Outsourcing Combines with Automation

Most outsourced services employ some type of online or automated product to perform the work and make data easily accessible. In 2016, the top billing and invoicing software for business included FreshBooks, QuickBooks and Zoho Invoice. These solutions were chosen for their ease of use, expense tracking, automated invoicing, online payment options, customized reports and customer support. Zoho is also integrated with a larger suite of business software, including CRM and accounting software.

There are programs designed specifically for an industry such as Clio, a time and billing software for law firms that is cloud-based and purchased by subscription. However, decisions about automation and outsourcing shouldn’t be made according to the features of a software package alone. They should be made    foremost from the perspective of being efficient. If you won’t have time to train staff properly on a new software solution, the move toward outsourcing may be more cost-effective in the long run.

We addressed this in an earlier article, but it bears repeating. Key considerations for outsourcing accounting and payroll are as follows:

• How much experience does the outsourcing provider have in payroll administration or accounting — and is there a dedicated team?
• Will the team walk you through data collection and set-up or are you on your own?
• Who is your go-to contact to ask questions about liabilities or deadlines?
• Is the provider NACHA compliant for ACH direct deposits?
• Can you arrange for tax payments on a schedule that supports cash flow along with compliance?

This last question is an important business consideration that most companies don’t know about. Some payroll services withdraw all funds from the business account for payroll transfers and taxes all at once, even if taxes aren’t due for a few weeks. If your receivables come in the first week of the month and payroll taxes are due on the 15^th of the month, you can schedule payments in a way that supports cash flow while still being compliant. Some payroll services may not provide guidance on industry-specific issues like law firm shareholder bonuses, for example. Consider carefully the level of industry expertise before selecting a provider.

Automating Finance is a Long-term Strategy

Determining the right automation solutions for your firm can’t be done overnight. It seems that new providers and products are coming to the market all the time, and it’s hard to compare apples to apples beyond price.

Successful transitions to outsourced and automated processes and solutions have three things in common:

There must be a clear business case for the automation.

Before selecting a solution, firms should review their current accounting and payroll processes to cut out any redundant or outdated steps. It doesn’t make sense to automate a process if it’s outdated. A CPA can help you review accounting processes and procedures to identify best practices before seeking automation.

Integration with existing systems makes adoption easier.

You may already have some solutions in place that are working well. Future automation should integrate with those solutions for efficient management and reporting. For example, you may already use a time and billing or workflow system you really like. New accounting or payroll tools should play well with those solutions. Your goal is an end-to-end process that reduces manual work and errors while improving the sophisticated of data.

IT staff should meet with operations and finance staff to understand the goals.

Whether you have internal or outsourced IT staff, one of the biggest mistakes with technology adoption is that IT doesn’t speak enough to operations to make sure the solution is actually going to solve problems and enhance the business. In the same way, IT needs to be in the business loop to determine if a chosen solution can be easily supported and maintained. In the industry, this collaboration is called “DevOps,” and it’s not yet foolproof. Some experts predict that movement toward cloud-based technologies will make developers happier because they can update solutions without having to check in with Ops. Meanwhile, the operations staff can get what they need without worrying about costs or slow adoption by staff.

If we just look at automating the invoicing process, firms could improve efficiency dramatically. About 84 percent of invoices enter processing in formats that include paper, fax and email attachments, according to a study by Paystream Advisors. We’ve seen estimates that the average cost of automated invoice processing is $4 versus $20 for manual processing.

Automated payroll processing reduces costs even further. The American Payroll Association (APA) estimates that automation reduces payroll processing costs by as much as 80 percent, much of that from reducing errors in invoices and paychecks…which also reduces the risk of payroll penalties.

Cornwell Jackson’s Business Services Department offers a wide range of outsourced financial services to serve professional services — including outsourced payroll processing and solutions to improve cash flow and productivity.  Contact us for a consultation.

Download the Whitepaper: Be More Billable: How to Add More Automation to Professional Service Accounting

Mike Rizkal, CPA is a partner in Cornwell Jackson’s Audit and Attest Service Group. In addition to providing advisory services to privately held, middle-market businesses, Mike oversees the firm’s assurance practice and works directly with many professional services firms in the metroplex. Contact him at mike.rizkal@cornwelljackson.com or 972-202-8031.

Professional service firms offer their services in a variety of ways, and this fact adds complexity to time and billing processes. If time and billing are complex, then accounting and payroll also have many moving parts. By automating some of the steps that go into accurate time and billing — and closing the gap between time and billing and accounts receivables — professional service firms improve cash flow and profits. Outsourcing is one solution to achieve automation without the costs of purchasing technology and training in-house staff.

Firms that use an in-house team for payroll, time and attendance and benefits administration spend 20 percent more than organizations that outsource those functions, according to UK-based global market research company, Technavio. The analysis, from 2016 through 2020, found that payroll outsourcing is the fastest growing segment in the human resource outsourcing market. It projects a compound annual growth rate of 4.4 percent. Just tally up the salary and benefits of a full-time equivalent employee to do the job correctly as well as the cost of system upgrades, training, supplies and office space. Then look at the rate a vetted payroll or accounting service will charge to do the function for you.

This growth rate also makes sense due to the sensitive information in payroll as well as the increasing complexity of compliance for withholdings, benefits elections and tax reporting. Payroll outsource services specialize in this area, bringing efficiencies through automation and increasing employee access to pay stubs and tax information.

Segregating payroll and accounting from internal staff serves two purposes: efficiency and oversight.

An effective outsourced provider reduces non-billable time for professionals and also delivers timely reports and financials to make proactive decisions. In addition, the outsourced provider can take a more holistic view of the organization and implement processes and systems that support compliance and organization.

Even in an accounting firm where the professionals are more than capable of doing their own bookkeeping and payroll, keeping these functions in-house can lead to a lack of internal controls and objectivity — not to mention confidentiality.

 A report by KPMG and HfS Research predicted that accounting and business process outsourcing overall would grow at an annual compound rate of 8 percent through 2017.

When firms select the right fit for outsourced payroll or accounting services, the service becomes an extension of the enterprise rather than a substitute. CPA firms that offer outsourced accounting or payroll services can help clients beyond their back-office in areas such as strategic planning, forecasting and compliance.

With a central clearinghouse to view financials and billing information, firms will have up-to-date data to proactively support business decisions rather than relying on historic data from several months ago.

In fact, integrative technology has advanced to allow time and billing systems to “communicate” with accounting software. Accounts can age out of the time and billing system rather than the accounting system to keep books cleaner and make forecasting easier throughout the year.

Continue Reading: Automating Finance is a Long-term Strategy

Cornwell Jackson’s Business Services Department offers a wide range of outsourced financial services to serve professional services — including outsourced payroll processing and solutions to improve cash flow and productivity.  Contact us for a consultation.

Mike Rizkal, CPA is a partner in Cornwell Jackson’s Audit and Attest Service Group. In addition to providing advisory services to privately held, middle-market businesses, Mike oversees the firm’s assurance practice and works directly with many professional services firms in the metroplex. Contact him at mike.rizkal@cornwelljackson.com or 972-202-8031.