Technology involved in Accounting Outsourcing
by Priyankar Baid
Often it is considered that outsourcing requires a huge amount of investment in terms of human resources, infrastructure, and technology making it a feasible solution only for the larger companies. This is a myth that probably emanated from the fact that outsourcing experiences of only large companies are covered in popular media. This assumption has been proven consistently wrong with fast multiplying instances of small mid market companies outsourcing their back end for fruitful results. Accounting outsourcing has gained rapid popularity (the fast growing sizes of BPOs is a testimony to this). Apart from the cost savings, organizations have seen benefits in terms of accuracy, reliability and proper maintenance of their accounting books.
This transition has been aided by rapidly decreasing technology costs (computers, internet connections and email/data storage accounts) are so much cheaper now, rising reliability of remote access softwares, and ever falling communication costs(thanks to Voice Over Internet Protocol (VOIP) among others. In this article, a brief overview of the different technology aspects related to outsourcing is covered.
There are two basic data items involved in an outsourced accounting process: a) Input Documents or Source data like bank statements, invoices, bills, check stubs etc. b) Accounting file like QuickBook , Peachtree, and MYOB file
Communication between both ends is another information item that needs to be managed well. However this article covers only the options for handling source documents and acc. files.
Technology Options for accessing the input documents:
a) Scanned Form Scanned documents can be uploaded by the client staff on a website (usually of the service provider). These are then downloaded at the service-provider delivery centre/office. Alternatively, they may also be picked from the client server or just opened remotely by the service provider' staff. Accessing scanned documents remotely though the best method in terms of data security is the least productive method. This reduction in productivity is because the scanned documents open very slowly over even the best internet connections ( just do a simple test of opening a PDF file through your browser and compare it against the time taken while storing it first on your PC and then opening it). Also please note the transmission security while you upload the data to the service provider's website or while they download it from your PC/server.
b) Faxed - data can also be electronically faxed to an e-fax number. These faxes then get emailed to service provider as electronic images
Both Scanning and faxing have their advantages. The first method gives clear and magnified images while the latter method is convenient and fast. Further in a high volume process (where the source documents run in-to hundreds), scanning is definitely the better solution in terms of reliability, image quality and even time.
Technology Options for accessing the accounting file: Primarily there are four ways by which accounting outsourcing is possible Server Based, Remote Access Based, Hosted Software Based and Online Software Based
Server Based: The accountant works on the backup copy of the accounting file and once the work has been completed the file is uploaded back to the server. The client can download the files and save the updated version of his books.
Remote Access Based: The accountant connects to the clients' computer using a remote desktop access service like GoToMyPC.com, LogMeIn, Windows Remote Desktop or Secure VPN connection.
Online Software Based: In this method, the accounting software is a web-based version. So the accountant logs in to the Online Accounting Software (eg Quickbooksonline.com, NetSuite) and updates the books and logs out. The client can login to the online accounting software via internet and see the updated books. This method is the best in terms of processing speed and reliability, however the web-based versions of popular software like QuickBooks and Peachtree are stripped down versions and do not have all the features like inventory, sales orders , complete reports etc.
Hosted Software Based: This version is a modified version of the Remote Access based version. The difference being that the accounting files of the client are hosted on a third-party hosting service provider such as Personable.com. Hence the service provider access these hosted files. This method may be more reliable and useful if the clients' current technology set-up is not robust or good.
All these options do not require a huge amount of investment or any major changes in your IT setups. Data security is one of the most important factors that come into play while evaluating your outsourcing accounting needs. It is of utmost importance that necessary steps have been implemented for data security. Encrypted technology be used to make sure there are no breaches in your private information. The remote access software should not allow for copy or transfer files from client computer to service provider systems.
Certain other steps such as signing Non-Disclosure Agreements with the service provider, using 128-bit encrypted servers for storing accounting data and having a paper-less office should be considered In sum, the plethora of different technologies- remote access, scanning, communication and document and wok-flow management helps in making outsourcing work for small businesses.
About the Author
Priyankar Baid is an experienced accountant who has consulted small businesses in US, Cananda and UK over the last few years. He also runs a firm (http://www.outsourcinghubindia.com) specializing in online accounting. He helps businesses set-up accounting systems, clean-up existing books and implement outsourcing agreements. His firm specializes in providing accounting and reporting services to small medium businesses in North America.
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