Does Outsourcing Change Accounting Firm Culture?

Welcome to the Accounting for Innovation podcast where we explore cutting edge strategies and insights into the world of accounting and finance. Presented by Decimal and the Radical cba, each episode dives deep into industry trends. Whether you're a seasoned professional or a budding entrepreneur, join us as we unpack key concepts and share practical tips to drive success. Today we're talking about outsourcing and accounting best practices and pitfalls. And we're really going to be talking about what it means to have outsourcing in your firm for your team here in the US So our last episode we kind of talked about what it was like, you know, culturally to hire people overseas and how you kind of worked with them overseas. But today we really want to focus on what does it mean to your team, how does it affect your culture here and how do they kind of work with the team. So Matt, how does it happen here?

Well, I, I think this is a really important conversation because I, I think a lot of the conversations around outsourcing and I'm a, a proponent of this. You talk about the business reasons why it's good for you as a company or as a firm or as a partnership, but I, it you also need to talk about culturally, what does it mean for your team in the US and this is where buy in is such an important thing. If you're going to make a business decision to do it, you need to get buy in from the team in the US that's also helping. And because effectively you're growing your team and you need the culture to align, it's no different than hiring somebody in the US you need to make sure that they're going to fit with your type of culture. And, and I think a lot of people just think of it more as an asset addition rather than a cultural addition. And I actually have a really good example of this. A couple of years ago, we bought a company from kpmg and for a lot of tasks they were using college kids and it was great. It worked out really well for them from a cost and quality standpoint. Our model was much more to use people in the Philippines before instantly switching everything and doing it. We spent a lot of time with the remainder of the US team talking to them about the benefits, allowing them to get to know some of the staff in the Philippines and effectively getting their buy in for the type of work. And it made that integration in that flip much, much smoother and much, much better long term.

Yeah, I think it's so important because I think like anything else, if you're going to jump into this and you don't have buy in, your team is gonna maybe not intentionally make it fail, but make it fail.

Yes.

They're just not like it's not their priority or they don't see the value in it for them. So maybe they don't set out to make it fail, but they don't really set out to make it succeed either. And so by not setting it out, setting out to make it succeed, it just kind of fails because like nobody cares. And so I think it's really important as we talk about this is how do you make it successful overall and what does that mean for your team?

Well, and I think this is where it's just like when you hire a new group of people, if you were going to hire those college kids, you would have to really, to make that successful, you would think through like how are we going to use them, what are they going to do? Who is going to oversee that, how are they going to work with person X, Y and Z? You have to think about the same thing with outsourcing and with hiring those people in other countries is how is the work relationship going to go? Who is going to do what, how are they working together, how are they overseeing things? And that's also just thinking through how do I put people in a position to be successful. Because like you said, if, if you have a team that doesn't have full buy in, even if they do, if they don't know what to do, they're going to struggle on how to do the next step. And so you have to think through how do I position this to be successful.

And I think you need to think about like all the pieces of it. Right. So there's like this lack of communication and the cultural things that we touched on last, last episode. But I also think what's the expectation of this team communicating with the other team and do their hours cross over at any time? Right. Like I've worked with global teams before and we used to have our stand ups at like 10am and everybody had to be there. And yeah, it was 10am for us, but whatever time it was for them. Right. Like so. And is there an expectation that they will work together in sync at any time versus Async? Right. Because again there's no right or wrong answer. But it's how you're going to manage all of this work and how your team wants to effectively work with the other team or the, the, the extension of your team. Right. And so I think these are the, the tactical things that people don't think about. Right. It's not until you have a global team. Then you're like, oh wait, well like if we want to meet at 10:00am That's 10:00 o' clock their time at night or whatever time it is and is that really the right time we should meet? Or like, you know, it's like kind of the silly stupid stuff, but that's the stuff that actually makes a big difference when you're trying to figure out how to get the team to work together.

Well, and all right, let's throw this out there. The two most popular outsourcing locations in the world for accounting are India and the in the Philippines, period. Those are the two most prevalent currently today, which means that they are about 12 hours behind 10 to 12 hours. So your first decision is, am I going to hire them on night shift or am I going to hire them on their day shift? And if you're going to hire them on their day shift, which is your nights. Has your team ever worked asynchronously? Think about this. You have work that requires input. So your team in the outsourced country has a question, somebody wakes up the next day answers that question. Well, that question isn't answered till another 24 hours. You have a 48 hour turn on that question. And you have to think through that when it comes to asynchronous work and time framing. And so what is the best decision for you? And I can tell you that there are plenty of companies that have successfully done asynchronous work and there are plenty of companies that have hired night shift. So it's just a matter of what is going to work for you.

