Outsourcing of typical accounting functions : impact on the accounting services industry

Since the Australian recession which began in the 1990s, outsourcing has\ud received considerable attention. Amongst the many benefits that outsourcing is\ud believed to offer, a key benefit is that it allows organisations to focus on their\ud competitive strengths while contracting out non-core activities.\ud While there is currently a considerable amount of studies and evidence on the\ud costs and benefits of outsourcing, much of this is centred on Information\ud Technology. There are predictions and some anecdotal evidence indicating\ud that the outsourcing of typical accounting functions will increase as we\ud approach the second millennium. The questions left unanswered are many:\ud • are the trends in the outsourcing of typical accounting functions really on the\ud increase?\ud • what are the rationales and perceived benefits associated with the\ud outsourcing of typical accounting functions?\ud • does the outsourcing of typical accounting functions raise any concerns?\ud • what impact will outsourcing have on the service providers in the accounting\ud services industry?\ud This study has been designed to answer the above questions. The methodology\ud undertaken necessitated two separate surveys which were conducted over a\ud period of 6 months within 1997 and 1998. Both surveys were based on mailed\ud questionnaires which were forwarded to 300 service-user organisations and 300\ud service-provider organisations.\ud Several key findings have emerged from this study:\ud • the increasing trend to outsource in between 1992 and the period beyond\ud 1997 had only applied to two out of nine accounting functions.\ud • the outsourcing of typical accounting functions were not undertaken by at\ud least 75% of responding firms in 1997.\ud • there were differences between service-buyers' and service-providers'\ud perception of outsourcing benefits.\ud • the outstanding number of concerns associated with the management and\ud control of outsourced functions as well as humans resource, technological\ud and financial issues was a factor which appear to have deterred firms from\ud outsourcing typical accounting functions.\ud The recommendations arising from this study are summarised, as follows:\ud First, in order to minimise undesired outcomes as a result of outsourcing,\ud service-user firms need to consider several issues before the decision to\ud outsource is made. These issues include the strategic importance of, and\ud existing problems associated with their accounting functions, as well as the risks\ud and benefits of outsourcing those functions.\ud Second, service providers' ability to deliver services at pre-determined levels are\ud more likely to be successful if they are prepared to specialise in the types of\ud client industries where risks can be measured.\ud Third, the identification of human resource problems warrants some research\ud into how organisations can achieve a win-win situation with in-house staff\ud whose positions are jeopardised as a result of outsourcing arrangements.\ud Fourth, service-provider firms need to be aware and perhaps become familiar\ud with the capabilities of commercially available software for the processing of\ud basic accounting functions