the debits and the credits, but some things are very client specific that someone wouldn't just know necessarily from getting into their QuickBooks file. And so I think the more that you can have a practice management system that really documents all the steps specifically for that client, the specific things that you're going to need, I mean, the more granular in detail that you can get, the more successful someone is going to be, and it'll be just less frustrating for everyone. And so it's funny because it's like you'll learn to fine tune your processes because every time someone comes with a mistake, you're like, that wasn't in my step. So now I got to add that step to my practice management. So it's continually evolving your steps that you're going to do to provide for that team member to be successful in their role.
Danielle Lee (31:43):
Great. And we've touched on some already, but what are some other major challenges you both have seen firms encounter and that you've encountered with outsourcing?
Laurence Whittam (31:52):
So I can start with communication being a big one is probably one of the major problems that comes up. And it is partially from, I say communication in terms of the channel and the expectation of that. A communication like, okay, when do I want them actually communicating with me? How do I want them communicating with me? And that means do I want them reporting and giving me a call every time they have a problem? Do I want them to document all the problems and then send it to me every day and we're going to go over on a call at the end of the day? And again, those types of things. Build relationships with those team members and make sure that there aren't gaps that they're missing out on and stuff. But I've seen a lot of firms not have any process around that communication channel.
(32:38):
They're not educating on this is how we want it. So if you don't tell them how you want it, they're going to do it the way that they do it and it may not fit the way that your firm communicates. And also individually, there may be people in your firm that communicate better in certain ways. There may be ones that really don't want to get on a call throughout the day and work better doing their work and then sitting down at a meeting at the end of the day or reviewing a set of notes and problems that came up and then going over it in the morning to communicate how to provide that feedback. You're going to have managers that act differently as well, both internally and in your offshore team. So this is where that understanding of expectations and understanding of the people that you have is very important as well. But definitely communication is a big key aspect to making it work.
Hitendra Patil (33:26):
I think as a general rule, expectations mismatch becomes a big problem right up front. So essentially what we are saying is, okay, you're talking to a salesperson of an outsourcing vendor, if you will, and you kind of say, okay, this looks good. Price is within our range. Good. So now, and that's when we say, okay, as an accountant, you speak to my accountant, not to my salesperson and define the scope of work as detailed as possible. We have huge templates in terms of what should be defined in each type of workbook, keeping payroll, whatever, whatever. And generally we find it, most of it fits and sometimes it's okay, we are different and we need it this way. So sometimes the reporting is different. So if you just leave it at that time, okay, you are an experienced vendor, you know what you do, so let's start. And then you say, oh, you don't even know this. That doesn't work. So the scope of work becomes a very crucial aspect before you actually start sending any work offshore.
Kristen Keats (34:26):
Yeah, I agree. And I think as far as mistakes, I think that you have to be committed to the process at the beginning because there's going to be bumps no matter what. All the situations we've been describing are bumps on the road. And so I think the mistake that a lot of folks make is they maybe give it a month or three months or something. They're like, well, it didn't work. And I say, well, if you went to hire a receptionist in your firm and that person didn't work out, you wouldn't say, oh, I'm not going to have any more receptionists. You're going to hire a different person, or you're going to try something else, or you're going to work with your partner to say, okay, what can we do to either make this person fit the role that we need or tune up our processes because these folks have done it. These folks have the experience and they've worked with a hundred different firms, so they can help you really craft your processes better, figure out where the holes are and make it a successful process for your firm. But you have to make that commitment at the beginning and not just say, well, we'll dip our toe in and try it and see if it works. I can guarantee something's going to go wrong, something's going to happen. And so you just have to be committed to see it through.
Danielle Lee (35:33):
One question I had, and starting with you, Kristen, from the practitioner perspective, and maybe you kind of already answered this with your last question, but what is something you kind wish you knew or were better prepared for before you started your journey in outsourcing?
Kristen Keats (35:45):
Oh my gosh. I mean, I made so probably so many mistakes, but what I should have known from the beginning, and I think that especially for a smaller firm, owners, we're used to kind of doing everything in our firm. And what I learned is I am not good at recruiting and hiring. I'm just not. I like most people when I talk to them, I believe everything that they tell me. And so I really needed a level of people in between me and the person that we're actually going to bring on. And so that's why I do emphasize being really specific in your job description because that way I can take that to my recruiter and say, this is exactly what I'm looking for, and they can bring me one to two people and be a little more objective about it than me because I liked them and they made me laugh during this or something
Danielle Lee (36:31):
Perfect and Hitendra what have you?
