Do­mes­tic com­pa­nies try to catch up with trend of out­sourced ac­count­ing

Kyiv Post - - Business Focus - BY NATALIE VIKHROV [email protected]

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.”

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