Accounting
A primer for outsourcing for accountants
Sherwood Tax and Accounting owner Kristen Keats was no stranger to outsourcing when she co-founded a Guadalajara, Mexico-based accounting staffing agency about four years ago to help supplement and support her home team in Oregon.
Having previously worked for a firm that outsourced to a team in India, Keats understood the benefits of outsourcing. She also understood the challenges that can arise.
“We had heard that Guadalajara was a great place as far as the number of universities that are there and just the number of people. It is called ‘the Silicon Valley of Mexico,’ so we were excited that it has more of a technology [focus]. So, we looked at expanding into Mexico,” said Keats. “In 2021, I, with my partner, started Cadencia, the outsourcing firm that now has staffed for our firm but we also work with other accounting firms as well.”
Today, Cadencia employs 45 associates, of whom four are dedicated to supplementing the staff at Sherwood Tax and Accounting in Sherwood, Oregon.
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Establishing an outsourced staffing agency like Cadencia may not be the preferred route for many U.S.-based accounting firms; however, there is no denying that more and more firms are exploring how outsourcing in some capacity, whether domestically or overseas, can help them broaden bandwidth and better serve clients.
“[Outsourcing] was almost like a dirty word, I would say, like five years ago,” said Keats. “It was always thought of in a bad light, in my opinion. And now I definitely feel like that has shifted. I feel like it has become more accepted and there is more understanding, more openness to thinking about it, I think, in the industry. If nothing else, out of sheer necessity.”
Laurence Whittam, founder of South Amboy, N.J.-based Impact Global Solutions, which provides outsourcing-related consulting and implementation services, agreed and said, “[Outsourcing] is definitely a moving area. A lot more firms are really interested in it and moving on it. They are investing quite heavily in it, which is great. Even private equity is getting involved in it. I’m seeing outsourcing firms now even being acquired by both private equity and firms as well.”
Further highlighting the growing interest in outsourcing, the American Institute of CPAs’ 2023 National Management of an Accounting Practice survey found that roughly 40% of respondents said they planned to outsource work domestically, and 35% planned to use offshore talent in the future. Among the top-performing firms, 52% said they planned to use offshore talent and half were looking to outsource work domestically.
Finding an outsourcing model
The findings come as little surprise given the staffing constraints that are facing the profession due in part to seasoned professionals eyeing retirement and a dwindling pipeline of new accounting majors and graduates entering the profession.
That being said, it is important to keep in mind that outsourcing entails more than simply broadening the talent pool. To achieve success, firms must have a strategy in place and be aware of the outsourcing models that are gaining traction.
1. Onshoring model. Onshoring is essentially outsourcing work domestically. Onshore outsourcing can be achieved by collaborating with a local entity to handle specific tasks or using gig workers. Some firms may also turn to a contracting vendor to find U.S.-based contractors who can work closely with the firm.
Onshore outsourcing can ease compliance concerns as the talent is well-versed in U.S. regulations and has a clearer understanding of U.S. business practices. However, firms may find there are limitations to the availability of qualified candidates in today’s competitive labor market.
2. Nearshoring model. Nearshoring is outsourcing work to a nearby country, such as Mexico or Canada. One of the biggest advantages is the close proximity of the outsourced talent. This makes in-person meetings easier, if needed, and the time difference minimal — maybe only an hour or two, if any at all. And compared with domestic outsourcing, it may be easier for firms to find available talent.
3. Offshoring model. Offshoring is similar to nearshoring; however, the talent is located much farther away, typically on a different continent. With that can come significant differences in time zones, cultural differences, and perhaps language barriers — all of which must be considered by a firm looking at offshoring.
India has emerged as one of the most popular countries for offshoring due in part to the lower labor costs, strong English proficiency, and expertise in tax, accounting and audit services. The Philippines is also a popular choice for outsourcing accounting services, and South America is rising up on the list.
However, the differences do not stop there. As Whittam explained, there are “a spectrum” of approaches when it comes to outsourcing.
