An offshore accounting SLA is the schedule in your outsourcing contract that turns "good work, on time" into numbers you can measure each month. The seven clauses below set turnaround by priority, first-pass yield, QA sampling, reviewer ratios, escalation, service credits and change control, with sample wording you can adapt.
Quality rarely drops in one bad week. It slips when a strong reviewer leaves in peak season or when a template changes without anyone telling the partner who signs the file. A written offshore accounting SLA gives both sides an early warning and a fixed response for each of those moments. The figures in the sample clauses are starting points for negotiation. Set your own based on client risk, volume and how much review your US team can absorb.
Most firms attach the SLA as a schedule to the master services agreement or statement of work. The main agreement covers liability, termination, confidentiality and data ownership. Our guide to outsourcing contract key terms for CPA firms walks through those terms in detail. The SLA schedule holds the operating numbers, which change more often and are easier to amend on their own.
Two US rules shape what the schedule has to say for an offshore team.
The FTC's Safeguards Rule guidance lists tax preparation firms among the businesses the rule covers, and says the contract must "spell out your security expectations" and "build in ways to monitor your service provider's work." Under 16 CFR 314.4(f), a covered firm must oversee service providers by taking reasonable steps to select capable providers, "requiring your service providers by contract to implement and maintain such safeguards," and periodically assessing them based on risk. An SLA with measurable security and reporting terms is the most direct way to show that monitoring happens.
Section 7216 governs tax return information. Under Treas. Reg. 301.7216-3, a US preparer needs the taxpayer's written consent before disclosing return information to a preparer located outside the United States. For Form 1040 series returns, the taxpayer cannot consent to disclosure of the SSN to an offshore preparer, so the US firm must "redact or otherwise mask" the SSN first, unless it uses an adequate data protection safeguard and verifies that safeguard in the consent request. Our page on Section 7216 consent covers the consent wording itself.
If you are still comparing vendors, put the draft SLA into your accounting outsourcing RFP so every bidder prices against the same targets.
"On time" means little when the team works ten or more hours ahead of you. Define priority levels, state which time zone the clock runs in, and tie month-end work to a close calendar.
Sample clause: "Vendor will meet the following turnaround targets, measured in the Client's local time zone. P1 items (bank feed breaks, payroll blockers, e-file rejections) will be acknowledged within 60 minutes during Coverage Hours and resolved within 8 business hours. P2 items (reconciliations, journal entry reviews, AP exceptions) will be resolved within 2 business days. P3 items (documentation requests, backlog cleanup) will be resolved within 5 business days. Month-end deliverables will meet the Close Calendar, with final deliverables due by 6:00 p.m. Client time on business day 3 after period end."
How it is measured: ticket timestamps and close calendar checkpoints, reported monthly.
The overnight gap can work in your favor when handoffs are planned. Our article on the time zone advantage of offshore teams explains how firms set cutoffs so work submitted at 5:00 p.m. is back by morning.
First-pass yield is the share of items accepted at first review without correction. It works well as a leading indicator of slippage, because rework shows up in your reviewers' hours before it shows up in client complaints.
Sample clause: "Vendor will maintain a monthly first-pass yield of at least 98.5% across reconciliations, journal entry preparation, AP coding and workpapers. First-pass yield equals items accepted at first review without correction, divided by total items submitted for review. An error is any item that requires correction to meet the Client's written procedures or US GAAP presentation. Client may sample outputs weekly to validate the reported rate."
How it is measured: item counts by work type, an error log with the reviewer's name and reason code, and a weekly QA sheet signed by both sides.
Agree on the error definition before go-live. Disputes about whether a misclassified expense counts as an error or a "preference" are a common reason SLA reports lose credibility.
Firms often write review steps into internal procedures and leave them out of the contract. Putting the sampling rate in the SLA makes it auditable and stops it from quietly shrinking during busy season.
Sample clause: "Vendor will apply a documented second review to at least 20% of weekly outputs during the first 60 days, and at least 10% thereafter, with 100% second review for P1 items. Reviews will use the Client QA checklist and record pass or fail per item. Any week with a pass rate below 98.5% triggers a written corrective action plan within 2 business days."
How it is measured: QA checklist records and reviewer sign-offs.
This clause should line up with your own review process under the AICPA quality management standards. SQMS No. 1 brings new requirements for service providers, and the Journal of Accountancy notes that firms had to design and implement compliant systems by Dec. 15, 2025. Our overview of SQMS and the AICPA quality management standards explains how an outsourced team fits inside your firm's quality risk assessment. For the wider control design, see quality control in outsourced accounting.
Slippage often starts when a provider stretches one senior reviewer across too many preparers in peak weeks. A ratio clause sets a floor.
Sample clause: "Vendor will staff the engagement with at least 1 senior reviewer for every 6 processors, rising to 1 for every 4 processors during month-end close and the period from January 15 to April 15. Coverage Hours are 8:00 a.m. to 6:00 p.m. Client time on business days, with an on-call senior available for P1 incidents until 10:00 p.m. Client time. Vendor will give 14 days' written notice before replacing any named reviewer or reducing headcount."
How it is measured: a weekly roster, timesheets and the vendor's holiday calendar, shared at least 30 days ahead.
