Outsource vs offshoring for bookkeeping services
With changing business dynamics over the years, the way businesses function has also changed. A lot of multinational companies choose the option to focus on their core work and tries to lighten the rest of their work. Generally, a company has two options for this purpose; outsourcing and offshoring. These two terms are much alike but contain some base differences.
What is outsourcing?
Outsourcing is the process where a business offloads some of its responsibilities to a third party who does not have any association with the business directly, i.e. the service of outsourcing accounting activity to an individual accountant or accounting firm. Outsourcing can be done in the same country where a business operates or in another country as well.
What is offshoring?
Offshoring is the process where a business establishes its own business unit or set-up in another country in order to take various benefits. Such benefits include cost-effectiveness, law labor, availability of manpower, etc. A U.S based business setting up a unit for its business process in a developing nation is the best example of offshoring. The team that a company establishes in another country works exclusively for that particular company, unlike outsourcing.
Why offshoring is increasing nowadays?
There are various factors that affect the decision-making process of business to go after offshoring; some of their business activities, which are as stated.
- Cost-effectiveness: Many times maintaining a certain business activity in the home country becomes very expensive. Thus, by opting for offshoring such activities in another country can prove to be cost-effective. A company can save a lot of money by choosing the right country to offshore its activities; developing nations are generally the best option for this purpose.
- Skilled manpower in developing nations: Offshoring business activities to a developing nation like India would not only benefit a company in cost but also in terms of the skilled manpower. Developing nations are the best source to get skilled and less expensive manpower.
- Connectivity technology: The hurdles of connectivity between two countries no longer exist, and thus a company can easily choose to offshore its business process to another country. There are various techniques such as Skype, Google Duo, etc. which makes the process of offshoring easy to monitor.
- Cloud bookkeeping software: There is various cloud bookkeeping software such as QuickBooks, Xero, etc. that give the benefit of accessing the real-time data anytime and anywhere. This ultimately makes the process of offshoring easy and quick.
- Social behavior: Different counties have a different set of people having unique mindsets and abilities. That thing ultimately improves the quality and output of a business. Thus, a firm gets an advantageous position if the offshoring nation has been chosen wisely to grow the business.
- Use of software: The usage and reach of advanced software have increased in the past years. There is various software that helps a business in getting connected to its branches regardless of place limitation. Software such as Asana and Karbon HQ are quite helpful for tracking the performance and growth of businesses.
- Mobile technology and speed of data: With 4G already in wide usage and 5G on the way, connecting to offices in different countries has become a touch away. With advanced and digital mobile technology and high-speed data, the connectivity limitation gets eliminated and offshoring becomes easy to manage.
- Real-time accounting: With advanced accounting tools, accounting activity has become easier. A business can overlook and monitor all of its accounting activities in real-time with the usage of software such as Xero, QuickBooks and more. It lets the businesses excess the data anywhere and anytime making the process real-time.
- Increase in e-contracts: Goes are the times when a company has to copy and sign bulky contacts; with the digitalization, e-contacts have gained great popularity. From small-scale business to multinational companies, e-contracts are widely used and makes the physical necessity of contracts void. Thus, a business can sign and agree on contracts for its offshoring businesses with great ease through simple modes like emails.
- Accounting becoming a commodity: With the digital revolution and advanced technology, the process of accounting has become more automatic and rapid. It has made the accounting procedure simpler and has commoditized it, and thus benefiting the firms to save their cost.
- Global laws: Laws in various countries are different: some are strict where some are in favor of the corporate world. This makes many companies attracted towards countries which have liberal or less stringent laws so that they can have an advantageous position for their business.
- Accounting as a reporting tool: Accounting activity is no more the traditional activity of maintaining books of accounts, it has become more vivid with passing time. Companies around the globe see the accounting activity as a tool for financial reporting and based on that they make important business decisions. In short, accounting activity is much more about the growth than the cliché of keeping accounts in place.
These changes and improvements have encouraged companies to offshore their business activities.