Right. And I think that's really important. It's just like what's, what's the best practice for your firm? It's not one or the other. And one is the right way and one is the wrong way. It's just, you know, what works overall for how you work. Right. Because there are, you know, there are firms in the US that still make their accountants sit at their computer from 9 to 5 because they expect availability to get work done. And like from when I had my firm, I used to have stay at home moms working at 4 in the morning or 5 in the morning. And like we nev. We were always async and like then you know, there are still firms that are like, oh, if they're not on teams from nine to five, I can't work with that person. Right. So it 100%, it's just what, what the Expectation is for your culture. And again, there's no right or wrong answer on it.

So it's interesting because culture and this communication we've talked about actually is a really good lead in to quality control. And I'm interested, Jody, what, what do you think people should consider when it comes to managing quality of output, quality of work in an outsourcing type relationship? Because that's also communication based.

So it's interesting to me too because it depends on how you're hiring people. Because if you have like just a regular team member sitting in an office in the Philippines, but they're part of your team, you may have like, it's just like a one on one relationship. Right, right. But if you actually outsource something and there's like a process around it, a lot of times there's a QC over it before it even comes back to you. So it depends on like the type of outsourcing you've done with like your outsourcing company. Right. But I would think if you're truly hiring a person who is an extension of your firm and they're just sitting in an office somewhere globally, that you need to train them just like you would train another person. And now, you know, we all know that things get like, people get busy and so they just like fix a mistake and they move on. And sometimes it always doesn't get communicated back to the other person. And so they continually make that mistake because, gee, you never told them they were doing it wrong. Right. But that's just poor training overall. That doesn't matter where the person's sitting. Right. But I, I think that's like, again, you have to be intentional about training this person because otherwise your QC is never going to like improve because you didn't train them well.

And I think that's one of the hard things for a lot of particularly smaller firms. But I would even say bigger firms that test out outsourcing, there is an assumption of, oh, the quality is going to be there. Like these I hired high up. And even the cost structure is a third of what I pay somebody in the U.S. like, I don't need to worry about quality control. That's just wrong. You have to think about the entire work stream from beginning to end and putting people in a position to be successful. And if you view it in that way, also if you view an outsourced hire as equal to a US hire, that will help you think through how do I train and teach.

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Well, and I also think you have to back up here where you think most firms, smaller firms especially, really have no documented processes and no sops. So, like, if you don't have any of that, it's very hard to train a person sitting next to you, much less train a person in sitting someone 12 hours different. Ready?

Yes.

So I think we got to, like, kind of step back for a minute and say, okay, what are we really training? And, like, do we have to start with systematizing and kind of putting processes around the work that we do internally? And you could do it with an outsourced person as well, kind of do it, like, concurrently, Right. Like, as you figure it out. But that's just good business that has nothing to do with, like, whether they're outsourced or not. But in most firms, it hasn't been done. It's all in the partner's head. It's all in the manager's head. No one has, because, like, you don't have time, right? Like, you're so busy doing client work, you forget to document it. Like, and so the reality is, is you as a business owner have to step back and say, look, if I want to build a business and not just be a solo practitioner or not just kind of live on a whim and. Because if that person gets sick, like, then who picks up that work anyways? And you have to hire a new, like person immediately. That new person knows nothing of what the old person did anyways. Right? So that's kind of like the redundancies that small firms have to really think about building into their practices that maybe they haven't thought about in the past, or maybe they haven't focused on the path past, but they have to start at least a little bit at a time. And I think that the thing about it is today is it's a lot easier to do today than it was five years ago. Right? Like, the, like, loom and scribe and all those tools make it very easy to do a lot of that documentation that in the old days, you used to have to hire a person full time to Figure out how to document, process. And today, you know, you can spend 10 minutes and get something documented pretty quickly.

Yeah, and let me, let me actually throw a little flip side on that because I just talked to a brand new firm owner the other day and he was thinking about, do I hire some, my first hire, need to make my first hire, should it be in the Philippines or should I hire somebody in the US And I said, hey, either way, do the documentation, do all this stuff if you can. He goes, I need somebody now. I was like, okay, well, number one, you're going to really suck at it the first time. We all do. We're none of us are very good with that first hire. We get better every time. It is more cost effective for you to hire that first person in the Philippines and to work through all the stuff that you need to do than it is to hire somebody in the U.S. so your risk profile in that first hire, I said just go hire that person. If you're overwhelmed, go hire that person. But document, because you're going to end up hiring more and it'll be easier the next time. But I said your risk profile is much lower if you hire that person in the Philippines to help you than it is the US staff person. Also, it will go a lot quicker because it's really hard to hire in the US Right now.

For sure. For sure.

So one of the things that I'm interested in your opinion on, Jody, that I think a lot of people struggle with is communication. Person to person, US team versus the outsourced team. What are some of the ways people can improve communications between team members in other countries that can benefit the firm or company as a whole?