For instance, some firms may opt to build their own captive, while other firms may choose to work with a business process outsourcing services provider to handle certain business functions or processes. There’s also the employer-of-record model, which is when a firm contracts with a third party to hire talent on their behalf and the third party handles payroll, compliance, and perhaps infrastructure like office space and equipment; or a firm may want to leverage a traditional full-time employee outsourcing model, in which the candidate will work for only the contracting accounting firm.
“[Firms] have generally heard the options, but I think the differences between the models that are available is very important for them to understand because outsourcing comes in a bit of a spectrum,” Whittam said.
Hitendra Patil, CEO of Miami-based consulting firm Accountaneur, agreed, and said it is important that firms first determine what it is they are looking to achieve. “What is the purpose of outsourcing? Is it just an inability to hire locally and volume is growing and you need to make sure that you have enough people, hence, you are outsourcing? So there are multiple ways in which a firm decides on how to create that capacity. Ultimately, outsourcing or not is technically a decision of capacity planning,” he said.
As outlined by Patil, firms that are trying to determine if it is time to outsource may want to ask themselves such questions as:
Is the firm consistently missing deadlines? If yes, this can be a sign that staff is stretched too thin.
Is it hard to hire new staff and is staff turnover on the rise? If so, staff may be overworked, overwhelmed, and becoming disillusioned with the profession.
Does the firm lack capital for growth? Outsourcing can save firms money and time, enabling them to fuel profitability.
Is the firm turning down new clients or not getting new clients? If yes, outsourcing can help expand capacity so the firm can provide more competitive, value-added services.
Employ best practices
As previously noted, outsourcing involves more than simply expanding the talent pool. To help firms achieve success, there are several important best practices to consider before diving into the outsourcing waters.
Kane Polakoff, a principal and CAS practice leader at New York-based Top 100 Firm CohnReznick, suggested talking with peers who are outsourcing to better understand the lessons learned. “Don’t just jump in to jump in,” he said. “Take the time before you go ahead and start that process. Start small. Of course, determining whether you want to do a captive, or you want to do a third party, or you want to do both. You need to have those discussions too, and then determine what that roadmap is. You definitely want to come up with a good plan and then execute on that.”
According to sources, steps to consider when embarking on the outsourcing journey include, but are not limited to:
- Define the firm’s objectives.
- Assess internal processes and take steps to improve efficiencies.
- Establish and maintain comprehensive process documentation to help ensure consistency and compliance.
- Establish strong lines of communication and foster relationship-building between the firm’s home team and the outsourced talent. For instance, conduct regular video conferences and/or on-site visits.
- Invest in training to help the outsourcing team enhance their skills and gain a better understanding of the firm’s processes.
- Ensure the necessary technology infrastructure and software is in place, such as a project management system to help track projects, tasks and schedules.
Successful outsourcing also involves making sure the right security protocols are in place. This means, for instance, ensuring the secure transmission of data and using two-factor authentication to authenticate users, and limiting access control so only authorized individuals and devices can gain access to the appropriate network resources.
“I know that it feels scarier to have that [talent] located outside of the U.S., but in reality, I believe, it is really no different than having a remote employee in the U.S.,” Keats said.
Embrace transparency
Some accounting firms that outsource work may have clients who are concerned about data security, compliance issues, lack of expertise, and language barriers (when offshoring), among other potential issues. The key, according to sources, is to be fully transparent.
“Today, we are very transparent. … We have a global capacity, a global operation, and here’s what we do and here’s how we do it. So that is an expectation that we set with our clients from the beginning and it’s understood. We really don’t have much of any push back on that,” Polakoff said.
Added Polakoff, “I think the worst thing that you can do is to go ahead and do it but you don’t share that with the client, because that will come back and haunt you.”
Keats agreed: “When we initially started working with the [outsourced] team, I did a video that got sent out to all of the clients. We were extremely transparent about it. … In the beginning, we actually allowed clients to opt out of it. We said, ‘You can opt out of it but you have to pay a higher fee,’ and some folks chose to do that. There were some folks that left us. There were some people that just were not comfortable with it at all.”
