Different Costs of Offshoring Financial & Accounting Work

Often times when small businesses consider offshoring their work, they will consider only the hourly rate they need to pay to the offshore vendor for various accounting works like bookkeeping, accounts payable, accounts receivable, etc. Though the hourly rate is the direct cost small business will pay to the offshore vendor, there are several other additional hidden costs small business will incur in their offshore outsourcing engagement. Typically a small business goes through following offshore accounting work cycle in their offshore engagement:

• Selecting an offshore accounting vendor
• Sending the work to the offshore vendor
• Answering questions for the offshore vendor
• Receiving the finished work from the offshore vendor
• Verifying the finished work from the offshore vendor
• Monitoring the quality of the finished work from the offshore vendor

Small businesses go through the above steps when they outsource their financial and accounting work either to an onshore vendor or to an offshore vendor. But there is significant costs difference when the work is performed in onshore Vs offshore locations. For example when on onshore vendor performs the work, then small business can meet face to face with the onshore vendor, explain what needs to be done and handover the accounting and financial documents. The onshore vendor will finish the work, meet face to face with small business customer to deliver the finished work. The other alternative for small business is to either use courier service or UPS to send the accounting and financial documents to the onshore vendor and they can communicate over the phone regarding what needs to be performed. The small business cannot use any one of above mechanisms when working with offshore vendors in a cost effective way. For one thing, the offshore vendors will be physically located in a different country and there are significant culture differences that will exist between the small businesses and the offshore vendors. Finally both small businesses and the offshore vendor will be in different time zones. So the small business cannot use the same mechanisms that they used in dealing with onshore vendors. Small business needs to use High speed Internet connection and other related software, and hardware technology infrastructure to work with the offshore vendors. All of these can be done in cost effective way and small businesses can save significant cost in working with offshore vendors.