Lots of exciting AI action this week in the world of accounting including OffshoringOS, a new human + AI augmentation project I’m investing in.

Introducing OffshoringOS--accounting work offshored to humans, enhanced by AI

As accounting leaders, we face immense pressure to balance client needs, staff resources, profit margins, and changing regulations.

It's not easy to run a thriving practice in today's complex business landscape.

And one dilemma we tend to grapple with is whether to offshore accounting and compliance tasks like bookkeeping and tax preparation.

On one hand, offshoring to overseas providers offers potential cost savings through lower labor rates. But on the other, implementing it successfully requires expertise your firm may lack.

Offshoring seems to demand an all-or-nothing commitment that could disrupt your operations. Many firms end up avoiding it altogether, even if it could significantly improve their bottom line. But what if there was an easier way to offshore that didn't jeopardize your firm?

In this article, we'll explore a smarter approach to offshoring that eases the transition, integrates seamlessly into your workflows, and sets you up for scalable growth. You're about to discover how offshoring can transform your firm without the headache.

Perhaps just in time for busy season.

The Offshoring Dilemma for Accounting Firms

As an accounting firm owner, offshoring parts of your workload likely appeals to you for one main reason: cost savings.

By leveraging overseas accounting staff and firms, you can benefit from much lower labor rates and significantly improve profit margins.

But while the financial upside is clear, the path to get there is far murkier. Setting up offshoring requires expertise in areas like:

- Finding and vetting reliable offshore providers

- Drafting NDAs, 7216 disclosure letters, and other client paperwork

- Determining which specific tasks or clients are suitable to offshore

- Onboarding and properly training offshore staff on systems and processes

- Overseeing quality control and communications across time zones

It's daunting to build this specialized knowledge and managing infrastructure from scratch. Not to mention the time you'll invest that could be better spent serving clients and running your firm.

This leads many firms to think offshoring requires an abrupt all-or-nothing switch. But making such a disruptive change carries risk, so it's easier to just maintain status quo. Unfortunately, that means losing out on profit improvements from offshoring.

There has to be an easier way to offshore that lets you dip your toe in the water without diving into the deep end. A way to ease the transition so you can test potential cost savings before fully committing.

To make matters worse, according to a recent report from the Alliance of Accounting and Finance Tax Outsourcing Companies (AAFTOC), demand for accounting-related work is so huge that, despite increased competition, the demand for offshoring EA and CPA services continues to rise:

The shortage is quite alarming with those pursuing their EA:

And even worse with accountants pursuing their CPA:

My Aha Moment Discussing a Client Analysis Tool on LinkedIn

The inspiration for a smarter offshoring solution came from a discussion sparked by my post in on LinkedIn which sparked a lively conversation with many of my accounting peers (50+ comments).

I created a spreadsheet tool called the "PITA Meter" to analyze client profitability and other key performance indicators. It provides visuals like a radar chart showing areas for improvement.

I asked the group for help naming this new tool. Comments poured in and a conversation ensued around the challenge of managing client portfolios.

One insightful reply came from Chris Keody, an expert on accounting firm exit strategies. As we explored the issues, Chris explained: "Offshoring is not an all-or-nothing initiative. It can augment onshore staff rather than fully replacing them."

This was an aha moment.

With proper guidance, firms could ease into offshoring through a small pilot group before full commitment. We also discussed how offshoring compliance work helps handle influxes of last-minute tax returns.

It dawned on me that a tool like my PITA Meter could identify the right tasks and clients to offshore. This would allow a gradual transition to significant cost savings.

Out of that discussion, the idea for “OffshoringOS” was born. I realized it could transform accounting firms through flexible, data-driven offshoring rather than disruptive overhauls.

Introducing OffshoringOS

After the lightbulb moment realizing a software solution could ease offshoring, I set out to make this vision a reality. The result is OffshoringOS - an offshoring operating system designed for accounting firms, powered by AI.

OffshoringOS aims to make offshoring simple, scalable, and seamless through an easy-to-use cloud-based platform. It guides you through every step of assessing, testing, and expanding offshoring within your firm.

The core components and benefits of OffshoringOS include:

- Step-by-step guidance on drafting NDAs, 7216 letters, and establishing relationships with offshore providers

- A powerful KPI engine that analyzes your clients to determine offshoring potential

- Flexibility to start with a pilot group of clients before expanding offshoring firm-wide

- Easy onboarding of offshore staff on your systems and processes

- Ongoing quality control across time zones and providers

- Insights into cost savings and profitability improvements from offshoring

- Gradual transition plan tailored to your firm's needs and risk tolerance

With OffshoringOS, offshoring becomes a turnkey solution. It's like having an entire offshoring consulting team available on-demand through AI-powered software.

