Global Accounting firms are still avoiding freelancers for outsourcing

Offshore hiring & Outsourcing for global accounting firms is increasing, particularly post-pandemic as remote working is becoming normal so hiring any employee working remotely whether, from ‘Boston or Bangalore’, ‘Miami or Mumbai’, ‘New York or New Delhi’, is all the same, as long as your staff has the right skill set, attitude, and speaks the same language.  Which means more opportunities for Indian youth for jobs. Hence, outsourcing has become an integral part of the accounting and CPA firms’ overall decision-making. However, due to the inclusion of internet-based programs and processes and remote working related limitations, there are several issues which the firms should take into consideration before making a decision to embrace offshoring work to a small firm and hiring a remotely working freelance consultant.

Things like, cybersecurity, identity theft, and credit card scams have increased and client information privacy has become the most important considerations for accounting firms worldwide. A similar case was reported by media recently in Delhi where 42 people were arrested running a fake call center. Reliability and mutual trust are two of the most important factors in establishing long-term business relationships. However, it is tougher to trust freelancers when there are news of freelancers cheating US citizens through illegal call centers.

There are many freelancing platforms and websites that provide you labour for hire for global accounting firms. But accounting firms have been avoiding working with freelancers and small shops because of inherent perception issues and scam that has been done in India. Sharing his experience, CPA Aric Martin, Martin & Company- a small CPA firm based out of Shirley, New York, mentions, “I have tried freelancers and I regretted doing that, perhaps one of the biggest mistakes I made in my professional career. They hacked my data and all my client information was stolen away. What I realized that they have misused social security number, credit card details, and got tax refunds filing fake returns” Why are firms not hiring freelancers offshore?

Time and again, it has been red-flagged on many platforms that firms that have chosen to work with freelancers and small shops offshore have only regretted. So what makes an accounting firm's experience with freelancers/small shops offshore so bitter here are the reasons why

a. Data Breach and Identity Theft Risk

One of the most important reasons why Global firms avoid working with freelancers and small shops is Data Breach and Identity Theft. These are primary risks especially when you choose to work with freelancers & small shops. For accounting firms and tax professionals who manage financial data and prepare client taxes for a career, however, the theft of client identity and tax data or breach can be even more perilous. This can result in legal and financial consequences to the firm. Aside from this, the loss of trust would likely result in a mass exodus of clients, which could mark the end of the firm.

Data security is vitally important to the future viability of accounting firms and must be treated in the same manner that the military guards nuclear codes. Most freelancers heavily depend upon using Free Wi-Fi at the Cafes or work from home while doing their work, nothing wrong when you are a freelance blog writer who is writing for your own blog. But not for a client’s work! There have been several instances where these notorious Freelancers have been involved in stealing Identity, social security, credit card credentials and thereby defrauding your clients.  They don’t have any data security, anti-virus, firewall, 2-factor authentication or any such measures implemented. And in most of the cases, there are no mutual agreements or contracts to protect confidential information. AICPA and IRS require all firms/CPAs to do reasonable due diligence when you work offshore company or persons and get reasonable assurance for client information protection.

b. Missed Deadlines and Multiple Projects

Freelancers & small shops have a reputation for being unprofessional and missing their deadlines. They often work with multiple clients, and on short-term low-budget projects.

c. Lack of Focus

Also, most of these small shops are local accounting firms whose core focus area is their local business in their country and on the side they would like to make a few bucks by trying outsourcing.

d. No Contractual Commitment or Binding

You have no agreement whatsoever that penalizes them for any wrongdoing or missing deadlines, neither they have their reputation/goodwill at stake

e. Lack of Control or Poor Work Quality

Offshore Freelancers work thousands of miles away from the client, unsupervised from home. However, A client thus has very little control or authority over an offshore freelancer. Hence, a freelancer is unlikely to be held accountable for the conduct and quality of their work. Often turnaround time with contractors or freelancers are not consistent, and you may have to wait a few hours (or even a few days) to hear a response, depending on how quick the freelancer is to respond. Additionally, you don’t have control over the process and the way things are done.

Freelancers love doing freelancing for one major reason: Freedom. Freelancing gives them the freedom to choose when they want to work, and with whom. The problem? When you are the one giving them the work, you have absolutely no clue, when they are going to work and when they are not. This creates major trouble in communication, as you are always wondering about getting a reply on your last email, and a lot of time is wasted in deciding the time when you want to have a call.

f. Infrastructure Challenges

In developing countries where having a stable Internet is also a big challenge today. Many firms have hired freelancers offshore during season time and have ended working themselves 80 hours/week. Why? because this offshore Individuals

I. May not have a stable Internet connection

II. They face power outages,

III. They work on Laptop and USB Internet or Mobile Internet and it’s working slow

IV. They had an accident or they lost their laptop and now they cannot work for the next 3 weeks. These reasons may sound ridiculous, but ask firms who have worked with these small shops. They have faced delays and missed deadlines because of these issues.

g. No Team

No Ecosystem: In case of accounting firms you have to work in a collaborative environment where you work as a part of a team rather than working on your own. A freelancer will be working from the corner of his home or a cafe, most of the time alone. So there is no continuous learning or development, sometimes because they work with multiple clients they want to finish their projects as quickly as possible, to serve as many clients and as a result real objective of work gets missed and work quality suffers.

h. Using freelancers has been disruptive

Freelancer Contractors come and go; very few end up staying for the long-term and become part of a company. Most firms only hire freelancers and independent contractors on an as-needed basis for shorter-term projects. This constant rotation can be disruptive to the working environment and inconvenient for full-time employees. Plus, the quality of work that is delivered may suffer, and different contractors deliver work that varies in quality.

As Gibson CPA LLC- an accounting firm working with clients in Cincinnati, Ohio, for 26 years, also once expressed, “I was excited when I started working with the company that I contracted with. They misrepresented to me that they are already working with firms, In Fact, they were a sham company. I was so scared to even think of that now. However, I still continue to work with offshore workers but now through a reputed staffing company, they have end to end data security controls and do all background checks and have all agreements in place.”

Author: Melvin Caine, President, CPA firm based in Calgary Alberta, Canada