Outsourcing complex, professional tasks

One of the questions that CPAs ask frequently is “My clients pay me for my professional expertise, how can I outsource that to some clerk in India?�
The answer is that while the CPAs work needs professional skills, not every part needs equal skills. Let us take the bread and butter of CPA practice – income tax.
An income tax practice provides the following services:
1. Strategic tax planning and counseling, such as entity choice.
2. Projections of taxable income and preparsation of estimated taxes.
3. Preparation of income tax return.
In every case, if we segment the work into its component parts, we find that there are areas where a less experienced person can do the job just as well. Let us look at the preparation of tax returns.
Here is how one of our clients analyzed the process of doing the job in-house.

Step Description Time taken in minutes

1 Clerical staff time copying files 6
2 Time on data management, indexing the documents,
preparing control totals etc. 57
3 Time on data input 52
4 Time on review by the preparer 16
5 Review time by partner 18

Total time in minutes 149


Clearly items 1, 2, and 3 can be done by a non-CPA. Steps 2 and 3 account for 109 minutes of the 149 minutes or 73%.
This 73% can be efficiently outsourced. It is very economical since the fee for tax return preparation by the outsourcer usually approximates 15-20% of the fees the CPA charges the client.
The client gets the same valuable service from his CPA. In fact by outsourcing the CPA has now freed up the time to devote to less obvious areas where the CPA’s expertise can add real value
One can go one step further. Let us take the case of a really complex tax return. The truth is that much of the data organization and data input work can be outsourced.
Consider a much more complex tax return that we prepared for the same client.
On this project the CPA’s client did not complete an organizer, and we had K-1s from 21 different entities, and 1099’s from 12 separately managed stock brokerage accounts.
In this case, the CPA sent us the 21 K-1s for summary and input first. As the reader might guess, there were a multitude of different types of income and deductions contained on the K-1s.
The next segment involved the summary and input of 12 separately managed stock portfolio 1099s which consisted of over 300 pages of detail and included different types of income such as interest, dividends, straddles, and capital gains/losses.
At the completion of these two segments, we provided the CPA with a “draft� of the tax return, which consisted entirely of the data from the 1099s and K-1s. After review the CPA then provided us with all of the other data for input: estimated payments, W-2s, itemized deductions, etc. This was the final segment of the input process.
This process was very efficient for our CPA client. He removed at least eight hours of time from his staff, at a cost to him of $200 for our service.

The benefit to the CPA: not only did he charge his client the same fee but his staff had an extra eight hours to use in ways more productive to the client than just doing data summary and input. He could use the time for consulting to their best clients and marketing to obtain more clients.
The bottom line is this: outsourcing can be used to remove approximately 75% of the time spent on an income tax return (the data handling, summary and input time) in exchange for a cost that is 15-20% of the fee charged to the CPAs client. That is the definition of both efficiency and effectiveness.
As our client has demonstrated, a CPA who embraces outsourcing as a strategy, can find ways to use it even in areas that would normally be considered too complex for outsourcers.
It really comes down to a partnership between the outsourcer and the CPA. Both parties must be willing to try new ways of doing things. We at Indevia Accounting Inc., take pride in serving innovators like the client we have highlighted above.