You can sign-up for the beta at offshoringos.com (or get notifications if you just want to follow our journey building the platform).

The Powerful KPI Engine at the Core

The core of OffshoringOS is a powerful KPI engine that analyzes your clients to determine offshoring potential and overall profitability. In a nutshell, this engine enables data-driven decision making on which clients and tasks to offshore.

As Chris noted in our convo, "If you could identify which clients are suitable for a junior accountant, the offshoring firm will be able to staff appropriately based on your needs." The KPI engine does exactly this.

It provides insights like risk, referrals, lifecycle stage, satisfaction, pays on time, and overall profitability grade for each client. This helps determine the ideal clients to start offshoring as a pilot program before expanding.

I also noted that outsourcing compliance work as deadlines approach is an ideal use case for rapidly handling influxes of last-minute tax returns. The KPI engine can identify these time-sensitive workflows to offshore.

Their are several paths to profitability for OffshoringOS. A long-term strategy could be monetizing the rich data set on accounting firms and their client trends over time. Above all the data must remain private, anonymized and secure.

This approach would be a win-win among OffshoringOS and its accounting firm partners since it would benefit all parties including maintaining strict client privacy. The KPI engine will become more intelligent as more data is aggregated across the OffshoringOS customer base.

Gradual Adoption for Minimal Disruption

A key focus in designing OffshoringOS was enabling accounting firms to gradually adopt offshoring for minimal disruption. Offshoring does not have to be an overnight, all-or-nothing transition.

With OffshoringOS, firms can start small with a pilot group of clients, while building knowledge and confidence in the process. The platform would provide the flexibility to expand offshoring at your own pace based on initial results and data.

This phased approach prevents getting overwhelmed upfront. The legal onboarding, staff training, and workflow management would be handled seamlessly in the background by OffshoringOS.

So rather than an intimidating overhaul, the platform eases you into offshoring through incremental adoption. You remain completely in control of the expansion roadmap tailored to your firm's needs and risk tolerance.

The goal is to make offshoring feel like a natural extension of your existing workflows. OffshoringOS integrates the process into day-to-day operations for a frictionless transition.

Automating the Right Tasks for Offshoring

To determine which tasks to offshore, OffshoringOS will incorporate principles of automation and process optimization. Offshoring is ideal for automating high-volume repetitive tasks.

Like driving on the highway, bookkeeping, accounts payable, and certain compliance workflows involve predictable repetitive steps. These are prime candidates for offshoring.

In contrast, lower volume specialized tasks like advising clients require judgement and don't benefit as much from offshoring. The goal is to optimize the "sweet spot" of high-frequency, low sophistication work.

OffshoringOS will analyze your services to identify these automation opportunities. This initial offshoring “health check”), would consider factors like:

- Task volume and frequency

- Process complexity and standardization

- Strategic value and client sensitivity

- Talent requirements and availability

This data-driven approach ensures we automate the right tasks for offshoring. Those that provide the biggest cost and efficiency benefits with minimal impact on client service.

The platform will gain intelligence over time, delivering even more advanced insights and recommendations. This benefits the entire accounting ecosystem.

We’ll strive to help firms adopt future-proof strategies and operating models to thrive in a climate of rapid change. Offshoring is just one piece of the puzzle, but integrating it seamlessly unlocks transformational possibilities.

Overcoming Challenges on the Path to Offshoring

While offshoring through OffshoringOS will offer transformative benefits, we recognize the journey won’t always be smooth. There are challenges accounting firms may face when adopting offshoring, which we aim to help overcome.

One potential hurdle is resistance from accountants who view offshoring as a threat rather than a way to enhance capacity. OffshoringOS will need to provide change management guidance to get staff onboard.

Maintaining quality control across time zones takes diligent oversight. Information security is also paramount when offshoring sensitive client data. OffshoringOS will need to enable compliant data sharing through access controls, encryption, and virtual handoffs.

There may also be hiccups as workflows and handoffs are refined. We will mitigate risks by starting small and leveraging automation to ensure smooth operations at scale.

With the right approach, these potential stumbling blocks become surmountable bumps in the road. OffshoringOS will equip firms with strategies and technology to overcome implementation challenges.

Follow our journey in building OffshoringOS from Day 1 and if you’re interested in being a part of this project, just reply to this email or contact me at marc at infrontofai dot com.