In response to the talent shortage and the declining number of certified public accountants (CPA) professionals, many corporate accounting departments are relying on professional services firms to fill the gaps. This disruption has caused professional services firms to create different offerings to assist clients, prompting the questions, ‘What does this mean for my company, and how do I determine what I need?’ Key considerations center around the strengths and limitations of the organization’s current accounting team.
The most common accounting services include:
- Co-sourcing: Using an external provider to supplement your internal accounting function
Key indicators this is an appropriate service for you: Your organization has an accounting team with most of the competencies needed, reasonable industry/business understanding, and/or a serviceable enterprise resource planning (ERP), but you need help filling the gaps.
- Outsourcing: An external provider takes full ownership of accounting or specific tasks
Key indicators this is an appropriate service for you: Your organization needs day-to-day accountants to cover the basics (i.e., billing, collections, procurement, accounts payable, payroll general ledger). You also have the ability to move toward the ERP tool an outsourcing team uses and to replace most, if not all, of your team and not lose ground.
- Offshoring: An internal or external team processes or services accounting overseas or in a different country, typically to take advantage of lower costs, market access, and without losing quality
A Deeper Dive Into the Co-Sourcing Accounting Model
Co-sourced accounting has become more popular in recent years as it is a flexible and collaborative solution. While many organizations experience talent scarcity, co-sourced accounting is a tactical approach for organizations that have quality team members to “keep the lights on” and allows corporate accounting to bring in additional knowledge. Co-sourced accounting services are adjacent to more commonly known outsourced bookkeeping and tax services with a supplemental focus on your current accounting function.
Some common use cases of co-sourced accounting include:
- A company needing technical accounting advisory assistance to help its internal accounting function navigate complex accounting for a business combination, debt or equity issuance, or uplifting its financial statements to Public Company Accounting Oversight Board (PCAOB) standards for an initial public offering (IPO).
In a traditional outsourcing or loan-staff model, companies may be assigned a single resource that does not have the breadth of skills to satisfy all of the requirements. Co-sourcing is typically filled by multiple subject matter experts (SMEs) throughout various phases, depending on the nature of the matter.
- An accounting department selects a new ERP or needs to implement new technology. Co-sourced resources can expand the company’s bench strength or alleviate capacity constraints so that key team members can prioritize projects accordingly.
In each of these cases, the company may not have the in-house expertise, limited capacity to address the issue, or inconsistent transaction volume to justify hiring an additional full-time equivalent (FTE).
The current economic climate and regulatory environment are challenging for corporate accounting departments and leave little room for error. All eyes are on the corporate accounting function, with agencies like the SEC and the PCAOB increasing their level of scrutiny, while audit firms are simultaneously trying to minimize risk exposure by lowering materiality thresholds. Additionally, the post-pandemic era has led many companies to seek creative financing — convertible debt, warrants, equity-based compensation, among others — that trigger complicated accounting. In this complex and demanding environment, co-sourced accounting can provide the flexibility and expertise needed to navigate these challenges.
How Cherry Bekaert Can Help
If you’re looking for a strategic advisor to boost and broaden your current team’s capabilities, co-sourced accounting could be the answer for your accounting department. Cherry Bekaert’s co-souring solutions provide the capacity and capability to support in-house teams and can assist your organization at the level it needs. Our practice is equipped with the experience and knowledge to help your accounting function fill the gaps and deliver value.
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