First of we will start with CAAS (Clients Accounting and Advisory Services) and VCFO ( Virtual Chief Financial Officer ), which traditionally are quite profitable in terms of the firm. A huge percentage of our clients have scaled these services after they have incorporated offshoring staffing in their business. However thinking it inefficient and distracting from the core services of accounting, tax, audit, business advisory which is very core to CPA firm's business. Also, accounting firms think that CAAS in a way is not that lucrative opportunity or a profitable service area. However, let's see why CAAS and VCFO are really the growing service area in the business.

Why are CAAS and VCFO growing?

1. Earn profit with less number of clients: This is a very different business model of the firm. You don't need hundreds and thousands of clients to make million-dollar revenue in practice. With 30-40 clients, you can build a million-dollar accounting practice that is too profitable wherein your net margins will range in 50-60%.

2. Shortage of Talent: These services are in-demand because accountants, bookkeepers, and CFOs are not available for hire. There is a steep shortage of talent. According to a recent Xero survey, 77% of business owners pay someone to temporarily stop doing many CAS-related activities. But a full-Time CFO/Controller is needed for bookkeeping, accounts, controlling, and CFO.

3. High Engagement Value/Profitability: Engagements are valuable, which range from $30K to $50K. Which is very lucrative and profitable in terms of engagement, first of all, a handful of accounting firms are providing these services so competition is less, also your pricing/value would be comparable, if your client goes out and hire a team of bookkeeper, accountant, controller, and CFO. Over the years, firms haven’t offered these kinds of services. It was viewed as a low-margin, inefficient, and distraction from the core audit, tax & advisory offerings. CAAS and VCFO are some of the fastest-growing areas of service offered by small firms.

4. Easy to Offshore: Offshoring is easy if you are able to standardize your process and firm.

5. Getting Clients Stick around: The more services you surround your client with, the harder it is for them to leave.

6. Easy Upsell on Advisory: If you essentially manage your client’s accounting department, you have a pretty good finger on the pulse of the business to be able to easily spot advisory upsell opportunities.

7. Efficient Compliance Work: It’s a lot faster to complete your compliance work when you’ve been the one handling the books and payroll. During this time savings translate to cost savings, boosting margins.

How can you Leverage Offshoring for CAAS and VCFO Services?

1. Acquiring Big Clients: It allows you to acquire big clients which you typically don’t target. (You can provide entire outsource accounting/finance department services).

2. Offshoring allows providing Full Suite of Services: (Transactional work, compliance, controllership, advisory, CFO or all of them, Intensity of service performs may be different)

3. Staff Augmentation: Typically you require a team of CFO's, Controllers, Sr. Accountants, Account Manager, Bookkeeper behind you to provide services. Your client wouldn’t go offshore for hiring a part-time bookkeeper or accountant. You have to act value-added shared services for your clients.

4. Pricing Competitively: Price it competitively and profitably – First of all there are not many accounting firms out there who provides these services so competition is less, also your pricing/value would be comparable to if your client goes out and hire a team of bookkeeper, accountant, controller, and CFO and TRANSACTIONAL SUPPORT, TALENT SHARING, TECHNICAL EXPERTISE, TECHNOLOGY.

5. Protects Margins: Firms that have scaled Offshoring have Engagement Level Margins of 70% and the profitability of 50%.

6. Enhanced Delivery: Multilevel Delivery happens. Multiple people are involved. You may have one person mapped to clients at the point of contact.

7. Client Focus: You end up working with 100 or 200 clients but focusing on each client is very important as each client engagement size would range from $50K to $500K.

Roles and tasks that can be offshored in CAAS + VCFO Services.

Examples of Leveraging Offshoring with CAAS and VCFO

All the mentioned companies are no-tech companies nor that they have to build any software, what they have done is integrate all the services under one roof (CAAS and CFO)and providing to small and midsize businesses. 

One of the key reasons these companies scaled so much is they have a huge offshore team for the delivery of their services.

Practical Case Study of Summit CPA Group.

Summit CPA Group is run by Jody Grunden and Adam Hale. 

Jody Grunden is the Co-founder and CEO  of Summit CPA Group headquartered in Fort Wayne Indiana. Jody Grunden has been awarded CPA.com’s Innovative Practitioner Award for 2020 with the 1st position. His entire career has been devoted to innovating the accounting industry, starting with the company’s mission statement: “changing the way people think about accounting.”

Adam is a Partner and COO of Summit CPA Group where he leverages 15+ years of experience in the public accounting sector to coach both his team and other accounting firms in modern best practices and the strategic delivery of Virtual CFO services.

If we talk about an overview of Summit CPA Group,

• Its 80% revenue comes from CAAS and VCFO
• They have 130 - 140 clients with client retention - 90%
• Avg Engagment Value - $68000
• Client Contract - No Lockin - No Commitment

In an interview, Adam said, "We started with hiring just 1 offshore staff to check it out. Soon, we hired a few more staff members and today, Entigrity is a key partner of Summit CPA where we have our organizational structure customized to leverage our team of offshore staff."

Roles and Task that can be offshored for CAAS and VCFO Services:

There are 5 tasks that can be offshored for CAAS + VCFO + Advisory:

Lets us look at what task can be offshored:

1. Day to Day Tasks: (Paying Bills, Managing AR/AP, Invoicing and Collection)

2. Periodic Tasks: (Month End Close, Financial year Report)

3. Tax-Related Tasks: (Planning Projections, Quarterly Review, etc)

4. Business Advisory Tasks: Managing Team, Team Evaluation, Designing an Incentive Plan, Evaluation Performance of Department, etc

5. Strategic Advisory Tasks: Planning, Valuation, M&A and another sort of advisory)

What are the Roles that can be Offshored?

(Offshore and Onshore)

When we say 65-70% of tasks can be offshored, we mean gradually, it won’t start from Day 1, It typically it takes 2-3 years to leverage complete offshoring and providing CAAS and VCFO Services.

We have divided it into Phases:

Phase 1, Phase 2, Phase 3, where we can clearly see the roles of offshore and onshore where red represents the role done by onshore teams and green represents the role done by offshore staff. 

What are the dos and don’ts in CAAS and VCFO offshoring?

1. Communication is the key whether it’s your in-house team or your offshore team. With your offshore teams, you need to communicate even more frequently so that all the thoughts and ideas are aligned and there is no room for confusion despite the distance.

2. When you are working with an offshore team there will be differences in time zones, which could turn into a great. Using these overlapping hours will help to mitigate this challenge.
3. Knowing the culture of your offshore team will be beneficial as it will help you to communicate in a better way. To acquire more knowledge about your team you can read about their country on the internet or ask the team members.
4. As we know the morning shows the day so treating your offshore team well from the first day is really important. So treating your offshore team as your business partner from the initial days is very important. When you treat them equally they put their heart and soul in the work.
5. Trying to micromanage the work of your offshore team will turn into a disaster. It is considered that Micromanagement is a negative practice that eventually results in the breakdown of trust between employees and the employer.

Entigrity™ is a trusted offshore staffing partner to over 500+ accountants, CPAs, and tax firms across the US and Canada. Our flexible and transparent hiring model gives helps firms of all sizes to hire staff for accounting, bookkeeping, tax preparation, or any other task for 75% less cost. As a firm 'run by accountants, for the accountants', Entigrity captures the hiring needs of accounting firms most precisely, providing staff that works directly under your control and management, still, you are left with least to worry about compliance, payroll taxes, overheads or any other benefits.