Contingent Workers vs. Outsourcing: Which Is Right for Your Accounting Needs?

Hiring skilled accounting talent today, whether via contingent workers vs. outsourcing, can feel like solving an impossible riddle: what do you do when the economy is adding jobs to the auditing and accounting sector at a higher rate than others, but fewer workers than ever are entering or staying in the profession?

Competing for the resources you need with what feels like everyone else in the space isn't just frustrating, it can have a direct, prolonged and negative impact on your bottom line as vacancies go unfilled, output lags and remaining team members start to burn out. You need to augment what you have, and you have to do it fast.

Fortunately, there are options out there, if you know where to look.

The Accounting Talent Shortage, Contingent Workforce & You

In 2020 — a year that can be safely defined as, well, pretty remarkable — almost three quarters of working CPAs hit retirement age, and many exited the workforce just in time for a whole slew of new challenges to land on finance leaders' desks. Alone, that kind of mass exodus would already mean hiring headaches.

But paired with a pipeline that's slowed to a trickle, finance leaders are suddenly finding themselves in a full-blown talent supply crisis just as the finance function as a whole is undergoing a dramatic transformation. The ten years between 2010 and 2021 saw the number of candidates sitting for the CPA exam reduced practically by half, plummeting from fifty thousand at the beginning of the decade to just north of thirty thousand by the end.

With an outdated perception of what accounting professionals do keeping new blood out of the game and astronomical rates of burnout forcing seasoned pros out altogether, many finance leaders suspect that something's got to give. In fact, when we asked 800 finance leaders to give us their perspective, over 80 percent agreed that not only was there an accounting talent shortage presently, they expected it to get worse in the months and years to come. The result? A full 85 percent of finance leaders were feeling the squeeze so acutely that their hiring practices were impacted as a result.

The result is an expansion of considered solutions to bridge urgent skills and outputs gaps. One such solution? Contingency workers — a lot of them. According to MBO Partners, a business operating system for independent workers, 67 percent of the accounting firms they surveyed expected to tap into the contingent workforce to triage their talent needs, and 77 percent expected to increase their reliance on contingent workers through 2024.

All of this begs the question: what, exactly, are contingent workers? And perhaps more importantly: how do contingent workers stack up vs. outsourcing? Can you use contingent workers to fulfill needs in the accounting department you're leading — and should you?

To confidently answer that question, we need to start by understanding what the contingent workforce actually is. Contingent work is an umbrella that covers more than one type of working model, and each comes with its own advantages, disadvantages and individual management needs.

Simply put, a contingent worker is an individual who works for an organization without being hired by that organization. This can obviously cover a lot of ground, but most often, a contingent worker — especially one of interest to talent-strapped finance leaders —will belong to one of three main categories:

Contract Employees or Temps

When most people think of contingent work, this is the category they're envisioning: a skilled professional who can come in-house temporarily to help complete a project or fill a specialized need, hired through a third party like a staffing agency. Leaders have used temp workers to cover We've covered the pros and cons of sourcing accounting talent this way in depth with a three-part deep dive.

Read more: Accounting Staffing vs. In-house Team: What's Right for Your Business? [Part 1]

Consultants

When organizations need a specialized skill set or guidance that's not available in-house, it's not uncommon to bring a consultant or consulting agency in to help steer the ship, sort out problems, offer advice or draw up strategic action items. The Big Four and ad hoc expertise in the form of a fractional CFO are two examples of what this type of contingency work looks like in the finance function.

Freelancers

Then you have your freelancers. These are independent operators that work on a project-by-project basis. A lot of organizations will bring on a freelance CPA to help during tax season or the annual closing process, for instance. CPAs who hang a shingle as a sole practitioner are technically freelancers.

Whether you work with an individual contractor, make use of a third party's managed services to staff a temporary bench while you focus on recruiting permanent employees or seek out a contingent workforce management program or platform to connect you with the talent you need, there are certainly benefits to sourcing talent this way. For one thing, you can shift the stress of the recruitment and retention off of your plate, triage big projects and augment your existing resources to stave off burnout. That said, many finance leaders are turning to contingent solutions as a matter of necessity.

Hiring Virtual Accounting Teams: How Outsourcing Differs from Contingent Workers

So, what's the difference between outsourcing vs. contingent workers? Technically, there isn't one! Outsourcing is a subcategory of contingent work, and each of the examples explored above is a way to bring contingent workers into your organization's finance function in the short term to alleviate the strain of a reduced talent pool to draw full-time employees from; each qualifies as "outsourcing". When it comes to what's most associated with the term, however — skilled professionals working offshore to augment in-house teams — there are some key differences to consider.

Cost Savings

The first thing to know about the difference between choosing an outsourcing partner and bringing on a contingent worker is that, while both are a way to access specialized skills and triage productivity needs, only accounting outsourcing will deliver cost savings as well.

Only 14 percent of leaders who have turned to contractors, consultants or staffing firms list "cost savings" as one of their top three reasons for doing so. That makes sense, considering that in many cases, the costs associated with these solutions are as high or higher than hiring a full-time employee.

