Outsourcing accounting to offshore firm

[David Collens]

Hello, I run a small a small online retail service. I am looking for cheap way to maintain our books without having. Do any of you have the experience of working with an offshore provider? If yes would anyone recommend one to me.

[Accounting.NET]

Hi David,

How many employees do you have and what is the typical transaction volume for your site? Depending on the size and complexity of your business, my recommendation would vary.

If you are a sole proprietor and just need basic financial statements generated for tax filing purposes, you may not need any software at all as your e-commerce software should have enough tracking and reporting to give a tax accountant the required information. If it doesn't, you may want to consider changing e-commerce software rather than outsourcing the accounting.

If your business is more complex, offshoring your accounting may be well worth it. There are definitely some considerations to think about first though:

[LIST][*]How will you transmit/receive data from your service provider?
[*]Is it secure?
[*]What are the qualifications and experience that the employee working on your account would be required to have?
[*]What are turnaround times between the time you submit raw data and when they return it in the requested format?
[*]Are they willing to guarantee their work?

Accounting is something that is fairly similar in most countries, so I would imagine that it would translate well as an offshoring opportunity, but we've found that most of our clients feel more comfortable having a US accountant review their data as they are typically more in the loop on tax codes, GAAP compliance changes, revenue recognition rules, etc... I don't know of anyone offhand that has done a complete accounting offshoring but I will be interested to see who else replies.

[InfoSourcing]

Hi,

There are companies who do such Business Process Outsourcing and are capable of understanding US and other countries operations, we have provided such services to our clients part of our turnkey solution, if you are interested in learning what areas of accounting could be outsourced, its risks, its benefits then do read about it here http://www.info-sourcing.com/Outsourcing_BPO.htm

I don't want to pitch for your business on this forum, but its worth telling customers what is out there and what could be done and how other business are moving fwd with such open world services.

[marc77]

I think such services are useful for larger businesses (10+ employees) only. Small businesses may be advised to hire a local bookkeeper that is at hand in case of problems or questions.

Even in most cases, it is the better solution taking care about bookkeeping yourself. It requires some time and efforts to get familiar with, but you know what has been done and can avoid bad surprises later.

[or_josh]

"Hello, I am Josh. I want to find a cheap way to maintain my heartbeat..." Why would you go the cheap route for something as vitally important as bookkeeping?

Let's look at this a couple of ways.

First, the risks. Offshoring, especially with something as vital as accounting, is extremely risky. You have no legal reach. If one of the employees of the outsourcing firm decides to hold your data hostage (as occurred in the past when a hospital tried to offshore some of their operations), there's little you can do about it. You may be unable to fully comply with VISA CISP requirements, as it is impossible to certify that your contractor can be bound by US Law (and by extension, the contractual obligations that VISA CISP requires as well as your company policies).

http://www.sfgate.com/cgi-bin/articl...FS3080R264.DTL

Next, let's look at the big picture side of things. If all, or even a large percentage, of the small businesses in the U.S. did this, then who would be left to purchase their products? If you starve local partners of business, then they in turn have to lay their employees off and those employees in turn contribute less to the local economy. This is one of the reasons the U.S. economy is tanking - the model of using cheap overseas labor is not sustainable. If we take this to its logical conclusion, then a) very few people in the U.S. will be able to buy your products, and b) since you are based in the U.S., your products will be too expensive for those overseas to purchase.

Or, let me turn it around. Why should I buy widgets from you, if I can get those widgets from Singapore for pennies on the dollar?

Have you considered these points?

Cheers,
-J

[marc77]

I wouldn't see outsourcing in such a negative way, it can be still a good idea to be flexible and to satisfy market demands (consider call centers used for taking orders or providing support on a 24/7 base).

vital as accounting, is extremely risky. You have no legal reach.

Good point. I think that this is the main reason for deciding against to outsource bookkeeping to an offshore firm.

Most small business owners just see the cost side and blindly fill in contracts. The bad awakening comes when the IRS encounters problems in your records...

who would be left to purchase their products?
...
model of using cheap overseas labor is not sustainable

This argument is highly illogical (just not to call it "stupid" ;-).

Small businesses (or generally all) are deciding for outsourcing services because they want to lower their own costs. In other words: Lower costs = lower product prices.

Seen even the production sector (not just accounting which was the original question discussed here), for example you never could sell a computer for the same amount when it would be produced without "cheap labour" or inexpensive parts originated from "cheap labour".

If we all would earn $50+ per hour, then no one would really have "more money" due to the expected inflation.

People often make the globalization responsible for job loss or economical problems, but in fact they forget that it also has many positive effects. Much more than negative ones in my mind.