Well, I think it has to do with having set times to communicate. So whether it be a daily standup or every other day or whatever, you know, get that consistency and meeting times and actually talking with them. Because again, a lot gets lost over slack and it's not intentional, but it happens. And I think it's about consistency and it's about making sure that you're one team, right? So like depending on how your teams work together on various projects is maybe it's having the same. Just like in the US you'd have like the same three people working on a project, right? Well, again, if you're going to have three people on a project, you know, it's two people from the Philippines and one person from the US and you know, make sure that. Because like anything else, some people like some people, other people like other people. Right. Some people get along Easier. So, you know, not everyone is everyone's cup of tea. So, like, you know, you want to make sure that your team members can get along and they need to develop deeper relationships. And the only way that's going to happen is by kind of facilitating those relationships.

You know, one of the other things I would say is that one of the first things we did when we reached three people in the Philippines was we put on a remote cultural event. I think we played a game of Pictionary and we included them. And it was just, I think shared work, by the way, bonds people together and builds relationships better than anything else. But it goes a really long way with your outsource team. If you're effectively paying them for an hour to have fun with your team, that is a really good cultural thing that they aren't used to that can help bond them to you and help make it easier for your teams to bond together and is just simply doing random things that can help. And there's one company we used, I think called Confetti, and they help with remote events. And that's been a great way to help bond the teams together is through just doing that every once in a while and being a good person.

Along those lines, you know, with working with remote teams, regardless of if they're overseas or not, one of the things that we found helpful is just opening up like a zoom meeting and working side by side, even though you're not talking, is you're just kind of hanging out in an office together online and you know, saying, like, for two hours on Thursday afternoon, from 2 to 4, come join me in the hangout and work on your work together. And I think that that goes a lot to culture building as well, regardless of if your teams are sitting overseas or not. And I, I thought it was kind of funny when we started doing it. But, like, I'll say that the younger generation is used to, like, just kind of sitting side by side, like in zoom meetings, like, and they enjoy it. So regardless, I mean, that's just a remote teen thing that I found, like, kind of, I'll say silly, but everybody seems to love it, so. But again, if you're by yourself all day, and it's one thing, a little bit off topic here, but it's one thing if you're a leader and you're in meetings all day versus someone who's doing more tactical art work all day, those team members don't get the inner social interaction that happens if you're in meetings all day. And so for them that you Know, a couple hours a week is actually, you know, exciting.

So we talk a lot about how in an out, in a company that is remote only, people start and end their day on an island and it's our job to build bridges. And so we talk a lot about how do you build bridges and how did you today? And I think that's important, remote, outsourced, etc. So, Jody, pivoting really quickly. There's one concern that I hear from a lot of accountants and I'm interested in your thoughts. Data security. What are the worries? Should they be worried? Are there concerns? What do you think?

So you need to be data security concerned about wherever your team member sits. It doesn't matter, it's not an outsourced thing. And like whatever, you definitely have to make sure that whoever you're using, you know, has like kind of gone through that audit, right? I would say most of the out the, I'll say the legit outsource providers, right? I'm sure there's some sketchy ones, but the legit one. And a lot of them are spending a lot of money marketing so like you could find them pretty easily. They have like crazy security concerns where like the people can't go in with their cell phones, right? Like they're kept in lockers, right? Like they're way more secure than we are in the US and just walking into an office and putting your laptop on your desk, right? So you definitely have to do your due diligence. But I would say that the majority of companies, as long as they are a solid outsourcing company, have way more security than I would say probably the person you sent a laptop to who's working in their home office.

You are 100% much more likely to run into a security issue related to a US employee then you are an outsourced team member. I'll also throw this. All of our team members are remote, period. Even in the Philippines, even in the four other countries where we have employees so they work from home. There are ways that you can make devices secure as well. Rippling does a good job. Apple has some stuff. There are plenty of ways that you can secure data through software and make it an effective tool for you. And it's just a matter of being intentional about it. But I do think a lot of the old school security concerns. The other thing is I have yet to be asked by a client about the data security of our team in the Philippines. I've been asked about my SOC2 compliance and all that stuff which is included in it, and that's fine. But client to client, on a individual engagement basis, it literally has never come up well.

And I think what is different today than was like, I'll just say even like five or seven years ago is all these smaller providers who have the sophistication, like, rippling, like you said, who really can do a lot more, like data security. So it's not like you have to figure it out yourself. Whereas I think that's like a misconception. It's like, oh, my gosh, I don't know how to do days of security. How could I even begin? There are so many providers who can do it for you, so you don't have to worry about it. Right. And they know how to keep the data secure. So it's just a matter of connecting with that provider.

I agree. I mean, the reality is outsourcing is here to stay. It is a great leverage point for businesses, and it provides great opportunities. You shouldn't be afraid of it. And there are a lot of tactical things and people that can help you to be successful, learn from those of us that have made mistakes. And there are plenty of people that are more than willing, like me, to share. And I think it's just one of those things that it's the new normal.