How to Benefit from Offshore Accounting
Accounting is a fundamental business function that helps to evaluate the performance of a business, ensure timely compliance, and provide the stakeholders with a detailed understanding of the organization’s position in the market, which further helps them to make informed business decisions.
Regardless of the size of a business, accounting has proven to be a necessity, but nevertheless, it carries the risk of being overlooked in the process of carrying out core business functions. It has been observed that businesses tend to favor the outsourcing of accounting and bookkeeping services in order to carry out hassle-free business operations.
When businesses outsource their accounting services to a firm in a different country, it is called “Offshoring of accounting services.” Offshoring accounting services is practiced by businesses in developed nations to minimize costs, enjoy tax relief, and make timely compliances.
The COVID-19 crisis resulted in a significant boost in offshoring accounting services. And it has been established that offshore accounting has substantially impacted the productivity and efficiency of organizations.
Is reduced cost the only reason for Offshore Accounting Services?
Not at all
Let’s understand the Benefits of Offshore Accounting:
- Economic Benefits:
The prime motivation for offshoring accounting services is the lower cost of labor. There is a huge difference in the remuneration paid between employing an in-house accountant and employing an offshore service provider.
Reportedly, the average salary of an accountant in the USA is $60,000 per year, or $30.00 per hour, with the job role consisting to Prepare, maintaining, and examining financial statements; ensuring all financial records are compliant with federal laws, regulations, and GAAP; and be responsible for identifying and resolving any discrepancies. Whereas when employing an offshore accounting service provider for the same services it approximately starts $10/hour or $250/month.
However, McKinsey Media has reported that there is also a second reason why offshoring accounting brings economic benefits. In the U.S., many of the offshored accounting jobs are seen as relatively undesirable or of low prestige, such as data entry jobs; in the countries, they are offshored to, they are often considered desirable and attractive. As a result, workers in low-wage countries often have higher motivation and outperform their counterparts in terms of performance measures such as the number of transactions per agent or the number of errors per transaction.
2. Quality and Time Effective:
When outsourcing accounting services for small businesses, it is important to know that the offshore service providers’ main focus is on the services they offer, and they are highly skilled and trained in the services they offer. So, it eliminates the possibility of errors and the delivery of quality-assured services.
Additionally, outsourcing accounting services gives you access to extensive talent overseas, it can give you a diverse perspective and a strategic edge which allows you to understand the opportunities and risks in the global markets.
Managing an in-house accounting department is time-intensive. When you outsource accounting services to an offshore service provider, it saves you valuable time to concentrate on the functioning of your core business.
3. Business Growth:
Offshore accounting staff can be remarkably cost-effective, as it can save up to 80% of your costs when outsourced in a challenging labor market compared to employing an in-house accounting department.
Offshore accounting enables you to streamline your accounting processes and derive higher results by delegating optimal resources to the core business process.
4. Prioritize Core Business Process:
The chief advantage of offshoring accounting services is that it allows you to focus on your key business processes.
You can direct your resources to strengthen your position in the market and establish a unique selling proposition for your business to serve your target audiences. It also eliminates the employment of excessive resources and increases your productivity.
5. Technological Advantage:
Offshore accounting services allow you to access updated technology with little to no investment.
As the offshore service provider possesses every required piece of technology to produce the necessary accounting and bookkeeping reports. This unspent expenditure on technology can be utilized in the core operations of businesses to further boost productivity and maximize profitability.
6. Operational Excellence:
The difference in time zones for the working hours of accounting service providers is an added benefit of having online accounting and bookkeeping services.
As a matter of fact, offshore accounting service providers employ teams to work alongside their overseas counterparts as per their stipulated schedule. It gives your organization operational excellence as the recording and processing of business transactions work simultaneously and effectively.
7. Data Security and Transparency:
Data security is of essential concern when employing offshore service providers. It is important to outsource accounting services for small businesses to a well-known offshore service provider.
Offshore Accounting firms in countries like India have a strict environment to protect clients’ data and adhere to International standards and data privacy laws. Additionally, the employment of processes such as two-factor authentication, the use of FTP for the transfer of files, and the use of the cloud secures your data and offers complete transparency.
8. Eliminates Recruitment Cost:
The number of employees required for the accounting process can vary depending on time periods, for example during tax seasons i.e. from January to April in the USA, a high-functioning accounting team is required whereas for the rest of the year the functioning of the accounting department is considerably more remote.
Hence, when accounting is carried out in-house, organizations have to pay the employees and incur office expenses even if the employees are not working.
Offshore accounting services allow you to hire an accounting team depending on your needs and eliminate the recruitment costs that you would incur by recruiting an in-house accounting department.
9. Timely Compliances:
It is essential that you possess up-to-date accounting knowledge and are aware of all the necessary compliances.
Offshore accounting service providers are highly knowledgeable in accounting standards and complicated tax filing procedures. Having an offshore accounting team helps you stay on top of your compliances without missing any deadlines and filing timely compliances without incurring any loss or penalties.
10. Enhances Financial Planning:
As the offshore accounting process is integrated with your daily business activities; it gives you easy access to financial reports as and when required.
Offshore accounting allows you to analyze the finances of your business and measure the growth of your business over the past quarter or the past financial year. It also helps you determine the position of your business among your peers and lets you understand your position in the industry.
It is important to have extensive financial knowledge of your business to undertake further financial decisions such as expansion into new markets or investment in the right assets to improve your operational activities.
Offshoring accounting services is the New Normal
Accounting doesn’t end with the recording of data and the finalization of accounts; it is a complex procedure that requires extensive knowledge of accounting principles, and adherence to government compliances, and is influential in the decision-making procedure of an organization.
As you are certainly aware, offshore staff are your employees who work for your organization remotely from a different country. With Offshore Accounting you stay updated with the latest accounting technology and you are able to efficiently manage your business accounts.
Offshoring accounting services has multiple benefits, especially in today’s market where working from home has become the new norm.
For businesses looking to offshore their accounting services, IBN Tech can provide experienced bookkeeping and accounting services. Our experts understand the importance of accuracy and efficiency and can help you streamline processes to take your business to the next level. Contact us today to learn more about our solutions and how they can benefit your business.