Today, the firm no longer allows clients to opt out of outsourcing the work, as it became too difficult to segment the client base. All existing clients have transitioned and new clients are informed during the first phone call to ensure full transparency.
“Just remember that these are human beings. I think sometimes firms tend to think of outsourcing as this monolithic strategy or solution for things. It is good to be reminded that the individuals that you will be interacting with — whoever you go with, wherever they are in the world — are people who are all learning, want to do a good job, and want to advance; they want all the same things that we all do,” said Keats. “So I think that is a good thing to keep in mind — to keep the humanity at the forefront when you are thinking about outsourcing.”
Artificial intelligence has indeed led tech-forward firms (including those in this year’s
On the positive end, firms such as the Texas-based Franklin Alliance reported that adopting AI technology has dramatically increased their capacities as bots take on repetitive manual tasks with an ease and a speed far past more conventional automation setups, allowing accountants to focus more on higher value tasks.
“What’s been most impressive about the AI tools we’ve explored is their ability to dramatically reduce the time spent on repetitive, manual tasks—things like document summarization, data extraction, and even early-stage tax prep. In the right context, these tools create real efficiency gains and allow our team to shift focus to higher-value advisory work,” said Benjamin Holloway, co-founder of Texas-based Franklin Alliance.
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For some, like Illinois-based Mowery & Schoenfeld, these efficiencies have been most impressive on the internal administration side, with AI effectively taking care of the non-accounting work that nonetheless keeps many firms afloat, especially where it concerns meetings.
“Truly most impressive and a huge time savings for us has been AI’s ability to record and summarize Team meetings. Circulating notes and reducing administrative burden on such activities has freed up much capacity, both for our admin side and for partners or management who are not able to be at every meeting,” said Chris Madden, director of information technology.
Others, like top 10 firm Grant Thornton, emphasized AI’s benefits in client-facing activities and noted that it has been especially meaningful in its risk advisory services at least partially due to the firm’s recently-launched CompliAI tool, designed specifically for this area.
“The tool uses generative artificial intelligence and was developed using Microsoft technology, including Microsoft Azure OpenAI Service. CompliAI’s ability to quickly analyze vast datasets and identify potential risks has proven invaluable in combining Grant Thornton’s extensive global controls library with generative AI models and features, including AI analysis, ranking and natural language processing capabilities. As a result, our employees can run control design and assessment tasks in minutes, versus days or weeks. This means clients enjoy faster operational insights, which could amount to a new level of efficiency and a path toward transformative growth,” said Mike Kempke, GT’s chief information officer.
Another positive frequently mentioned, such as by top 25 firm Cherry Bekaert, has been the accessibility and ease of use for many AI solutions even for those without strong technical capacities. Assurance partner Jonathan Kraftchick said this means they did not need to wait long before they began seeing results.
“The most impressive aspect of AI has been its ability to add value with minimal ramp-up time. Many of the tools we’ve implemented have a low barrier to entry, allowing users to start experimenting and seeing results almost immediately. Whether it’s drafting content, conducting accounting research, summarizing meetings, normalizing data, or detecting anomalies, AI has consistently helped accelerate tasks and enable our teams to focus on higher-risk or higher-value areas,” he said.
Several firms, such as California-based Navolio & Tallman, also mentioned improvements to broad strategy and ideation, saying it’s been good for enhancing creativity and accelerating the early stages of their work.
“We’ve still seen value in AI as a jumping off point for ideas and strategy. It’s been helpful for brainstorming, drafting early versions of client communications, and supporting high-level planning conversations,” said IT partner Stephanie Ringrose.
Inconsistencies, inaccuracies, insufficiency, and insecurity
At the same time, firms over and over again said that while the strength of AI comes in handling simple jobs, it often lacks the precision and consistent accuracy needed for higher value accounting work. While it can certainly generate outputs at an industrial scale, trusting that those outputs are correct is another story for firms like Community CPA and Associates.
