Business Case For Small Business Finance & Accounting (F&A) Offshoring

Business Case For Small Business Finance & Accounting (F&A) Offshoring
In this article we will explore why CPA firms and other small businesses should consider using offshore providers for their accounts and financial related work. Accounting firms and small businesses are just starting to offshore some of there F&A work, and still it is in the very beginning phase. Several accounting firms and small businesses are still trying to realize the benefits of offshoring their F&A work. In this article we will investigate all the benefits of offshore accounting outsourcing and present a business case for you to consider in using offshore vendors for your F&A work.

1. Demand & Supply of Accounting Professionals
The American Institute of Certified Public Accountants, AICPA conducted a study and found that the number of students enrolling for accounting programs has been growing continuously over the past two years. Still due to the government's new accounting rules and regulations companies need for qualified accounting professionals exceeds the supply to a greater degree. This phenomenon will increase the earnings of accounting professionals. Skilled Accounting professionals are already scarce, and the battle for talent will become fiercer as companies search for employees with diverse financial and accounting background to manage various F&A work within the company.
To overcome the shortage of quality accounting professionals and to remain competitive in the market place several big corporations began offshoring several core and non-core Finance & Accounting functions to countries like India, Philippines, China, etc. and started to reduce their cost and increase their operational efficiency. But the offshoring trend is not yet popular among the small businesses. The paramount reason quoted by the accounting firms and small businesses is lack of quality and accountability of the offshore vendors. This trend will subsequently change as the F&A offshore providers are getting mature and competitive in their service offerings to their customers. Accounting firms and small businesses need to do their due diligence in making the decision to offshore some or all of their F&A work to stay competitive in the market place. 2. Cost & Productivity Big corporations often quote cost and productivity as their fundamental reason to offshore F&A work. As per Deloitte's consulting group survey the cost savings may be any where from 40% to 60% depending on the type of F&A work that has been sent to offshore locations. Higher the values of offshored F&A work better the cost savings. By doing more work for less cost, big corporations are increasing the productivity of their employees, which directly attributes to better profit margins, customer satisfactions, and employee satisfactions. Just like the big corporations, small businesses can also achieve cost and productivity improvements by offshoring some or all of their F&A work. When the small businesses starts to offshore their F&A work, they may not achieve the cost savings and productivity immediately. But over a reasonable period of time small businesses need to establish the relationship with the offshore vendors and sort out various issues that may arise with offshore vendors then they can achieve the benefits just like the big companies.
3. Managing Seasonal Surge in Workload
Using the offshore workforce provides the accounting firms and small businesses the advantage of managing seasonal workloads that come in specific times of the year. All accounting firms face significant surge in their workload during the tax season deadline. Also small businesses may have more work during their corporate year ending time. During these busy times, accounting firms and small businesses can supplement their accounting professionals with the offshore accountants so that they can handle the surge in their workload. Many accounting firms are particular in accepting new work during busy season, and several of them had to turn away profitable clients due to heavy workload on their own accounting professionals. An F&A offshore arrangement will enable the accounting firms to get more new work without overloading their accounting professionals and without hiring temp workers.
4. Focus on Core F&A Work When an accounting firm or a small business transfers the entire non-core F&A task to an offshore vendor, they can concentrate on other core F&A work that will provide more value to the entire company. Each company has its own core F&A competency and by concentrating on it they can reduce their cost, increase quality, and efficiency, all of which will improve their bottom line. Also by concentrating on the core competency, companies can compete efficiently with their competitors. 5. Access to Specialized F&A Expertise After the Enron scandal Accounting rules and regulations has been changing drastically on regular basis. Several countries have been announcing new laws and regulatory requirements like Basel II, Solvency II and Sarbanes-Oxley, etc. Given the number of new regulations and accounting laws it is no longer possible to adopt a reactive, piecemeal approach to compliance and tax regulations, but companies should have a well-trained staff to see the complete picture of overall regulation and compliance that may affect all segments of the company. By establishing a relationship with the offshore vendors, you can gain access to specialized knowledge like tax, regulatory, etc. Developing these types of specialized skills in house may not be cost effective and further companies may need these skills not on regular basis but on some limited projects. In these situations using an offshore provider to do these specialized services will benefit the accounting firms and small businesses.
6. Improving Customer Relationships with Technology
The Internet and other related technologies have empowered the end customers, and they want more F&A services cheaper and faster. Companies like TurboTax, TaxAct, Vertex, etc, are responding to these challenges and offering online services for customers to file their tax returns electronically. Online tax services also eliminate paper based tax filings and the customers can directly use the Internet to file their tax returns. The online tax services do not reduce the necessity of CPAs, but it affects the amount charged by the CPAs. By effectively using an offshore F&A provider accounting firms can fight back the online service providers in cost and services. The customers need to send only the papers to the accounting firm, where it will be scanned and sent to an F&A provider with instructions. The offshore F&A provider will verify and complete the tax return and send it back to the accounting firm to review and file it. This process is better than online tax service, in which customers need to understand various tax codes and properly input their data, and any simple mistake may delay their final tax returns.
7. Offshoring & Professional Standards The small businesses and accounting firms who are against offshoring often mention security and confidentiality issues as their number one concern. The AICPA Code of Professional Conduct states accounting firms can use third party service providers to prepare tax returns but the firms should use proper due diligence in their selection process to find appropriate outsource provider to transfer the work, and they should take proper care in inspecting the finished work. So by carefully selecting the offshore vendor as specified in this Article it is possible to protect the security and confidentiality of the F&A data that are sent to the offshore locations. 8. Improving Internal F&A Process Efficiency By separating the F&A process into core and non-core, companies can take a new look into their entire service offerings to their customers, find potential bottlenecks, and streamline the entire process for minimum overhead and maximum efficiency. Several large financial institutions have been successfully incorporating system and process best practices developed by the offshore vendors into their own F&A processes. For several years large financial firms have been using offshore service vendors to send their F&A work, and have found remarkable success in cutting overall cost and improving their efficiency. When the large financial firms started sending their F&A work to offshore, they have to go through huge cultural and political issues while making the onshore team and the offshore team to work together. But over a period of several years offshore vendors have gained more experience and maturity in their service offerings to their clients. Due to this the financial companies those who offshore their F&A work have realized all the benefits explained in this article. The accounting firms and small businesses have just started sending their F&A work to offshore vendors. But this phenomenon is just started and it will get accelerated in the coming years. Scarcity of accounting professionals and stringent compliances and regulations from the government will make the small businesses and accounting firms needs to cut their cost and improve their operational efficiency. To achieve these goals and to stay competitive in the marketplace accounting firms and small businesses should consider using offshore providers for there F&A work.