2020 has been all about drastic changes and extraordinary challenges.
And there’s no way accountants can expect tax season 2020 to be any easier.
Filing tax returns is a resource-intensive process that demands a lot of time and effort. Along with time-crunch and burdening burgeoning workload, there is skills shortage in the UK which has reach critical levels now. If not handle promptly, it will result in a progressive deterioration of quality of services and even, missing deadlines.
The usual norm is that the tax season is excruciatingly busy and hectic for accountants. It’s the time when they work fingers to the bone making sure that their clients meet all the tax deadlines.
However, the scale of difficulty is even higher this time.
In this article, we will talk about the reasons why this tax season is different, the struggles of an accountant and an effective outsourcing strategy that will help you navigate through this tax season smoothly.
The pandemic has added new concerns to the already potent mix of challenges, which have pushed uncertainties to new heights and led to situations which could never have been predicted in the first place. Every business has a unique problem and there is no universal fix to it. Some business owners have had to rework their business models to meet the new customer needs, some have to diversify their revenue streams to revive their cash flows. And the UK government also announced supporting businesses by introducing new legislation and schemes to help them.
With so much going on, accountants are helping their clients tackle the problems by COVID-19 and move their businesses towards a brighter and a more resilient future. Given below are two factors that have massively influenced tax season 2020:
‘Burnout’ is officially recognised by World Health Organization. According to WHO, “Burn-out is included in the 11th Revision of the International Classification of Diseases (ICD-11) as an occupational phenomenon, not a medical condition… reasons for which people contact health services but that are not classed as illnesses or health conditions.”
Maintaining client relationships, fulfilling compliance work while looking after the kids and doing household chores – life in 2020 is difficult for accountants. And the arrival of the tax season has added to the pressure.
The dependence on technology is linked to the work-from-home model. Accountants were forced to leave their offices and serving clients virtually became necessary.
Not that the change happened overnight. The accounting industry was already in the process of digitisation. It was adopting new technological changes; however, the pandemic accelerated the speed of change.
But here’s the rub, no matter the benefits of resulting from change, there are always teething problems, which make change discomforting at the onset.
In this case, accountants had to adopt new technology, upskill themselves, and extend digital transformation benefits to their clients who were struggling with a similar situation. Also, they had to figure out new ways to meet diverse and evolving client needs like business advisory and meeting new and evolving financial legislation and regulations.
According to Sage Accounting’s report, ‘Practice of Now 2020’, 51% accountants believe that accountants must have financial business advisory skills such as cash flow and growth modelling.
Before hiring an outsourcing company to outsource tax returns, accountants must have a well-defined strategy that helps them reap maximum benefits from the association.
Here’s an outsourcing strategy that you must follow:
Your process must begin with a background check and asking peers for references. Make a list of some outsourcing companies and start interviewing them. Check their infrastructure, staffing and technological capabilities. Narrow down to the one that ticks all the boxes in your list and is GDPR compliant. Even better, work with someone who is professionally affiliated to bodies such as the ACCA or ICAEW.
To manage the outsourcing plan effectively, consider how much time you have, the number of clients and the workforce available to file those tax returns. Once the workload has been identified, you can choose how to divide that number between the in-house team and the offshore team.
A simpler way will be - outsourcing all the tax returns. Your in-house accountants can utilise the freed up time to learn more about financial business advisory services, upskill, learn new technology and thus explore more revenue streams without adding to the overheads.
Before kickstarting the collaboration, you must check if your requirements align with the scope of the outsourcing firm. You can choose to select the entire set of tax functions or selectively go for a few like tax self-assessment for individuals and partnerships, tax summary for individuals, property schedules, etc.
There are three modes of co-sourcing to meets each client’s specific needs. They are:
Coming to the pricing, there are two models to choose from. One is Fixed Fees, the other is Variable Fee. Under the fixed fee model, you pay £75 per tax return. For the latter, you pay as per the number of income streams. There are further volume-based discounts available in both models.
You must have a knowledge transfer session with your outsourcing partner. Discuss the tax projects you are managing currently or better yet, fill in a checklist. Once you have answered all the important questions, share your existing process with the outsourcing team.
Tell them about the software you want them to use, the reports (like tax computation report, SA 800, SA 100, etc.) you want them to provide and set a deadline.
Once an appropriate model is chosen, the outsourcing team will allocate the required resources.
The Tax Return Outsourcing Process
Here’s a 6-step process that tax outsource company in India follow:
•Remote login using secure software
Scanning and uploading documents on FTP server
• Recording the data and processing it
• Finishing the task
• Review and feedback
• Implementing changes as per feedback
• Providing a final pdf report of the tax return
Ensure that you stay connected with your outsource partner through the entire process. Earlier, it was not an easy task but today some outsourcing firms have apps that allow the client to review the work from any corner of the world. For example, the QXAS Job Tracker mobile app allows accountants to see task progress, raise queries, etc.
According to AccountancyAge, 67% of accountants are all set to outsource services to remain competitive.
In an age where the role of an accountant is not limited to just filing tax returns, accountants need to do more in a limited period of time. Outsourcing becomes the key in managing this excessive workload during tax season.
Here’s why you must have a tax returns outsourcing strategy for tax season 2020:
1st April 2019, new digital tax initiative (MTD) and it was a massive change for businesses. UK accountants spent their entire year working with clients to helping them get prepared for Making Tax Digital.
Many such developments are on the horizon and to integrate them well in the client’s business ecosystem, accountants must be well-acquainted with them. With tax outsourced with an offshore client, you focus on ‘what’s next?’ rather the mundane, compliance-driven tasks.
Businesses are facing difficulties in maintaining their cashflows and generating revenues. They don’t need assistance with their tax returns only but also managing their businesses. If your accounting firm outsources, you will be able to take on more work, evolve their service offerings and become the advisors they’ve always wanted.
You can focus on advising your clients on several areas such as legal, technology and on any business changes that are needed for a better future.
For tax compliance, data-accuracy is utmost important, and tax preparation outsourcing helps prepare more taxes, accurately. Accurate data enables you to analyse the numbers and interpret them. It will allow you to provide more value to your clients by offering business advisory services.
Also, the expanded service portfolio helps to attract more clients.
With this guide, accountants can consider outsourcing as a solution to their growing tax season stress. And one must keep in mind that this not just a temporary solution but helps an accounting firm grow in the long run. An accountant must consider making outsourcing an indispensable part of their firm’s workflow. It helps to expand your clientele and grow your practice, without having to worry about the size of the workforce.
In a competition-driven economy, it helps to stay a step ahead with strategic support and streamlined processes delivered by an outsourcing partner. Outsourcing helps you leverage advanced tax technology and skilled tax experts to reduce overhead costs by 50 per cent.
Note from the Editor: This blog is a part of a special tax season series called ‘Navigating Tax Season in the New Normal’. Stay tuned for much such articles and updates. Or you can call our tax experts to discuss your outsourcing strategy.