Hitendra Patil (36:33):
Yeah, I think one of the most common pitfalls is when the firms do not have a handle on how much work volume they plan to outsource. If things works out okay, say, okay, how many tax returns or how many clients you have, and out of that, how many you want to outsource, what's the kind of number of hours you're looking at because somebody else is doing that capacity planning. And it's same thing if you're going to hire five people because you think that you have worked for five people, then that's how you plan your capacity, but now you're dipping the toilet in the water. You say, okay, I might send you 50 tax returns and things come back, great, okay, tomorrow onwards I'm going to send you 50 tax returns a day. That's not going to happen. So you're not committing, but you're at least giving the vendor a kind of a roadmap so that they can plan their capacity.
(37:21):
Some vendors will have ready capacity, but again, nobody invests in too much of ready capacity. That's just not feasible or viable at all. So everybody needs that kind of a little bit of a lead time. So you help them plan so that you can plan better. So you better have that volume estimates, which generally you have, but when you go into an outsourcing relationship, you got to be ready with some kind of pot. If it works, here is how much I will go, I'm not going to outsource more than 30%, for example. That's fine, but if you say, I'm going to just outsource 2% and tomorrow send 20% in four months, which has happened to me, people got so happy with everything and it's okay. 17 more clients do it tomorrow. Yeah.
Kristen Keats (38:02):
We have to keep in mind that you guys have to also hire and train and onboard people. You need some lead time to do that if we're going to send you 500 tax returns
Hitendra Patil (38:11):
To keep. And even today, many firms wake up in middle of February, Hey guys, I need tax assistance.
Danielle Lee (38:18):
Oh my gosh,
Hitendra Patil (38:18):
Can you do it? You have capacity? Well, not possible.
Danielle Lee (38:22):
Nothing close.
Laurence Whittam (38:23):
Yeah, I mean, I'll touch on two quick points there. One is definitely timing, right? I mean, I think the need aspect a lot of firms focus on is I need somebody now. They wait until, and again, discussions go on throughout the year with these vendors. You come to the conferences, you talk to them, you start figuring out, but the flows, let's say, especially with tax, right? But there's a lot of seasonal type of work that comes up and the need is there, but they don't try it during the extension season. They go and wait until January to really take somebody on, and then really you only have a month to train them, and you don't really have any active work during that time as well because the clients haven't provided. So there's very little training. It's more onboarding that goes on. So it's actually better to think about it from an investment perspective starting for the extension season.
(39:10):
Then you have, even though you're not going to have as much work between November, December, January, you now have three months to go over what the results were and how they actually performed and work on those aspects so that they're now coming into the actual busy season. You can now utilize them a lot better, and also your team is less stressed during that period of time to actually give them training and help and work on those. Then when they just start working with 'em in January, going on February, it's a stressful time for everybody. So more than likely, as they stop working with them, they stop sending returns. They don't want to provide the feedback, they shut down and they say, I'll then just correct everything and I'll start passing it along. That way it never improves that way. So now you've had a bad experience, you're not going to outsource again or you're going to go to another vendor.
(40:01):
The grass isn't always greener on the other side. It's the same talent that you're going to receive. There may be a slightly different process, but if you're going into the same areas, there's a lot of talent in a very specific area in different countries, you may have the same exact same person working on it, following a slightly different process, but it depends on how well you guys prepare yourselves to do it. So it's that aspect. And the other piece for firms, definitely one of the biggest challenges that I hear from, especially managing partners and partners leading it is around the actual legal side of it, especially when it comes to tax. So this disclosure piece, and it's somewhat of an internal voice saying, if we do this, our clients are going to leave. If we send them this one page disclosure that we have to include for 10 voice, they're going to see that and they're going to be like, we don't want to work with you anymore.
(40:54):
I can tell you the firms that do now, the firms that do it properly and just put it in their engagement letter and they've got an automatic engagement letter, they have very good success rates. The clients aren't going to just come in the door and say, why are you doing this? You may have one or two people come to you and ask the question. You may have some say, I don't want to sign this. You say, okay, no problem. Right? Or you say, okay, but we've got to charge you X, Y, Z more because now we have to have this piece of it prepared on shore. You also have to make sure your partners and directors who manage the clients understand why you're doing it and understand how to answer those questions. Because I've also heard experiences of firms that didn't do that education across the firm.
