Global Outsourcing of Accounting Services: A Complete Guide
The outsourcing business has seen an upward trend since the time it showed its first noticeable impact in the late 1980s. It evolved in the decade that followed and was considered one of the legitimate business strategies. Beginning with the IT industry and progressing to Business Process Outsourcing (BPO), the outsourcing industry diversified into various business functions, and new concepts. Global Outsourcing of Accounting Services has become a popular trend among businesses of all sizes, as it offers cost-saving benefits and access to expert knowledge. Post pandemic, there is a growing pressure on all industries to cut costs and save money. Taking advantage of globalization, businesses can now outsource their accounting services overseas. Currently, Outsourced Accounting is one of the most sought-after markets in the outsourced industry, which is rapidly growing by leaps and bounds.
Here are some interesting statistics and facts about outsourced accounting:
Market size: The global accounts outsourcing market size was valued at $42.2 billion in 2020 and is expected to grow at a CAGR of 10.5% from 2021 to 2028.
Popular among SMEs: Small and medium-sized enterprises (SMEs) are the primary adopters of accounting outsourcing services, accounting for approximately 60% of the market.
Adoption rate: According to a survey by Deloitte, the adoption rate of outsourcing accounting services among SMEs has increased from 33% in 2015 to 49% in 2020.
Benefits: The top benefits of outsourcing accounting services, as reported by businesses, are cost savings (47%), improved efficiency (42%), and access to expertise (33%).
Outsourcing destinations: The top destinations for outsourcing accounting services are India, the Philippines, and China, accounting for over 70% of the global market share.
Industry verticals: The industries with the highest demand for accounting outsourcing services are finance and insurance, followed by healthcare and retail.
Trends in accounting outsourcing to keep an eye on:
Cloud-based Accounting Services: The adoption of cloud-based technologies has made it easier for businesses to outsource their accounting services. This allows for real-time collaboration and easy access to financial data from anywhere in the world.
Automation and Artificial Intelligence (AI): Accounting outsourcing providers are increasingly using automation and AI tools to improve efficiency and reduce costs. This includes the use of Chatbots, machine learning, and robotic process automation (RPA).
Compliance and Regulatory Focus: With increasing scrutiny on financial reporting and compliance, outsourcing providers are focusing on ensuring that their services meet the latest regulations and standards.
Niche Accounting Services: The demand for specialized accounting services, such as transfer pricing, international tax planning, and treasury management, is on the rise. This has led to the development of outsourcing providers that specialize in these areas. Additionally company specific accounting processes and customized services are also provided.
Increased Demand for ESG (Environmental, Social, and Governance) Accounting: Companies are becoming more conscious of ESG issues, and outsourcing providers are responding by offering ESG-focused accounting services to help businesses meet these requirements.
Remote Work: The COVID-19 pandemic has accelerated the trend towards remote work, making it easier for businesses to outsource accounting services regardless of the location.
Block chain: Some outsourcing providers are exploring the use of block chain technology for secure and transparent financial transactions.
These trends highlight the continued growth and evolution of the accounting outsourcing industry, and the increasing demand for efficient, cost-effective and compliant accounting services.
The most common accounting services that are outsourced globally:
Bookkeeping: This includes tasks such as recording transactions, reconciling accounts, and preparing financial statements.
Payroll Management: Outsourcing service providers offer payroll processing, tax filing, and employee benefit administration.
Accounts Receivable and Payable Management: This includes invoicing, collections, payments to suppliers and tracking overdue transactions.
Financial Reporting: Outsourcing providers can prepare financial statements, including balance sheets, income statements, and cash flow statements based on the statutory due dates and regulations of the region Monthly MIS, management reporting are some of the additional services provided.
Budgeting and Forecasting: Providers can assist with creating and maintaining budgets, as well as providing forecasting and planning services.
Tax Preparation and Filing: Outsourcing providers can prepare and file tax returns, ensuring compliance with local regulations. Example, filing of Monthly and quarterly VAT, Sales Tax and GST.
Auditing and Assurance: Providers can assist with internal audits, financial statement audits, and other assurance services.
Treasury Management: This includes cash management, risk management, and investment planning.
Compliance and Regulatory Support: Providers can help businesses stay compliant with local and international regulations, including tax laws and financial reporting requirements.
These are some of the most common accounting services that can be outsourced globally. By partnering with an outsourcing provider, businesses can access specialized knowledge and expertise, reduce costs, and improve efficiency.
Choosing the Right Outsourcing Partner:
When choosing a global outsourcing provider, there are several important factors to consider:
Expertise: Look for a provider with expertise in the specific accounting services that your business requires.
Reputation: Check the provider’s reputation and customer reviews to ensure they have a good track record of delivering high-quality services.
Cost: Compare the costs of different providers to find one that offers competitive pricing.
Communication: Ensure that the provider has good communication skills and is able to understand your needs and requirements.
Security: Look for a provider that implements robust security measures to protect sensitive financial data.
Global outsourcing of accounting services offers numerous benefits to businesses, including cost savings, access to expertise, increased efficiency and improved compliance. When choosing a global outsourcing provider, businesses should consider factors such as expertise, reputation, cost, communication, and security. We at V.Purohit & Associates provides outsourcing accounting services that helps businesses stay competitive, reduce costs, and achieve their financial goals.