Domestic companies try to catch up with trend of outsourced accounting
Experts say accounting outsourcing in Ukraine is on the rise, but the growth is largely seen in international companies operating in the country.
Victor Nevmerzhitsky, tax partner at BDO Ukraine – the Ukrainian subsidiary of the BDO international network of public accounting, tax and advisory firms -- says his company has recently increased its clientele.
But that growth, he said, is being driven by factors outside the country, as the Ukrainian subsidiaries of international companies are more geared towards outsourcing, since the trend is growing at the global level.
“More and more foreign companies that operate in Ukraine are adopting internal policies to outsource either the whole accounting function or some portion of it - for example payroll accounting,” he said.
And according to Deloitte’s 2016 Global Outsourcing Survey, the practice is expected to see growth across many sectors, with finance being one area where growth is especially expected.
More than 40 percent of respondents of Deloitte’s survey said they already outsourced finance functions, and this is expected to grow by a further 36 percent. Meanwhile, more than 50 percent outsourced tax functions - and this was expected to grow by 17 percent.
Nevmerzhitsky said among the challenges faced by Ukrainian accountants are the country’s frequently changing tax rules, which makes automated accounting harder.
“In other countries they develop accounting software, they implement it, and with minimal changes it works perfectly for years,” he said.
“Here, accounting software needs to be adjusted for (every) change, so it’s very difficult to automate the process, and a significant portion of manual involvement is needed.”
He said Ukraine’s constantly shifting tax landscape is also among the reasons why international companies outsource.
“It is riskier to have one internal accountant, who may not be keeping up with all the changes, compared to outsourcing to an external firm, which has more resources (and) accountants.”
Despite the growing uptake of accounting outsourcing by international companies, the trend is yet to catch on among domestic Ukrainian businesses.
“If you talk about fully Ukrainian companies… we have some clients among them, but I believe that in many cases they don’t want to go to an external accountant because not all their operations are, ( let’s) say, official,” Nevmerzhitsky said.
“That’s probably the biggest issue for mid-sized and big companies. For small businesses, probably the cost factor is important, because there are a huge number of individual accountants who are happy to work for low pay, and their fees are uncompetitive for us.”
Dmitry Churin, head of research at EAVEX Capital, said Ukraine did not have an accounting outsourcing culture, partly because of the costs associated with the service.
“In Ukraine, in around 90 percent of cases it’s cheaper to find a local accountant… than to outsource to a firm,” he said.
Meanwhile, Churin said that for global companies finding a reliable firm with knowledge of local accounting standards was key.
“They need the confidence and reputation of a verified company,” he said.
“Even if they try to hire just a local accountant, it’s hard to run a check on them and control them.”
But Nataliia Afanasieva, the managing director of the Ukrainian branch of TMF Group – an international company offering financial and administrative services, said her firm was seeing new-found interest in accounting outsourcing from Ukrainian companies, even if they were not yet actively using the service.
She said her company has seen an increase in inquiries about the service over the past year.
Although Afanasieva said this hasn’t yet translated into an increase in domestic clients, the growth in interest itself is a positive sign, indicating that businesses were trying to clean up their books and become more transparent.
“Possibly, domestic businesses are moving away from shady payment schemes and want not just an accountant that comes in and gets paid in cash, but a fully legal representative,” she said.
“So I see this is a positive trend, in the sense that businesses are trying to come out of the shadows.”