The new-age technology, globalization, and increasing pressure to cut down the expenditure lead to outsourcing and offshoring. Foreign organizations use offshoring as a strategic tool, to recompose their activities across geographical boundaries.
Many offshoring models are now moving away from their sole aim of cost reduction. They are focusing on other fields like enhancing and improving flexibility, efficiency, and access to a diverse range of skills.
Accountants from all over the world and the CPAs as well are outsourcing their accounting and bookkeeping services. Especially the firms of Asia, Europe, Canada, and the US use this strategic option. The main question that strikes our mind is what the scenario will be within the next ten years.
The amount of business in the host countries in the upcoming years is a point that all should ponder upon. To have a glimpse into the future, we can have a look at indicators like global accounting standards, competitive pricing, changing technology, and the globalization of accounting software.
What are the Criteria to Select the Perfect Location for Offshoring?
The best part of these host countries is that they can adapt very quickly to the forever-changing needs of the BPS market. So it is the preferred destination for the accounting processes and offshoring businesses. According to NASSCOM, lately, there has been a steep rise in all these countries ‘share of the global offshoring market.
Qualities of the host countries to become the preferred destination:
- Customer service and efficiency
- Meeting client requirements
- Enhanced and improved productivity
- Skilled professionals
- Business process excellence
- Quality of service
These countries can accomplish these feats because of the vast number of English-speaking populations and also due to the availability of multi-skilled workers. But they have competitors too. They compete among themselves to get more and more clients. Countries like Mexico, the Philippines, China, India, New Zealand, and Australia all are rivals of each other.
Benefits of Offshoring
- Excellent communication skills among the workforce
- Improved level of technology
- “Follow the sun” client service approach.
- Lower communication costs and infrastructure improvements enable us to work anytime, anywhere.
- Due to the internet revolution, global collaborations are possible, and new business opportunities open up.
- Cost reduction without
- Compromising upon quality and efficiency
- Removal of geographical boundaries make it possible to access talent as well as resources worldwide
- Gradually streamlining and simplifying those businesses that are way too complex and complicated.
Great Opportunity for the Host Countries
Knowledge process outsourced services such as application operations, IT security, IT infrastructure management services, and maintenance of legal, accounting, content, and medicine is sure to perform well in the future too. These countries, too, will, for sure, set themselves as the global hub for knowledge services in the imminent future.
CPA Firms Coming Under Pressure
CPA firms are bound to maintain the quality of their services and deliver results diligently in the following areas:
- Setting up processes, ensuring compliance, and lending a helping hand in the proper implementation of adequate controls.
- Routine auditing, tax services, and accounting for their clients.
- Maintenance of the growth of their own accounting business so that they may achieve the year-on-year ROI.
- The adoption of methodologies that save costs and expenditure, and using technological tools, and achieving all these without compromising professional ethics or quality.
- Cater to the requirements of existing and future shareholders, investors, lenders, and regulatory agencies. Each of these people mentioned above trusts upon the financial statements prepared and provided by an accounting firm.
Specific Benefits of Outsourcing
- There is a considerable possibility of cost-cutting, almost up to 60%, by increasing margins.
- The foreign accounting firm will not bear the expenditure of building infrastructure and workforce.
- Bookkeepers and accountants are usually very readily available.
- As employee turnover is relatively low, it ensures consistency and cost reduction related to training and setup.
- The utilization of different software platforms to serve the clients is possible for the firm.
- Focus on the core business:
- CPAs are busy in daily, mundane activities like reconciliation, bookkeeping, bill processing, filing tax returns, payroll accounting, etc. These works are time-consuming. Also, these are almost non-profitable works.
- Bookkeeping is accurate and rigorous work. Therefore, offshoring bookkeeping services allows the CPAs to invest their effort and time efficiently and effectively in other essential activities such as, wealth planning, financial disclosure, investments, and tax planning, and marketing their business.
- A number of accounting firms are adopting the model of Offshoring. They prefer to send their high volume low skilled work to host countries, although these firms are a bit concerned regarding control and data confidentiality.
Elements of Risk
- The complications in the achievement of proper management and control from a distance.
- Risk of financial scams and frauds
- The vulnerability of Customer data
- Drop-in performance
The Main Factors that Have a Significant Impact on the Future of Offshoring
- Economic development in Asia
- Advancements in technology
- Shortage in domestic skills and a global labor market
Offshoring Success in the Future
Despite some risks and inhibitions, the offshoring process can be a sure shot success by doing the following things:
- Finding the correct location: There is an increasing number of potential offshoring locations. The organizers get a variety of options to choose from and reap the benefits accordingly.
- Recognizing the variety in benefits: The focus is now extensively shifting from cost-cutting to achieve effectiveness and flexibility.
- Preparation and getting of buy-in: The long-term commitments and buy-in are critical for the success of the organization.
- Dealing with challenges and risk: Apart from traditional challenges, new challenges get added to the list. For instance, retaining offshore employees in an increasingly competitive environment is a major problem.
- Proper planning for the future: Future planning is very necessary because offshoring as a business proposition is a very dynamic field. It undergoes changes every day.
- Discovering the apt offshoring model: Careful selection of the offshoring model is necessary according to the current and future needs and the environment it operates in.
I’m currently working as a Chartered Accountant with a Payroll Outsourcing Company. I have a great passion for outsourced accounting services. In the previous couple of years, I have worked with big and small clients across numerous continents. I have a keen interest in outsourcing payroll processing, outsourcing accounts receivable, BPO outsourcing, outsource finance, outsourcing bookkeeping, offshore Back office services, etc.