(41:34):
The managing partner said, this is what we're doing. They started to do it, and one of the partners got all the calls from his client, and he only had 10% take rate for his outsourcing. Every other partner was about 75 to 80% in terms of getting the disclosure sign. One partner had a 10% sign rate, and why? Because the partner got a call. He called every one of his clients actively and said, you don't want to do this outsourcing thing, do you? So yeah, okay. So if you approach it like that, they're going to say no. So it's about making sure that your team is now educated on how to do that as well, so that if the clients ask those questions, they're fully on board with it. It's not just about delegating and saying, yes, we have to do it this way. Everybody across the firm has to be on board with the why you're doing it, understand the goals, and then you'll have a much better success rate doing it.
Kristen Keats (42:27):
It's a lot less scary than I think we feel like it's going to be. I mean, at first, I think the mistake that we made at first was giving clients the opportunity to opt out of it, because then it was a nightmare within our firm. We did that for one season and we're like, we can't do this anymore because we just rely on our team so much. So now we do everything on the front end to disclose to our clients to let 'em know. Like I said, our team is on our website. We have a whole blog article on our website that we refer to folks to about why we are doing, I mean, I'm in a small town in Oregon, so a lot of our folks had never even heard of any kind of outsource. They'd never come in contact with that before. So it's about educating our clients.
(43:06):
And to your point, the adoption rate was shockingly high because our whole team was bought in on it. Our whole team supported the idea. There wasn't one person that was like, oh, yeah, no, you really shouldn't do that, because we all believed in it. So it was really important to have that buy-in from our whole team. But yeah, I think the 72 16 puts a lot of people off and it scares a lot of folks away. Like, oh, I'm going to have to disclose to my clients. It's like, yes, you are. And you can tell 'em why and you can get 'em. You can align with your clients because guess what? Accountants aren't the only ones that are having trouble finding employees. Once I've gotten through the spiel with some of my clients, they're like, well, how do I do that? Can I find people this way too? Buy in on the other side even. Yeah. Great. Well, I want to make sure we reserve time for questions. Does anyone have any questions they want to pose to our panelists? I've got more of my own, if not, but All right, well if anyone Oh, here. We can always just need one, the microphone. Need a mic on its way because we don't have the mic
Audience Member 1 (44:10):
Go into. Okay, great. Hello. I was just wondering if anyone wanted to share their favorite person to person experience visiting their team or engaging in the culture. I know Kristen has a couple really great ones, but I would love if Hitendra or Laurence wanted to share as well. We talk a lot about this, but what does it look like when you go there and you visit and you have an experience?
Hitendra Patil (44:32):
So we do get clients visiting us all the time from all over the place from UK and Ireland and whatnot, and they generally time the visits during India festivals, Diwali or the Ganesha. When you see the colorful things in all that, the office itself is colorful, lots of festive atmosphere, and they bring those gifts and they're careful in picking the gifts that are culturally afraid, not just taking chocolates from here, but more importantly, the moment you go and meet the people in person who've been on working on your jobs, you kind of instantly see that connect because they intimately know the work that your clients are requiring from you. And I can vouch for the fact that they all are ambitious people. They want to do great jobs for you. They actually have that cultural nuance of, if I made a mistake, they cannot sleep in the night, so they want to do the right work. So that kind of cultural difference, you only go and see there, but then you'll also find that it's very easy for you to go and talk to them. You don't see the barriers at all because you're just meeting people. That's it. So it's an experience by itself. As you said, the flight is too long though.
Kristen Keats (45:50):
You got to fly business class, just build it into the budget fly business class. It's too long of a flight for coach.
Hitendra Patil (45:56):
If you want to come by, coach, I can sponsor. If you outsource,
Laurence Whittam (46:02):
I'll say it again. I've spent probably about a year of my life in India specifically. I was growing an India based outsourcing firm for about eight years, and the first time I went over was for three months. And I have plenty of stories from that visit specifically. And again, traveling around and again, the team treating me family as such, people were bringing me out every day or wanting to bring me out and I say every day, but we were working the US shift timing the majority of the time. So it was actually two 3:00 AM before we got out in a lot of cases. So I was working, I dunno how many hours, but making sure I could use the US hours and India hours so I could meet everybody. So it was a lot of work, but a lot of fun when I went over, I mean one of the times they, and I didn't realize, but they were like, oh, we're going to go out. So a lot of my time was spent in Ahmedabad, which is in Gujarat state. Gujarat is where
Hitendra Patil (46:56):
The prime minister comes,
Laurence Whittam (46:57):
The prime minister comes from, and also it's a dry state, so there is no alcohol there unless you've got a passport. So you become the most popular person going because when you go in, you can get a couple of bottles of things and you have a certain amount you can get. But I would go in and one of the groups then brought me and said, okay, we're going to go out for drinks after work. And again, forgetting after work is at three 4:00 AM But we went out and then on top of that, we had to drive to the border, which I thought was maybe going to be 30 minutes. It was about two and a half hours. So we got there at the Cracker Dawn, it was like five o'clock and we could just cross the border. And then we were allowed to have a couple of drinks.