When it comes to outsourcing accounting tasks and other business processes, however, cost savings are built directly into the model, possibly accounting for the 59 percent of leaders who cite it as a reason for doing so.

The fact is, when it comes to hiring any worker stateside, finance leaders will have to offer more than just work to attract the skill set they need to get that work done. Accounting talent is in demand, so to stand out, part of your employer value proposition will have to be that you can pay more than your competitor.

When you work with an outsourcing partner, your talent pool opens up. As a result, you have access to a much wider range of options in a lot more markets, where what you can budget toward compensating skilled accounting professionals is still competitive without sacrificing quality of life.

More: How Much Does it Cost to Outsource Accounting Tasks?

Ultimately, bringing a contingent worker onto your team is a way to triage an imbalance between the work that needs to be done and the resources at your disposal to make it happen. It can help you get to speed in the short-term while you work on a more sustainable strategy, but it will probably cost you.

Talent Acquisition & Retention

Next up, you have to consider how talent sourcing actually occurs for each of your options. For a lot of contingent work options — hiring a freelance CPA or working with a consultant as a startup — leaders will spend about the same amount of time searching for, selecting and vetting their options as they would with an in-house vacancy.

Anyone who has ever shelved important strategy meetings to interview candidates can tell you it's not ideal. On the other hand, once those relationships are established, this can be a reliable way to get temporary or highly specialized work done when you need it.

Staffing firms and temp agencies work a little differently. You'll devote much less time to finding qualified talent; part of the draw is that it's handled for you. The issue is that you're likely to have to repeat the process. Turnover among temporary workers is common (some research places it as high as 443 percent!) so you may find yourself in a state of constant onboarding, struggling to bring contract workers up to speed on your company's business processes and accounting systems, only to have to start from square one next quarter.

With a virtual team of accountants sourced for you by the right provider, you're likelier to strike a better balance. First, because the accounting professionals you'll ultimately work with are employed by the provider, finding and bringing the right professionals on board is theirs to handle once you've established what you need.

Second, your provider will also take on the work of keeping those employees engaged, and since they have a vested interest in keeping turnover low, tend to have much higher retention rates. In some cases, retention is even stronger offshore than it is stateside. For instance, in 2021 LinkedIn research put retention rates within the accounting profession at about nine percent, but we were able to retain 98.5 percent of our accounting staff in Manila for the same time period.

What Can Be Outsourced to Outside or Virtual Accounting Professionals?

Traditionally, there's been a feeling among finance leaders that the scope and complexity of accounting work delegated to outsourced or contracted workers should be extremely limited. Data, privacy and control concerns have all meant that only the most manual tasks are sent offshore and the most specialized are executed where they can be directly supervised.

That's rapidly changing. A combination of factors — the introduction of automation tools, better cybersecurity technology and the shift to hybrid or remote work due to the pandemic in 2020 — have all made virtual workforce management easier and more attractive.

Given the range of contingent work options, the reality now is that practically anything can be outsourced, otherwise fractional CFOs wouldn't be a thing. More often, leaders asking this question are simply looking for a place to start. We created our Outsourcing Decision Matrix for Finance Leaders for that very reason, but it's worth looking at a little closer.

For years, conventional knowledge has dictated that if a task or process is manual, repetitive and falls outside of core competencies it can be outsourced relatively easily as opposed to higher-value and judgement-based accounting work.

Those low-value tasks are a great place to start, especially for organizations that are just beginning to weigh their options or haven't had a great experience outsourcing before. It's also where the greatest need already exists for most leaders.

Most executives we surveyed said their most urgent hiring need was for a general accountant (44 percent), while accounts receivable and accounts payable specialists were also highly sought after (29 and 26 percent, respectively).

However, we also saw an uptick in leaders who needed a controller- or VP-level professional (30 percent), pointing to an increased need for strategic accounting support. With the right partner, that work can be safely and effectively handled offshore. In fact, as the finance function overall becomes increasingly strategy-focused, more leaders are looking for ways to support high-level FP&A work.

More: 101 Tasks to Delegate to Virtual Accounting Teams

What to Do When You Find Yourself Asking: 'What's Better for Me to Source Accounting Talent?' - Contingent Workers VS. Outsourcing

Outsourcing vs. contracting. Contingent workers vs. outsourcing accounting firms. In-house vs. virtual teams. Vendor A or Vendor B.

Hiring decisions used to feel a lot simpler, didn't they? If you're used to the choices being between two qualified candidates or deciding whether you need a CPA or controller, navigating this new and rapidly changing landscape can feel downright overwhelming.

Having a trusted partner throughout the process can make all the difference. At Personiv, we have nearly four decades of experience helping clients like you refocus their time and attention on what really matters at work by closing the revolving door on talent. We source, engage and retain accounting talent on virtual teams as small as one to help businesses make real progress toward their strategic goals.

Whether you're looking for bookkeeping help to augment the work your hard-won talent was hired to perform or need to buttress FP&A efforts with seasoned CPA that can help streamline your business processes for a highly efficient finance function, we can help you decide what kind of contingent workforce you need — and help you manage it.

Get in touch with one of our contingent accounting experts today to get started — we're standing by, ready to learn more about your goals and how we can help reach them.