Ask for the vendor's local holiday list during onboarding. A national holiday that falls in your close window is a staffing risk you can plan around only if you see it in advance.
A clear escalation route shortens every problem. Name the roles and set a clock for each step.
Sample clause: "P1 incidents escalate within 15 minutes to the Engagement Manager and within 60 minutes to the Delivery Head. Vendor will issue a preliminary incident report within 4 hours and a root-cause analysis with corrective actions within 3 business days. A repeat incident of the same class within 30 days triggers a joint process review."
Security incidents need a separate, faster track. Under the Safeguards Rule, a firm that discovers a notification event involving the information of at least 500 consumers must notify the FTC "as soon as possible, and no later than 30 days after discovery of the event." That deadline runs from your discovery, so the SLA should require the vendor to report any suspected unauthorized access to client data within 24 hours, preserve logs and cooperate with your investigation. The IRS also reminds tax professionals that protecting client data is the law and that FTC regulations require professional tax preparers to create and enact security plans, so the vendor's duties should map to your own written information security plan.
How it is measured: incident tickets, root-cause documents and a corrective action log.
Service credits give the SLA financial weight without turning every miss into a dispute. Keep them modest and capped, and make clear that credits do not replace your right to terminate for repeated failure.
Sample clause: "For any month in which first-pass yield falls below 98.0%, or P1 resolution targets are missed on more than two occasions, Vendor will credit 10% of that month's fees. If on-time delivery against the Close Calendar falls below 95.0% in a month, Vendor will credit 5% of that month's fees. Credits are cumulative, capped at 20% of monthly fees, and apply to the next invoice. Client may withhold payment for undelivered milestones until accepted."
| Measure | Target or trigger | Actual | Credit |
|---|---|---|---|
| Items submitted for review | n/a | 2,400 | n/a |
| Items needing correction | n/a | 54 | n/a |
| First-pass yield | Credit if below 98.0% | 97.75% (2,346 of 2,400) | 10% |
| Close deliverables due | n/a | 41 | n/a |
| Close deliverables on time | Credit if below 95.0% | 92.68% (38 of 41) | 5% |
| Total credit on a $12,000 monthly fee | Cap 20% ($2,400) | 15% | $1,800 |
Both triggers fired, the combined 15% stays under the 20% cap, and $1,800 comes off the next invoice. The credit matters less than the pattern. A month like this should also trigger the corrective action plan from Clause 3, and two such months in a quarter are a reason to revisit staffing under Clause 4.
Uncontrolled change is a quiet cause of errors. A new chart of accounts mapping, a revised template or a software update in the middle of close can undo months of stable work.
Sample clause: "Changes to procedures, templates or systems require a written change request with an impact analysis and Client approval. No non-urgent changes are permitted during freeze windows, which run from 2 business days before to 2 business days after each month-end and for 10 business days before each federal filing deadline. Client may perform a desk review of controls and access logs once per quarter on 5 business days' notice. Vendor will retain activity and access logs for 12 months."
How it is measured: a change log, the freeze calendar and findings from each desk review.
Add the data security terms here as well. The Safeguards Rule requires encryption of customer information in transit and at rest and multi-factor authentication for anyone accessing an information system, both under 16 CFR 314.4(c). Ask the vendor to confirm both in writing, and for tax work, state that the vendor will not receive return information until the firm confirms the 7216 consent is on file and that SSNs are masked where the rule requires it.
Keep the SLA schedule to one or two pages so people actually read it. A workable layout includes:
Test the numbers before you sign. A short pilot outsourcing engagement will show whether a 98.5% first-pass yield is realistic for your client mix or whether the definition of an error needs work. Pair the SLA with the questions in our guide on what to ask before signing an accounting outsourcing contract, and keep the exit terms in mind. If the relationship ends, our guide on how to switch accounting outsourcing providers covers the handover.
What should an offshore accounting SLA include? At minimum, turnaround targets by priority, an accuracy measure such as first-pass yield, QA sampling rates, staffing ratios, an escalation path, service credits and change control. For US CPA firms it should also cover security incident reporting and the handling of tax return information under Section 7216.
Is a 98.5% first-pass yield a standard target? Neither the FTC rule nor the AICPA quality management standards set a required figure. Treat 98.5% as a negotiating starting point, then adjust it by work type after a pilot shows what your clients' files actually produce.
Do service credits replace the right to terminate? They should not. Write the contract so that credits are a partial remedy for individual misses and repeated failures, such as several months below target in a quarter, give you a termination right.
Does the FTC Safeguards Rule require a written contract with an offshore provider? Covered firms, which include tax preparation firms, must require service providers by contract to implement and maintain appropriate safeguards and must periodically assess them under 16 CFR 314.4(f). The SLA is a practical place to put the reporting and monitoring terms.
Can an offshore team receive client SSNs? For Form 1040 series returns, a taxpayer cannot consent to disclosure of the SSN to a preparer outside the United States. The US firm must mask the SSN first unless it uses an adequate data protection safeguard and verifies it in the consent request, as set out in Treas. Reg. 301.7216-3.
Madras Accountancy provides outsourced bookkeeping, accounting, tax preparation and CFO support for US CPA firms and their clients, working to the service levels, review steps and reporting each firm sets. To talk through scope and SLA terms for your firm, contact our team.
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