“AI is incredibly useful for certain types of tasks, such as summarization, data extraction, answering simple questions, drafting communications or documentation, brainstorming ideas, or serving as a sounding board. However, we have observed that most AI tools we’ve tried have difficulty with complex tasks that require lots of context, precision, or domain-specific knowledge. Oftentimes in these cases, AI tools will generate responses that are overly confident or wrong and are missing key information due to not being integrated with other systems or software we have,” said CEO Ying Sa.
Some, like top 25 firm Armanino, noted that these challenges mean that humans need to devote considerable time to ensuring the quality of AI outputs and intervening when the programs go off track.
“The primary disappointment stems from the occasional inaccuracies or biases inherent in AI-generated outputs, commonly referred to as ‘hallucinations,’ necessitating continuous human oversight to ensure reliability. Addressing these inconsistencies remains an ongoing challenge,” said Jim Nagata, senior director of cybersecurity and IT operations.
Top 25 firm Eisner Amper’s chief technology officer Sanjay Desai noted that these issues with accuracy and consistency can be found across AI solutions, though noted that the technology is still quite new and so many things are still in the process of being refined.
“The lows come from the gap between what’s possible and what works reliably in practice. We still need strong guardrails to define valid inputs and outputs, especially in sensitive use cases. Technologies like retrieval augmented generation (RAG) haven’t yet delivered the accuracy or consistency we need when working with proprietary or domain-specific data. Even in mature areas like audio-to-text transcription, we see issues—particularly with accurately identifying speakers in multi-person meetings, which affects the quality of recaps and follow-up actions. In short, while LLMs have come a long way, making them enterprise-ready still requires ongoing human oversight, thoughtful implementation, and continuous refinement,” said Desai.
Another issue reported by several firms was what firms like Navolio & Tallman saw as ongoing security risks from AI solutions that limits their ability to apply the technology to more sensitive use cases.
“The overall attention to security and privacy is still more limited than our industry requires, vendors have not yet aligned their pricing models with the impact their tools make to the business, and vendors still oversell their AI capabilities,” she said.
Top 25 firm Citrin Cooperman also noted–among other things–that the security of these solutions could stand to improve.
“The overall attention to security and privacy is still more limited than our industry requires, vendors have not yet aligned their pricing models with the impact their tools make to the business, and vendors still oversell their AI capabilities,” said chief information officer Kimberly Paul.
Another issue with AI that firms have reported is that solutions today don’t seem to integrate especially well with other programs, which limits the ability of these solutions to work across multiple systems in a single coherent workflow–under such conditions, AI solutions can wind up being siloed from the very areas it is needed the most.
“We believe one of the biggest gaps in current AI solutions is the inability to integrate into other AI solutions to work collectively across one process or workflow. There are many cases where one AI solution is very good at a specific task, while another is very good at another process or task, but the gap is the ability to integrate those solutions together to solve for an entirety of a process or a workflow,” said Brent McDaniel, chief digital officer for top 25 firm Aprio.
There is also the matter of data integration, which is needed for AI systems to gain a more holistic understanding of a firm’s needs. Without such integrations, AI becomes more limited in its ability to develop insights and provide actionable guidance, according to Tom Hasard, IT shareholder for New Jersey-based Wilken Gutenplan.
“We wish AI tools could fully synthesize all of our internal data and unique expertise—beyond the scope of general internet search—and provide detailed, context-specific answers for our team. In the near term, we envision an internal system that taps into our accumulated knowledge to assist staff in resolving complex client problems more quickly. Over time, this capability could be extended to give clients direct, on-demand access to our specialized insights, effectively scaling our expertise and delivering value in a more immediate and personalized way,” he said.
Beyond just data, lack of integration also limits the ability for AI to address complex problems due to lack of cross-disciplinary expertise, according to Kempke from Grant Thornton.
