The finance and accounting outsourcing industry is projected to reach $51.5 billion by 2026, growing at a compound annual growth rate of 4.9%. This growth is expected to put pressure on the accounting sector to meet demand. With skills shortages across the industry, outsourcing the following accounting functions could be a solution which can help support this growth sustainably:
- Accountants: CPA (Certified Public Accountant) or CA (Chartered Accountant) qualified
- Accounts payable
- Accounts receivable
- Payroll processing.
In this blog, we take you through the pros and cons of outsourcing these accounting services and why so many organisations are turning to offshore locations, like the Philippines, as their outsourcing destination.
The pros of outsourcing your accounting services
It’s cost effective
Depending on the geographical location of your outsourced accounting team, most times, you’ll find accountants and bookkeepers cost significantly less to hire through an outsourcing provider. Many factors can play into this, such as the economic standing of the offshore country and what types of tasks they are assigned.
But, it’s not just salary that plays a huge part in reducing costs, but also a reduction in fixed overheads. Think of all the components that are required for your business to operate, like computers or desk chairs. Then you pile on the expense to rent office space required for your accounting team, or facilities like a kitchen area, toilets, internet, air-conditioning and security. These costs can add up for an organisation. Now, imagine if you had an opportunity to just completely remove them. Usually, with outsourcing providers, some, if not all, of these costs are managed for you. This is also the same with the operational and human resources or recruitment costs of sourcing, managing and retaining accounting staff.
Much more than just 'an extra pair of hands', your chosen outsourcing provider have highly trained professionals who can offer insights, advice and add value to each stage of the accounting outsourcing process. From recruitment and onboarding, through to training and ongoing management, they are an extension of your business through a partnership agreement.
From an accounting perspective, outsourcing providers hire accountants and bookkeepers who are up-to-date with new local accounting laws and legislation, making it easier for organisations to adapt to changes and stay compliant.
Save on time and foster growth opportunities
By outsourcing the transactional, time-consuming tasks to your offshore accounting team, you can free up time for your onshore staff to focus on tasks that foster organisational growth and drive revenue generation. From a management perspective, less time is spent overseeing financial functions and organising financial statements, reconciliations and payables.
Just as you free up time for your organisation to grow, you are freeing up the time for your onshore staff to grow. By relieving them of repetitive tasks, they can focus on what they were hired to do, which, in turn, can also lead to higher employee satisfaction rates.
Cons of outsourcing accounting services and how to overcome them
Unfortunately, like any business transaction, choosing the wrong outsourcing provider can result in hidden, additional costs that may not have been in your original agreement at first but somehow made their way into the fine print.
Solution: Do the research. Make sure to settle the cost of the service at the beginning to avoid any unexpected fees popping up during your contract period.
With an outsourced accounting team, your accounting tasks are completed outside of the organisation. This means that the way things are managed or handled becomes out of your control. Not entirely, but to a point as it may be harder to communicate with an offshore accountant than an in-house one who is just across the office.
Solution: Ensure efficient processes and procedures are in place so that your offshore accounting team is aware of communication expectations. You can tailor your accounting staff(s) KPIs however you want in order to foster a healthy level of control and trust between you and your offshore team(s). Outsourcing providers are also experts in cloud-computing software and hardware and often have state-of-the-art facilities to foster seamless communication.
If you choose to outsource outside of your country or the local area, chances are English may not be the first language of your new offshore team. Language barriers may become an issue, not just with communication between your offshore team and in-house team but also if your accounting services are client-facing. This could significantly impact your brand and not to mention, business efficiency levels. With the amount of accounting jargon out there, a simple miscommunication could have significant repercussions.
Solution: Just as you would do research and compare outsourcing providers, do some background investigation into the compatibility of potential outsourcing countries, in particular, on their English-speaking skills.
The Philippines, for example, is one of the top outsourcing locations in the world. A key factor to its success as an offshoring location is that English is one of the official languages of the country. It is used as a way of verbal and written instruction in educational systems and institutions. In fact, the country's English competency in Asia is ranked second only to Singapore.
Data security and privacy issues
Setting up a new team anywhere away from your original base of operations comes with risk. Data security and privacy protection can be hard to manage due to a lack of control over the operating space, and the tools and equipment used. The physical location is normally insecure, and computers may not be adequately protected against viruses or threats, or secured against data theft. It goes without saying these threats are quite serious and need to be managed accordingly.
Solution: Outsourcing providers make it their mission to ensure that your business’s data and information is secure. Some providers are actually ISO-certified which means they demonstrate business conformity to the requirements of the latest quality process standards. When assessing an outsourcing provider’s data security measures, look for existing key processes such as:
- External entrance security to prevent unauthorised access
- Main operational area access monitoring such as swipe cards and biometric devices
- Mobile phone and devices restrictions to avoid potential data leaks
- Policies and procedures to promote a highly secured working environment.
Why outsource your accounting services to the Philippines?
The cost of living in the Philippines is roughly a third of Australia. This means that employment costs are approximately 70% cheaper. Not only is the Philippines in the same time zone as Perth, but it’s also the third largest English speaking country in the world. The government even provides funding to support the business process outsourcing (BPO) industry to provide world-class technology and internet infrastructure.
Real-world success story
Many accountants struggle with the quality of bookkeeping work that’s provided to them at tax time. From fixing errors to redoing coding, valuable time is wasted before the compliance preparation can even take place.
Find out how one firm took this struggle within their business and found an opportunity, through outsourcing, to:
- Improved accuracy and efficiency
- Increased revenue streams and profitability, and
- Added value for their clients.
This strategy has resulted in processing times being reduced by 50% and a more profitable bottom line. Could your business do the same?