As the end of 2024 approaches and a new fiscal year looms, accounting firms are gearing up to streamline their services for the tax season, a critical period requiring meticulous preparation and precision. Amid growing regulatory complexities and expanding client bases as new businesses across multiple industries emerge, firms face challenges that demand innovative adaptation. This raises a question: Can the accounting industry sustain the skilled workforce needed for tax preparation, or is outsourcing the key to bridging this gap? 

Staffing shortages and evolving compliance demands pose recurring challenges across the financial services sector, prompting firms to seek alternative solutions. Outsourcing has emerged as a potential lifeline during peak season pressure.  

But can tapping into global talent or seasonal workers sustain competitiveness? And how can firms ensure their outsourced operations remain secure and efficient when cybersecurity threats are pervasive? 

The Accounting Workforce Crisis: Perspectives from the U.S. and Australia 

As critical contributors to business decision-making, accountants are in high demand, but the industry faces a workforce challenge as demand outpaces supply. The CPA Journal deemed this a severe crisis, highlighting the talent shortage exacerbated by declining enrollment in accounting programs. 

The U.S. Bureau of Labor Statistics (BLS) projects a 6% growth in employment for accountants and auditors from 2021 to 2031. While slightly above the average growth rate for all occupations, this steady increase reflects rising demand for accounting services driven by economic expansion, globalization, and regulatory changes. 

However, this growth contrasts sharply with the declining number of graduates entering the field and retention issues within firms. 

Compounding the issue, many Certified Public Accountants (CPAs) are nearing retirement. By 2020, 75% of American Institute of Certified Public Accountants (AICPA) members were expected to retire, deepening the workforce gap. 

The growing demand for expertise in taxation further strains an already undersupplied talent pool, especially during tax season when firms struggle to meet surging compliance requirements and limited time to onboard qualified professionals for tax filings. 

Though less severe than in the U.S., Australia faces similar challenges. Joint research by the Association of Chartered Certified Accountants (ACCA) and Chartered Accountants Australia and New Zealand (CA ANZ) highlights increasing difficulties in attracting and retaining talent in the financial services and audit sectors. 

Both nations face similar pressures: high workloads, evolving regulatory demands, and the growing appeal of alternative career paths for accounting graduates. 

This staffing crisis extends beyond seasonal pressures, posing a structural challenge that threatens tax preparation efficiency and firm competitiveness. Consequently, many firms are turning to outsourcing as a viable solution. However, the potential benefits must be balanced against the cybersecurity risks, particularly with sensitive client data at stake. 

Tax Preparation at Present 

Tax preparation has transformed radically from a straightforward task of balancing books into a multifaceted operation requiring expertise, adaptability, and innovative thinking. Modern accounting firms now navigate mounting pressures, including heightened client expectations, stricter regulatory demands, and the constant need to opt to optimize operations while protecting sensitive financial data across global networks.  

This evolution demands a new approach to tax season management where traditional, in-house approaches to tax preparation are no longer sufficient for many firms. This shift is driven by several factors: 

• Client Expectations: Businesses increasingly demand value beyond basic compliance, seeking insights, strategic advice, and rapid responsiveness to complex tax scenarios. Firms must meet these expectations without compromising accuracy or efficiency. 
• Regulatory Complexity: Tax laws are constantly changing, with governments introducing more stringent reporting and compliance standards. For firms, staying current on these changes requires continuous learning and the capacity to implement them seamlessly. 
• Operational Efficiency: To remain competitive, accounting firms must streamline their workflows while managing costs. This includes using artificial intelligence, and technology reliance to automate repetitive tasks, and finding innovative solutions to maximize output during peak seasons. 
• Data Security: With the adoption of digital processes, the likelihood of exploiting client data requires a proactive layer of protection. Cybersecurity threats broaden particularly for firms that handle sensitive information across multiple systems and platforms.

The Cybersecurity Elephant in the Room 

While the benefits of outsourcing are compelling, they come with a significant responsibility: data protection and security regulations. This is where many firms hesitate, and rightfully so. Tax documents contain some of the most sensitive personal and financial information of clients handled by accounting practices. The risk of data breaches isn’t just a technical concern, it’s a matter of professional reputation and legal compliance. 

Best Practices for Secure Outsourcing 

Here’s how accounting firms can protect sensitive data while leveraging the efficiency of outsourcing during the tax season: 

1. Partner Verification and Due Diligence

• Assess Security Certifications: Ensure potential partners adhere to recognized industry standards such as ISO 27001, SOC 2, or GDPR compliance. 
• Review Track Records: Evaluate past performance in safeguarding sensitive information and handling breaches, if any. 
• Verify Staff Training: Confirm that outsourced teams are trained in handling and protecting sensitive financial data, with regular updates on emerging threats. 

2. Technical Security Measures

• End-to-End Encryption: Ensure that all data transmissions, whether internal or external, are encrypted to prevent interception. 
• Secure Client Portals: Utilize encrypted, cloud-based systems for sharing and storing client documents. 
• Multi-Factor Authentication (MFA): Require MFA at every access point to add an extra layer of security against unauthorized logins. 
• Regular Audits: Conduct frequent security audits and vulnerability tests to identify and resolve potential weaknesses before they are exploited. 

3. Clear Security Protocols

• Data Handling Procedures: Develop detailed policies for handling, accessing, and sharing sensitive information. 
• Access Management Guidelines: Limit data access strictly to authorized personnel and track access logs to detect anomalies. 
• Incident Response Plans: Have a documented action plan to address potential breaches swiftly and effectively. 
• Ongoing Training: Provide continuous cybersecurity training for both internal staff and outsourced teams to ensure everyone stays updated on best practices and threats. 

The Path Forward 

Struggling with the mounting demands of tax season? Outsourcing tax preparation services can be a game-changer for accounting practices when approached as a strategic initiative rather than merely a cost-saving measure. By prioritizing security alongside efficiency, firms can create a sustainable model that alleviates bottlenecks and enhances client satisfaction.

By prioritizing stringent cybersecurity measures alongside operational improvements, firms can establish a sustainable model that protects sensitive data while delivering exceptional value to clients. Transparency and proactive communication about cybersecurity frameworks build trust, reinforcing client confidence in your services.

When executed thoughtfully, an outsourcing strategy is more than a solution for managing workloads; it becomes a competitive edge, driving growth, improving client satisfaction, and solidifying your position as a forward-thinking practice.

Looking Ahead

As we head into another tax season, outsourcing presents a viable solution to the perennial challenges of peak period demands. Success lies in striking the right balance between operational efficiency and security. By implementing robust security measures and choosing the right partners, accounting firms can leverage outsourcing to grow their practice while maintaining the trust of their clients.

Trust is built on transparency. Demonstrating strong cybersecurity measures not only protects sensitive data but also strengthens your client relationships.

With Practice Protect, accounting firms can strike this critical balance. Designed for the unique challenges of accountants, it offers centralized access controls, Multi-Factor Authentication (MFA), and encrypted workflows to secure your operations, whether in-house or outsourced.

Ready to secure your outsourcing strategy? With proper planning and the right security measures in place, outsourcing can help your firm thrive while ensuring your clients’ data remains as secure as if it never left your office.