U.S. accounting firms can work with their counterparts in Ukraine to support the country as it endures the Russian invasion while also getting some much-needed help with their own work as labor shortages continue in the U.S.
Alyona Skichko, an accounting outsourcing partner at Baker Tilly Ukraine in Kyiv, and her colleagues have been helping other firms in the Baker Tilly international network. “All Baker Tilly firms are happy to get Ukrainians seconded to their firms because of a high concentrated level of experience,” she told Accounting Today.
They are able to assist firms outside the network as well. “Accounting firms in the U.S. are now fighting for younger talent, which still need to be educated and trained, and then you have a permanent workforce to support them in high season and low season,” said Skichko. “All of this can be mitigated by additional resources from Ukraine. It’s not our idea to get some short-term advantage from being on the front pages of newspapers all over the world over this big tragedy. It’s rather creating a win-win case where U.S. businesses, accounting businesses and other industries would win from cooperating with Ukrainian professionals from accounting and other industries.”
Accounting firms aren’t the only types of companies that have been benefiting from Ukrainian outsourcing services, she pointed out. “A lot of U.S. companies have set up some HR representation in Ukraine,” said Skichko. “They establish call centers to find talent, which would be servicing their projects around the world. Apart from the labor arbitrage, the level of salaries would be lower in Ukraine compared to the U.S. Also, the tax level on payroll and other taxes tend to be lower, so the cost is lower. We have multiple clients on small teams of 20 to 50 employees working from Ukraine, maybe even starting from 10 employees in various industries, mainly IT, but also engineering.”
While the ongoing war may affect companies’ willingness to rely on a long-term arrangement with an accounting firm in Ukraine, short-term projects may be one way to support the accountants in the country. “I understand that there might be a concern from business now in terms of the stability of such services, so it might be a good start on project-based assignments where there is a short-term project with a high volume of information to be processed,” Skichko suggested. “And then on the basis of this first experience, there would be grounds to detect [areas] which are most efficient for potential cooperation in the future.”
For right now, her firm is mainly supporting clients within Ukraine, who have managed to hang on despite the devastating conflict. Many employees work remotely from home, having gained experience during the pandemic with that way of doing business.
“For an accountant, there is always a job,” said Skichko. “No one has cancelled compliance, basic accounting rules and payroll. Our firm is operating. It’s fortunate to some extent that we had two-year training from COVID to have remote coordination. All of our team is well prepared to work decently. Moreover, our outsourcing division, which I’m a partner for, is mainly working and supporting international businesses operating in Ukraine. Basically all of our clients would be sitting remotely in any case.”
There are naturally security issues that arise during wartime, and the firm needed to take a pause when the war erupted in late February. “When it all started, for a couple of days people needed to take some action to be in a safer place because we have offices in Ukraine located in Kyiv, Odessa and Zaporizzhya,” said Skichko. “In our Kyiv office, most people moved either to the west of Ukraine or outside of Ukraine, mainly those who have younger kids. But in general, we are continuing to support our clients.”
The Ukrainian government also provided relief to taxpayers when the war broke out, eliminating penalties for late payments and late filings. “The tax authorities have actually offered to move to a decreased rate of taxation, 2% of turnover, which is very low,” said Skichko. “But so far, many of our clients would prefer to continue as usual. Mainly they are willing to support the state of Ukraine with regular tax payments. They are willing to support their employees with regular payroll payments. So far, business is showing goodwill in terms of their input.”
Shortly before the outbreak of the war, Ukrainian authorities approved a special tax regime dubbed “Diia City” to attract information technology companies, with a minimal 5% payroll tax.
However, since the war broke out, low taxes have been low on the priority list. In contrast to the desire of many multinational companies to reduce their tax payments as much as possible, Ukrainian companies have wanted to increase their aid to support the army defending them from the Russian forces.
The firm works with many clients in the energy sector, which is continuing to do well, but for clients in industries like agriculture the war has been especially difficult, with many assets destroyed or lost and their supply chains heavily disrupted. The firm has been able to continue working to help them remotely via the internet. They have been using electronic document management and e-signing technology instead of sending paper back and forth. The pandemic enabled employees and clients to grow more comfortable with these workflow arrangements.
“In Ukraine, for many years now, we have been doing all the reporting to the state authorities through electronic channels,” said Skichko.
The auditing profession is relatively new in Ukraine and was basically built from the ground up after the country won its independence from the Soviet Union in 1991. “Auditors just started in Ukraine in 1994,” said Skichko. “It's a very young profession and it was quite popular with youngsters of my generation. Those people are quite well-educated, with good language skills. Now we are trying to use the Baker Tilly network and other opportunities to provide some work and some services outside of Ukraine.”
For now, the people of Ukraine are doing their best to survive the conflict. “None of us would expect something like that to happen in the 21st century, and definitely this would not be the choice of the Ukrainian nation,” said Skichko. “But still we need to hold up. Any support is very much appreciated and we all hope that the good should win over the evil. We need to develop as humanity on earth in general. I hope that all together we will manage to solve this.”