(47:40):
And again, these guys all had quite a lot, but I had a couple of drinks at that point and we had some barbeque food and stuff like that. And then we came back. So it was probably about for an hour we spent, there was at least four hours of traveling. Then I had to get up the next day to go to work again. So it was a long time. But again, it's just that they like to do things. They very normal, they want to bring you out. And again, the big thing is they will treat you royalty and family and they'll bring you into their houses and introduce you to people. It's a very friendly culture, not just in India, in the Philippines, in Mexico. They love that you're making the effort to go there, number one. And they love that you're actually spending time with them. So they're just very friendly people in a lot of cases. But that was one of the stories, again, being out a lot, been traveling up and down the west coast of India a lot. So there's lots of things happen.
Hitendra Patil (48:35):
It's much easier in Mumbai to find alcohol.
Laurence Whittam (48:38):
You can get off the plane and you can find it.
Hitendra Patil (48:40):
Right. And that reminds me, the Indian food, what you get here is very different than the Indian food that you get in India. So if you need recommendations, just hit me up.
Kristen Keats (48:49):
That's so good. And you guys have good chocolate there, so why would you bring chocolate to India? Because the chocolate is better in India that you get than what we have in the US. But yeah, I think honestly, that's the best part about doing it. Outsourcing is you're right, there's this immediate connection because you've already done this. You already have something in common. And being able to meet family members and being able to go, I went last year to one of my staff persons, they were christening her son, and I didn't know when you went to a baby christening, it was an all night party in Mexico, but apparently that's how they do things. So Jesus was not surprised, but I was like, oh, we're out until five in the morning for the baby. And the baby was up too. The baby was partying with us. Good for that baby. And it's like the longer you have your team, the more you get to know them and the more you can visit or have them visit, it just really cements those bonds.
Hitendra Patil (49:39):
Yeah, so consider the outsourcing vendor as your baby, then you're fine.
Kristen Keats (49:46):
It's an all night party, right?
Hitendra Patil (49:47):
Only
Danielle Lee (49:49):
I know we have limited.
Audience Member 2 (49:49):
We have three actually. Okay.
Audience Member 3 (49:53):
So Kristen, a question for you. So we've tried shoring before and one of the issues we have with security breaches, so the offshore team was actually accessing bank accounts, and although there were security protocols in place, one of the major banks locked out all of our clients. So I'm curious for your offshoring, for your team, do you have a local person maybe pulling down bank statements so that your offshore team is only coding? Or maybe talk a little bit about that.
Kristen Keats (50:26):
So we have actually kind of two levels of security. So when we bring someone on, they've gone through a full background check and full background check in Mexico is way more intensive than what we do in the US, way more intensive. So they've been through that. We have an IT team in Mexico that has their computers are pretty locked down in what they can and can't do. And then I also have my IT team here in the US that oversees the access and all those kind of things. Having said that, I personally don't feel there's that much more of a risk by having our team in Mexico or in Mexico access the bank statements than our team in the US honestly, because I feel like we're just as likely, once you've gone through all those vetting processes, there's only so much you can do. You can't prevent fraud completely in the US and you can't prevent it completely in the outsource situation. And
Audience Member 3 (51:23):
Maybe breach was a bad word. So the system was set up to where it was, banks were reading it as being accessed in the us the platform field. So banks identified as being accessed offshore.
Laurence Whittam (51:36):
So there are some restrictions, right? I mean around even some software that you may use, they'll have restrictions. So you have to make sure you mention this is the IP address it's coming from. Again, major banks. Can you do that? Probably not. Right? So you'll just have to put workarounds around that. For example, by having a VPN and the accessing from a specific network, yes, you can do it that way. VPNs aren't the most efficient to work across the board though when you're working with international teams, it becomes lag time. But if it's a third party software that's locking them out, some of them do have geographical restrictions, so sometimes you won't be able to get around that. So you would just have to either get them to access from a domestic computer with the IP address, or that's a process that you have to make sure that everybody understands. No, we're going to have to have somebody domestically pull those to provide them to them, right? Yeah.
Kristen Keats (52:29):
That's what we have had to do that with some banks. Our admin team in the US will pull 'em down and just put 'em on our portal or whatever
Hitendra Patil (52:34):
Geofencing and you can automate the process of downloads and all that stuff. You don't have to really login. For example, you go to, let's say Caribbeans, and you try to download from there, you're still going to have problem. That's because the bank has geofencing. So what do you do then? So you automate a few things. For example, QuickBooks, if it pulls the bank statements in or bank feeds in and all that stuff can be done. So there are ways and means of overcoming these challenges.
