In recent decades, technology has advanced substantially, enabling quick, efficient, and secure long-distance transmission of large volumes of data. As a result, many services and jobs, particularly those that deal with information, are being outsourced to remote companies. Doing so is often more cost-efficient than hiring a dedicated worker or team to perform the task required within the company. Accounting is one such job, and it has seen increasing rates of outsourcing among different companies recently. Quinn and Strauss (2017) state that the reason for the phenomenon’s growth is the well-documented and structured nature of financial documents, which makes it easy to transcribe them into a digital format and analyze them. As much of modern accounting is done via specialized digital tools that automate and simplify large parts of the process, this quality is highly beneficial and minimizes the challenges of adopting the new system.
The popularity of remote accounting suggests that there are substantial benefits to be had in using it appropriately. Palvia (2016) states that in 2012, the accounting market in the U.S. was expected to exceed $4.5 billion. With that said, the adoption of remote accounting is still not a trivial process. As with most substantial changes in a company’s business processes, the switch can be associated with a variety of significant challenges. Security remains a noteworthy concern, as the regular reports of data breaches at various companies demonstrate. Both the benefits and the dangers of remote accounting must be well-understood so that the reasons why companies increasingly engage in the practice. The purpose of this research is to provide an overview of scholarly literature on the topic and illuminate the transfer process.
Research Objectives
The primary objective of this research is to illustrate the process of a company’s migration from an internal accounting system to a remote solution. This initiative consists of several different parts, including the reason why companies may switch to remote accounting, the available remote accounting solutions, the process of switching to the new system, and the outcomes of doing so. Each of these items warrants a detailed review, but the paper aims to provide a broad overview of each that can then be used to direct further research. To that end, several essential factors and challenges will be discussed for each of the four elements in some detail, forming an overall framework of the process. To that end, the following research questions will be asked and answered in the study:
- What are the primary arguments for and against the adoption of remote accounting considered by businesses and scholars?
- What remote accounting solutions are currently available in the market?
- What are the relative advantages and disadvantages of the different remote accounting solutions available?
- What steps are necessary to switch to remote accounting, and what issues can arise throughout these steps?
- How does the adoption of remote accounting affect the operational and financial performance of a company?
Research Methods
The research was in the form of a qualitative systematic literature review, forming a meta-synthesis of numerous different works. Due to the constraints placed upon the study, most importantly, the time and resources available, this approach was the most viable, as it did not involve the active collection of primary information. The author collected secondary data from scholarly articles located in different databases, notably JSTOR and Google Scholar. Several restrictions were placed upon the results produced by these tools, notably a relevance criterion of a publication date after 2014 and the requirement for the works analyzed to come from academic journals. They then conducted a content analysis, identifying shared themes and drawing conclusions from the meanings contained within each paper. Having completed that task, they were ready to draw conclusions and discuss them within the context of the research questions.
The author conducted multiple searches throughout the databases mentioned using a variety of keywords to produce items that matched the specific themes they intended to explore. The primary keywords were “remote accounting” or “outsourced accounting,” as well as “adoption” and “business.” The secondary keywords used were “advantages,” “issues,” “process,” “change,” and “effects.” The initial searches produced approximately 50,000 results across all the databases and search requests. However, by dismissing sources due to either unsuitability or time constraints that did not enable the author to review every result, they reduced the number of useful items to 8. The sample size is small, which introduces the possibility of bias, but it should produce noteworthy results, regardless. These findings can then be used as a foundation for future research that expands on the topics and confirms or debunks the prior conclusions.
Research Analysis
As mentioned above, the author employed content analysis as the method through which the information in the articles would be processed. They started by searching for the words “remote (or outsourced) accounting” in these papers and the contexts in which the phrase was mentioned.
Many of the works, being focused on the topic, contained the words numerous times, and the author generalized the usages and categorized them into different broad codes. Examples of codes that were used were “switching process,” “advantages,” “issues,” “solutions.” They then combined the results of performing this procedure for each paper and obtained an overall system of codes that would guide the analysis. With this step completed, they proceeded to review the documents again in their entirety and consider the relationship of each paper with every code identified.
The purpose of the code analysis was to identify the trends within the papers and how they would describe different aspects of remote accounting. The phrases that were mentioned the most frequently would have the strongest association with the item in question, and vice versa. As such, through the analysis, the author was able to identify the views of the researchers on the topic, which were informed by their research into the matter and likely to be reflective of the objective reality.
With that said, the author also considered potential biases, which may have affected the authors’ perception of remote accounting and skewed the results. To minimize the effects of such inaccuracies, the research also considers potential misrepresentations that can be identified in the articles reviewed and adjusts for their impact. By doing so and considering multiple sources, it should be able to provide a fair representation of the scholarly consensus within the sample and, possibly, the broader community.
Literature Review
Accounting outsourcing is generally prevalent at smaller and medium enterprises as opposed to large companies. As Rogosic (2019) claims, the primary reason is that the approach enables them to focus on their core activities without needing to learn the involved practice of accounting. Larger companies do not have the same issue because they can afford to hire dedicated accountants without incurring high costs relative to those of their overall business. Accounting and financial reporting involve stringent guidelines that can lead to legal penalties if they are not followed, and business owners prefer letting experts perform the task to avoid issues.
With that said, while Asatiani et al. (2019b) acknowledge the cost reduction, core competence focus, and process improvements as advantages of outsourcing, they also note that it diminishes the company’s access to expertise. Businesses that need the active assistance of an accounting expert will likely not choose to outsource the service and retain an always-available worker or contractor for the purpose.