“Current AI solutions lack the deep cross-disciplinary expertise to be able to solve complex issues. AI today is optimized for specific fields and tasks but when it comes to solving problems that span multiple disciplines such as Tax, Legal and Finance, the current solutions are not yet capable of providing meaningful advice and guidance. Grant Thornton is already working with various AI partners on this issue and targets to be a very early adopter of the next iteration of AI that addresses this,” he said.
The AI wishlist
Many firms hoped that the next generation of AI solutions would address these sorts of problems in a way that will allow them to become true assistants capable of taking on complex tasks that require extensive judgment.
“We have found that AI currently lacks in the ability to replicate human creativity and complex decision-making. While AI excels at data analysis and task automation, it struggles with tasks requiring creativity and nuanced judgment. If AI could offer more sophisticated support in areas such as accounting and audit services, its value and impact in our daily lives would be significantly enhanced,” said Jim Meade, CEO of top 50 firm LBMC.
Desai, from Eisner Amper, also pointed out that AI isn’t very good at handling bad data, which is a problem considering that AIs run on data. This means that using AI effectively today still requires a great deal of data processing and sanitation to make information useful. If humans did not need to do so much manual cleanup to get data AI-ready, it would help make the technology even more efficient.
“One of the biggest gaps in AI today is its limited ability to handle bad data. Since data is the foundation of any AI strategy, it’s a challenge that most organizations still face— dealing with messy, inconsistent, or unstructured data. We wish AI could do more to identify, fix, and improve data quality automatically, instead of relying so much on manual cleanup,” said Desai.
Finally, Avani Desai, CEO of top 50 firm Schellman, said that AI needs to not only be safer, it needs to be visibly so, as trust and confidence in the technology is often key to adoption.
“I wish that AI could de-risk itself so that clients would be more open to using it and build client trust. If AI could more clearly demonstrate safety and responsible use, adoption would be much easier. Once people understand it’s here to help—and learn to use it responsibly—the fear will fade,” she said.
Representative Nicole Malliotakis said increasing the state and local tax deduction cap to $30,000 from $10,000 would reduce the tax burden of the vast majority of people in her district, indicating support for a proposal that is dividing Republicans.
“Every member needs to advocate for the particular needs of their district. Tripling the deduction to $30,000 will provide much-needed relief for the middle-class and cover 98% of the families in my district,” Malliotakis, a Republican representing Staten Island, New York and a member of the House tax committee, said in a statement to Bloomberg News on Friday.
Malliotakis’ nod of approval for a $30,000 SALT deduction cap comes as Republicans are fighting among themselves about how high to increase a tax break that has the potential to scuttle President Donald Trump’s entire tax package.
House Speaker Mike Johnson on Thursday said the $30,000 write-off limit is one of several options being discussed. That figure was rejected by several other New York Republicans, including Elise Stefanik, Nick LaLota, Mike Lawler and Andrew Garbarino. California’s Young Kim also rebuffed the idea.
Malliotakis’ district has less expensive property values and lower incomes than some of the other lawmakers pushing for a SALT expansion, making it politically viable for her to accept a lower cap than some of her colleagues.
White House Press Secretary Karoline Leavitt suggested on Friday that Trump would not weigh in on an appropriate level for a SALT cap, leaving it to lawmakers to resolve.
“There’s a lot of disagreement on Capitol Hill right now about the SALT tax proposal, and we will let them work it out,” she told reporters.
House Republicans’ narrow majority means that Johnson needs to win the support of nearly all his members to pass Trump’s tax-and-spending package.
Several of the SALT advocates have said that they are willing to block the bill unless there is a sufficient increase to the deduction. However, most members have not publicly stated how high the deduction must be to win their support.
The debate over SALT has proved to be a particularly thorny fight because it is a political priority for a small but vocal group of Republicans representing swing districts critical to the party maintaining a majority in the 2026 midterm elections.
Expanding the write-off is an expensive proposition, and Republicans have little fiscal wiggle room as they are sparring over ways — including cuts to Medicaid and levy hikes on millionaires — to offset the cost of the tax-cut package.
The House Ways and Means Committee is slated to consider the tax portion of the bill on Tuesday, including SALT changes.
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