Audience Member 3 (53:00):
Thank you.
Danielle Lee (53:01):
Alright. I know we're pretty, did we have anything else before getting a little past time, but
Audience Member 4 (53:09):
Thank you. Talking for offshore models, we are discussing about the culture, about the complete attacks for the client, create value for the client. But I would like to know what kind of opportunities that you can offer for your people in terms of grow up in your professional careers in terms of maybe probably more senior manager position or maybe probably have the opportunity to jump into the firm and work in the US.
Laurence Whittam (53:37):
So if I understood that correctly in terms of what's the career paths that a lot of the outsourcing firms can offer their team members, is that right?
Audience Member 4 (53:45):
Yes. Benefits, opportunities to your people.
Laurence Whittam (53:48):
So I mean, it's going to vary from vendor to vendor at the end of the day. I mean, again, there are very specific benefits that have to be in place for certain countries as well that have to be provided by the company. There are also ones that are just best in class to say, if I want to get the best talent, I've got to offer certain benefits to them. And again, this is where when you think, I would feel like a lot of the vendors that I know and do due diligence on a lot of them, but it's about we want to attract the best talent. So if you want to attract them from an EY, Deloitte or any of the larger firms, you've got to offer the best benefits to them. You've got to offer 'em a competitive salary. They're not going to leave an EY and go somewhere where they have zero career path as well.
(54:31):
So I see a lot of firms having very tiered structures as well. And again, a lot of countries outside of the US, they work very well on a process side of things as well. And they like a hierarchy essentially to work in. So is if you actually look at EY structure, for example, they have a staff, I think there's a staff one, two, and three over here. I believe there's five staff members over there, for example, of different tiered levels. So they've actually expanded it in certain countries because they know that they need to give a raise every six months to a year just because of how the culture is. So it really depends on that side of it. But a lot of the outsourcing firms invest a lot of money, time, and effort into building out career paths because people are their asset at the end of the day. So that's where they put a lot more thought into it because they have resources and they're scaling in a lot of cases than necessarily firms over here because they're run by partners who are also doing the work. And they don't have necessarily, everybody can't afford to have a chief people officer that's just focusing on the staffing side of things. For example.
Hitendra Patil (55:39):
So in our case, we are a little larger company and we have our own internal training academy. So it's not just about QuickBooks training or a process training or a tax training, it's about leadership skills. It's about Excel skills, it's about AI and whatnot. So everybody who wants to go upwards in the hierarchy, they know that it's not just technical skills that is going to take them higher up. They need to develop all round capabilities and not necessarily they'll get that in every single outsourcing company. The moment to jump to a smaller company for a middle, let's say 30 percent raised, now, you're suddenly like, oh wait, now I can't do anything. All that they're doing is bookkeeping. So where do you go from there? And plus we do all full scale, right from the basic bookkeeping right up to financial statement audit support and whatnot. So there's a world range of work that we do. So people see that internally. Look, I can aspire to do that provided I become expert in some of the things. So as long as they see that perfectly fine. So there is a lot of upward mobility there in terms of shared numbers. Yeah,
Kristen Keats (56:43):
This question wasn't for me. He works for me. So he knows the answer to that. But I, the point is, it's a good question to ask your provider because not all providers are the same. So you want to make sure that someone isn't just relegated to being a permanent staff person, because I've heard that a lot in some of maybe the less expensive shops. They just keep someone at a staff person forever. And you don't want that. Nobody wants that.
Laurence Whittam (57:04):
And that's the reason why firms may have taken resources off your teams in some cases as well, because they've shown interest in other areas. And if they want to retain that talent, they have to move them into something more interesting. And if you are only willing to provide them a certain type of process and you don't need them to do anything else, that's fine. But you've got to understand that now there's going to have to be a transition.
Danielle Lee (57:29):
Well, the bad news is we're out of time. We're a little over time. So thank you for sticking with us. The good news is there's a cocktail reception. I'm sure some of the panelists would be happy to, if there's other questions that have arisen in your mind, do I get a drink address? Drink first?
Kristen Keats (57:40):
Yeah, just definitely come find me. Happy to answer any questions.
Danielle Lee (57:43):
Yeah, so thank you. I want to thank Kristen Hitendra and Laurence for all your insights, and thank you all for joining us.
Track 2: Alternatives to Hiring
June 5, 2024 2:18 PM
57:54