How an Offshore Team Helped Scale Capacity: A CPA Firm Case Study
Why Growing CPA Firms Face Capacity Issues During Tax Season
A CPA firm can often appear to be growing at a fast pace based on the number of clients, engagements, and revenue. However, as an example of growth, that growth is evident during tax time when pressure is put on execution.
This example illustrates a capable 15-partner CPA firm that has been growing but is having difficulty meeting deadlines and getting completed projects delivered to clients due to the burden of overload on its current team.
Rather than using traditional hiring methods, this firm moved to a structured offshore model for outsourced accounting services for CPA firms in the U.S., thereby achieving a 40% decrease in turnaround time.
Topics discussed in this blog include:
- Initial State
- Challenges
- Research & Decision-making
- Workflow Design
- Communication between Offshore Team and the Firm
- Time Zone Engagement of the Team
- Final Results
Initial State: Analyzing Where the Firm Stood
The firm had:
• 15 Partners
• 80-90 Staff
• A solid base of Tax Clients
• Increased workload every year Major Issues
1. Long Processing Times
During the peak busy season (April):
- Average processing times were 12 to 15 business days.
- Clients were becoming frustrated with these delays.
2. Senior Staff Burnout
Many of the Managers and Reviewers were:
- Working more than 8 hours a day.
- Working damning amounts of time, during both the preparation and review processes.
- Losing productive efficiencies due to fatigue.
3. Hiring Wasn't Scalable
The firm had considered growing local offices but found it difficult because:
- The costs were high.
- The hiring cycle was longer than seasonal.
- It was difficult managing the seasonal demand.
4. There Wasn't Flexible Capacity
The firm had determined that:
- The real issue was they didn't need to hire additional full-time staff.
- They needed flexible capacity when peak periods arose.
Strategic Question
Instead of asking, "How do we hire more employees?", they instead asked, "How do we create a flexible, scalable service delivery system using offshore staffing solutions, while not incurring additional fixed costs?"
Phase 1: Research
1. Evaluating Structured Options
The firm reviewed existing outsourcing style models:
Traditional Outsourcing Vendors
- Shared Resources
- Limited Control
- Inconsistent Output
Dedicated Offshore Staffing Model
- Hire offshore accountant for CPA firms
- Built dedicated teams constructed around their work process
- Retained full control over processes and outputs
They partnered with an offshore company specializing in the accounting outsourcing industry for CPA firms located in the United States.
Key Questions and Answers
What work was going to be outsourced?
- They focused on:
Outsourced tax preparation services for CPA firms
Outsourced bookkeeping services for CPA firms
How does the firm ensure its quality?
The firm employs an offshore preparation and an onshore review process. It also has a scalable model in place by hiring offshore preparers, expanding capacity during busy months, and optimizing operations after the busy season.
The firm's offshore tax prep team consists of 6 members, which include 3 preparers, 1 bookkeeping specialist, 1 audit support staff member, and 1 team lead, which created an effective execution model.
An effective workflow was crucial to the success of the firm in executing its offshore operation.
Step 1 was assigning the preparer assignments on a daily basis by the U.S. team, as well as organizing the work by level of complexity.
Step 2 involved the offshore team performing tasks such as data entry, preparation of returns, and preparation of workpapers.
Step 3 involved an initial check for quality by the offshore team to ensure errors were minimized prior to submission.
Step 4 was the final verification of the returns by the U.S. team, which included checking for any compliance problems and making appropriate adjustments to the return.
Step 5 involved the delivery of completed returns to the clients.
Communication was structured and formal, and the team utilized the following tools to communicate:
Daily meetings to check in, identify any issues or challenges, provide updates on assigned tasks, and track progress.
Weekly meetings to review the performance of the offshore team, identify any errors and process recommendations for improvement.
Escalation procedures to immediately report any obstacles to progress and resolve quickly.
Utilization of practice management systems, shared dashboards, and real-time communication platforms to facilitate both intra-team and inter-team communication.
The firm modified its previously negative experience with time zone differences and turned that into an ongoing strategic planning technique.
Work Cycle
When the team in the US finished for the day, they assigned files to the offshore team who began immediately working on the files. The work was completed overnight.
By the next morning the work was complete and waiting to be reviewed.
Results
The result was that the firm had created a near 24-hour productivity cycle without having to extend the hours the US team worked.
Challenges During The Transition
1. Initial Slow Down
The first two weeks were slow due to the learning curve the offshore team needed to go through.
2. Process Gaps
Some of the workflows were not completely documented.
3. Communication Gaps
Some instructions were given without being clear.
4. Trust Issues
The partners did not trust the offshore team’s quality and control.
Solutions That Worked
- Continue improving Standard Operating Procedures (SOP)
- Start with Pilot Batch
- Have a strong review structure
- Increase frequency of communication
The Turning Point
By the end of five weeks the offshore team was working in the same workflows as the US team, had lower error rates in their work and their speed of completing the work had increased dramatically.
As a result, confidence grew between teams.
Results: 40% Improvement
Turnaround Times
Reduced from 12 to 15 days to 7 to 9 days
Operational Gains
- Higher capacity to process
- Better distribution of workloads
- Reduced stress levels for the US team
Strategic Expansion
The firm is now able to focus on
- Providing advisory services
- Developing client relationships
- Growth areas such as virtual CFO services for CPA firms
Client Impact
- Shorter Turnaround Times
- Higher Satisfaction
- Increased Retention Rate
Summary of Project
Business Size: 15 Partners
Offshore Team: 6 Team Members
Model: Dedicated Offshore Staffing
Services Provided:
- Tax Preparation
- Bookkeeping
- Audit Assistance
Results:
- 40% Reduction in Turnaround Time
- Long-term Scalable Model
Key Takeaways:
- The main problem is not capacity; it's simply finding qualified employees.
- Using Offshore Staffing Solutions Provides Flexibility.
- Workflow creates efficiency.
- Communication is key to success.
- A Dedicated Model Provides Better Outcomes.
Conclusion
This firm did not simply outsource work.
They have designed a structured system that uses:
- Outsourced Accounting Services for CPA firms in the U.S.
- An Offshore Dedicated Team.
- Processes Driven Execution.
A 6 Person Team Achieved 40% Reduction in Turn-Around Times.
This represents much more than operational efficiencies; this represents a scalable growth strategy for modern-day CPA firms.
