India adds accounting as part of its outsource trend

Washington, June 12 (UNI) US accounting firms are outsourcing a growing amount of tax compliance and bookkeeping work to India, where labor costs are low.

The trend is part of the new growing outsourcing industry which is changing how work is done in the banking, financial services, insurance and telecommunications industries.

According to a report in the Cincinnati Business Courier, one of the largest accounting firms in the US, Deloitte Consulting LLP, has projected a two million financial services industry jobs that will move from Europe and the US to cheaper labor markets like India, in the next few years.

''This is the beginning of the bell curve of a new industry,'' according to Glen Keenan, president of Xpitax, a leading accounting outsourcing company based in Braintree, Massachusetts.

Xpitax has its sales, marketing and consulting staff in the US and an office in India where chartered accountants complete the accounting work for CPA-firm clients. The ease of sending information long distances has made it possible.

Here show outsourcing of tax-return preparation works. An accounting firm in the US scans client tax documents and sends those and the prior year's tax file to the outsourcing firm's hosting site. The company's chartered accountants overseas access the documents using a secure Web connection, prepare the returns and then post them on the site, where the firm retrieves them.

The Xpitax officials says his firm's clients range from sole practitioners to the largest accounting firms in the country.

Reasons for outsourcing vary. Some clients use the service as an insurance policy. Other firms use the service as a way to add capacity and expand their businesses. By outsourcing the simpler tax compliance work, they are able to focus on the higher-margin services, such as consulting.

According to Xpitax, it is the shortage of qualified people in the industry that is driving the trend to outsource more than cost.

Although outsourcing is definitely a trend in the industry, only a tiny fraction of work is now sent overseas. Keenan estimates about 250,000 to 300,000 US tax returns will be prepared overseas this year, while he estimated only five per cent of accounting firms in the US are outsourcing work overseas.

Some firms don't see the need for outsourcing yet, or they're not comfortable with the concept like Gilbert Associates, Inc in Sacramento, California.

''We considered it a couple of years ago when it was a big push, but we felt we didn't want our information outsourced, so we didn't feel our clients would want their information outsourced,'' Gilbert Associates official said.

Outsourcing companies say their firewalls are stronger than those of US firms. With Xpitax, for instance, no client information leaves the US. Accountants in India access the information from the US hosting site via the Web, and everything is done electronically.

The privacy and security questions have prompted many state legislators, including in California, to propose bills to address the issue.

The American Institute of Certified Public Accountants last year revised its ethics rules requiring accounting firms to inform clients, preferably in writing, about the outsource work and to specifically state that confidential information would be passed on to a third-party service provider.

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