This Journal of Accountancy article was mentioned in last Friday’s Footnotes (*ahem* Footnotes a wrap-up of the week’s accounting news from other sources without the sassy GC commentary and is published every Friday at 5 pm Eastern) but honestly it deserves its own article in case anyone missed it.
In “Offshoring for CPA firms: The hows and whys,” JofA throws out some figures on outsourcing — both foreign and domestic — based on responses from its MAP survey and sticks to the official line about how the CPA talent shortage is forcing these poor firms to look elsewhere for talent. We’ll ignore how much cheaper offshore talent is compared to their onshore counterparts. We’ll also ignore that firms are laying tons of people off in the US while greatly increasing their headcounts in other countries and not even trying to hide it (see: Firms Really Aren’t Helping This Pipeline Problem, You Guys). Anyway, the AICPA numbers:
Of the more than 1,100 firms that participated in the AICPA’s 2023 National Management of an Accounting Practice (MAP) survey, about 30% said they outsourced domestically and 25% said they outsourced to offshore workers. Another 14% said they planned to start outsourcing domestically, and 12% said they planned to start offshoring.
The CPA talent shortage and an increase in demand for accounting services in the United States are prompting many firms to go beyond their traditional hiring practices and explore the global talent pool and staffing across time zones.
As evidenced by the article’s title, it’s mostly advice for firms on outsourcing best practices. Blah blah. But at the very bottom there’s a sort of case study about a firm in Atlanta that consisted of five employees when they started offshoring “part of its expanding load” in 2018. At first they used a third-party vendor in India which meant this vendor handled the hiring and training of offshore staff, starting with one person and eventually expanding to three.
The firm’s team members, who were used to working virtually, understood the importance of setting up workflows, processes, and controls before pushing tax return billable hours offshore. The approach proved successful, and within months the firm had offshored enough work to India to keep three people there busy.
Would really love to hear from the firm’s team members here.
But then…
One year into the contract, the vendor experienced turnover. The firm initially switched to offshoring project by project and then decided to become the employer of record for its India staff. The firm hired one employee in India they had worked with the year before who was groomed to become team leader, recruited eight others, and took over onboarding, training, and managing the offshore employees.
Man, that leader was really putting in work eh? So fast-forward to current day and they’ve got eight staff of their own in India. And they’re offshoring 12,000 hours to India per year. The offshore staff are doing the preliminary work of gathering documents and drafting emails to clients requesting any missing data that is then pushed back to the onshore manager who communicates with the client and ultimately completes the tax return.
According to 20 seconds of Googling, the median salary for a tax accountant in India is ₹ 600,000 ($7,109 USD). Meanwhile, the average for a tax associate in Atlanta is $61,866 a year. Would ya look at that, 61,866 divided by 7,109 is approximately 8.7. Tell us again how this is because of the CPA shortage when the shortage itself was caused in large part by consistently pathetic pay.
Clients simply don’t want to pay the fees necessary to do it all onshore. Same way consumers don’t want to pay enough for their construction or landscaping projects and food to have it done by US citizens or legal immigrants.
The majority of entry level audit and tax work is one step above data entry, and yes staff need to do that to learn how to do more complex tasks, but it doesn’t take 150 GD credit hours!
I think there’s two pieces to this. The first piece is the one you mentioned and the second piece is that all these clients are probably former “possibly bitter” employees of these PA firms.
I’m sure everyone in industry knows how much their tax team loves to rip apart the invoice from a PA because they know how it was drafted and they ultimately know who gets a lion’s share of the increase…so it’s another issue with the profession eating it’s own tail…