Two primary types of accounting outsourcing can be identified: workstation accounting (where the company purchases software that automates some parts of the process) and cloud-based options, where the data is sent to another company and processed by it. As Asatiani et al. (2019b) note, the first option typically involves contracts that define highly specific functions that are outsourced, while others are still performed locally. On the other hand, cloud solutions are flexible and offer services on-demand, enabling higher degrees of external processing if necessary. Khanom (2017) lists several advantages of cloud services, such as availability anywhere that has an Internet connection as well as the reduction of the burden on the company but also notes the dangers of needing a robust connection as well as security. Unlike traditional outsourcing, where the company stores its data internally, cloud services can contain information from many different enterprises and present an attractive target for malicious attacks as a result.
The assertion that, as accountants’ responsibilities are automated and outsourced, they would no longer be necessary and be let go to move to those services, appears to be credible initially. However, Cooper et al. (2019) find that this effect does not take place in practice, instead reducing offshoring and enhancing employees’ satisfaction and upward mobility. Workers that no longer have to perform accounting tasks can shift to more value-adding tasks, acquiring new competencies and staying valuable to the company.
With that said, the concern over the potential obsolescence of accounting as a profession remains. Chaplin (2017) finds that accounting firms now require analytical skills first and foremost from potential hires, while factors such as team collaboration are much less relevant. Accountants now need to be able to interact with automated platforms that manage a majority of the routine work and translate their results into formats that are easier for managers to process.
As identified above, firms will typically outsource their accounting to ensure that they can concentrate on their work while still producing high-quality, accurate reporting. Höglund and Sundvik (2016) find that this expectation is typically consistent with the practical results of outsourcing, though only for specific areas of accounting such as financial statement preparation and not payroll processing. Firms that provide accounting outsourcing services will typically be highly competent at these standardized tasks. Cahyaningtyas and Ningtyas (2020) found a positive relationship between remote accounting and overall SME performance. However, Rogosic (2019) highlights the issue of lower accounting information usage in companies that outsource the service compared to those that perform it internally. This finding is a significant problem that may explain why large companies, which seek every possible advantage, tend to resort to the practice less.
Discussion and Analysis
Overall, it appears that the reason for the adoption of outsourced accounting methods is convenience, as it reduces the burden on the business. Through their usage, the effort takes less time and becomes easier to process and access. The latter is particularly relevant for cloud-based services, which allow a manager to review the company’s financial performance from their home or another convenient location (Khanom, 2017). With that said, workstation-based accounting robots are also an effective tool for businesses that want to retain more control over their accounting and involvement in it. Both approaches alleviate the burden of routine work placed on these companies, which can be relevant to smaller enterprises. Security is currently not a large concern, as most cloud platforms feature robust protection measures, but it may become one in the future.
The process of outsourcing a firm’s accounting duties will typically not be excessively convoluted, but it will require some substantial changes in the organization of its work. As Cooper et al. and Chaplin (2017) state, accountants are finding their current skill sets to be increasingly obsolete and have to search for other competencies to remain relevant. In particular, the ability to analyze and process the data produced by the various outsourced tools is currently valuable and will likely remain so in the future.
However, many workers that took part in accounting also change their competencies and begin participating in other value-adding activities. As a result, the overall performance of the firm increases, at least for a small enterprise that produces accounting data mostly for posterity and not internal analysis. Large businesses benefit from a more involved approach to accounting that matches current needs, for which an internal accounting process is essential.
Conclusion
The adoption of remote accounting in business is the result of technological advancements that have taken place throughout the last three decades. Many processes in the discipline can be automated without significant problems, as they are routine and uncomplicated number work. Instead, automatic tools can reduce the chance of human error, increasing the overall quality of accounting and reporting. The relatively low cost and high flexibility of the various available options also have the potential to benefit the company. With that said, the full outsourcing of all accounting practices to an external entity is likely not a practical solution.
Such a measure would dismiss the usefulness of accounting information to business owners and managers when it is formatted to suit their needs. The flexibility necessary to create such reports can likely only be sustained if the accountant is available at all times and has extensive experience working for the company.
As such, the outsourcing of accounting practices, whether to software or to external consultants, is unlikely to make the position of an accountant obsolete in the near future. Their skills of categorizing and interpreting information will still be required at most companies at least part of the time. With that said, accounting specialists should reconsider their priorities and the competencies that they currently prioritize. The transition of many businesses, especially smaller ones, to outsourced accounting is almost inevitable, and even companies that retain internal accounting are likely to automate large parts of the process. As such, accountants need to develop new competencies that enable them to add value to the company and remain valuable employees. The ability to work with electronic accounting tools is a valuable asset, but the specific skillset from which one would benefit most depends on their workplace.
References
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Asatiani, A., Penttinen, E., & Kumar, A. (2019b). Uncovering the nature of the relationship between outsourcing motivations and the degree of outsourcing: An empirical study on Finnish small and medium-sized enterprises. Journal of Information Technology, 34(1), 39-58. Web.
Cahyaningtyas, F., & Ningtyas, M. N. (2020). The use of outsourced accounting service and its impact on SMEs performance. Journal of Accounting and Business Education, 4(2), 79-97. Web.
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Höglund, H., & Sundvik, D. (2016). Financial reporting quality and outsourcing of accounting tasks: Evidence from small private firms. Advances in Accounting, 35, 125-134. Web.
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Palvia, S. C. J. (2016). Global sourcing of services: Why, what, where, and how? In S. C. J. Palvia & P. Palvia (Eds.), Global sourcing of services: Strategies, issues and challenges (pp. 3-48). World Scientific Publishing Company.
Quinn, M., & Strauss, E. (Eds.). (2017). The Routledge companion to accounting information systems. Taylor & Francis.
Rogosic, A. (2019). Accounting outsourcing issues. Eurasian Journal of Business and Management. 7(3), 44-53. Web.