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Businesses can’t survive without an accounting department. However, as regulations evolve and technology advances, the demand for accounting and finance services continues to rise. In the US, despite being a leader in the global financial industry, accounting is one of the most outsourced departments by businesses.
This article tackles the reasons why growing US businesses outsource accounting services to overseas service providers. We’ll also compare and highlight the differences between an outsourcing firm and a traditional accounting company to help you make the best decision for your business.
Why Do US Accounting Firms Outsource Accounting Services?
It’s a given that cost savings is the primary motivation for outsourcing accounting services. But if we take a closer look at America’s labor landscape and accounting industry, there’s really more to the story at hand. Below, let’s explore the motivation of US accounting firms in outsourcing accounting services.
1. There Is A Shortage of Talent
According to the US Bureau of Labor Statistics, there are 7.2 million job openings in the US. Unfortunately, these positions are left unfulfilled due to the dwindling participation of Americans in the workforce. This results in more openings than there are workers. There are factors that are at play, though.
America has an aging workforce. Adults aged 65 years and older stay employed to finance their retirement and maintain a sense of purpose in their aging years. Many (75%) Certified Public Accountants (CPA) have also retired, which means America is short of 340,000 accountants.
With younger Americans spending more time in school, aiming for post-graduate degrees, and birthing fewer kids, there’s not much supply of fresh talent to cover unfulfilled positions. Entrepreneurship is also an attractive venture for the youth.
Although entrepreneurship is risky, the possibility of earning more in a business than in an office job makes it tougher for employers to draw in candidates into corporate accounting roles. Even if there are eager job seekers, some employers are unsatisfied as these candidates are not qualified enough or have higher salary expectations for the role.
2. There Is An Increase In Accounting Errors
Mistakes are a grave sin in the accounting and finance industry. In the US, accounting errors are skyrocketing. In fact, Ideagen Audit Analytics found that 140 public companies in the US needed to revise their financial statements due to accounting errors.
This can be blamed on talent scarcity. While Americans are enrolling in school for longer, not everyone is interested in taking up accountancy. Heavy workloads, tight turnaround times, overworking, and burnout force accountants to quit their jobs and look for greener pastures.
Because there is a shortage of qualified accountants, accounting firms are more likely to commit errors and inconsistencies in financial reports, potentially putting them under regulatory trouble.
3. Accounting Regulations Become Complex Over Time
With accounting regulations becoming more complex, regulatory compliance can mean nothing but a struggle for companies, especially smaller ones. Regulatory changes entail not just complex calculations, but also foresight and critical thinking from the accountants themselves.
Unfortunately, companies with limited financial resources for hiring skilled accountants and implementing cutting-edge accounting software are more susceptible to making accounting errors, resulting in inaccurate, low-quality financial reports that can spiral into legal penalties and loss of investor trust.
4. The Cost of A New Hire Is Expensive
Did you know that the average cost of hiring in the US is a staggering $4,683 USD? Of course, hiring costs vary according to role and experience level. According to Indeed, CPAs earn an average annual salary of $91,957 USD, with the highest sitting at $144,778 USD. Junior accountants earn $57,155 USD, while senior accountants earn $83,840 USD every year.
It’s not only employees that are expensive, but also the cost of training new hires. That’s why it’s no surprise that companies can spend around $1,207 USD to $1,512 USD for every newly hired employee. Employee benefits and overhead for maintaining an in-house accounting team also add up to the cost, setting accounting firms back tens of thousands of dollars (or more) each year.
KDCI Outsourcing Vs. US Accounting Firms: Where to Outsource Accounting Services?
For growing businesses, choosing between outsourcing and partnering with a traditional accounting firm is a decision that can make or break their return on investment (ROI). To help you make an informed decision, this section compares KDCI’s offshore accounting model with accounting companies based on cost efficiency, scalability, and other factors.
1. Cost Efficiency
US Accounting Firms
While you have the advantage of working closely with local accountants, they require more financial investment due to the cost of labor, overhead, benefits, employee training, and turnover costs. Additionally, US accounting companies charge higher for bookkeeping, tax filing, auditing, and other accounting services.
KDCI Outsourcing
KDCI Outsourcing offers a suite of cost-effective outsourced accounting services for small and medium-sized enterprises (SME), ranging from financial reporting to credit control. Clients share their needs and pain points with KDCI’s outsourcing expert, who will create a tailored offshore outsourcing solution that best fits their budget and requirements.
Unlike traditional accounting firms, KDCI Outsourcing prides itself on cutting costs by 70%. Labor is cheaper in the Philippines, with Filipino CPAs earning $10,433 USD each year. Compare this with the average annual salary of a CPA in the US ($91,957 USD), and it’s a difference of $81,524 USD!
That means you can build a whole outsourced accounting department without sacrificing your budget. What’s more, overhead and training costs are shouldered by KDCI Outsourcing, so you’ll only be paying for the company’s service fee, employee rates, and other relevant costs.
2. Operational Efficiency and Time Zone Advantage
US Accounting Firms
Time zone is the biggest advantage of a traditional accounting firm. In-house accountants can easily coordinate with their colleagues in case of issues. Unfortunately, accountants in traditional accounting firms juggle multiple tasks, leading to delays, financial errors, and inefficiencies in workflow.
KDCI Outsourcing
KDCI Outsourcing is based in the Philippines. While a 12 to 13-hour difference may seem like a disadvantage, this offshore accounting firm can make American time zones work in its favor. For starters, BPO companies in the Philippines are open 24/7, including holidays. Thus, they can provide round-the-clock offshore services to American clients.
KDCI Outsourcing’s offshore accountants also work the graveyard shift, so they can seamlessly coordinate with your in-house accounting department. When you outsource accounting and bookkeeping to the Philippines, you get an extra pair of hands that can help minimize the workload and streamline the day-to-day financial operations of your in-house accounting team.
Not only does an outsourced accounting department improve operational efficiency, it also helps maintain data integrity and accuracy, as in-house accountants have more mental space for high-quality, error-free work.
3. Access to Talent
US Accounting Firms
For local accounting firms, hiring is confined to a limited geographical area. With America’s exorbitant hiring costs, shortage of CPAs, and candidates’ high salary expectations, companies struggle to attract talent that best fits their requirements.
These accounting firms may not even accept new clients as they are already short-staffed and overwhelmed, causing you to miss important deadlines during busy seasons.
KDCI Outsourcing
The Philippines is abundant with fresh talent, producing around 500,000 college graduates annually. The country is also said to have 200,000 registered CPAs. KDCI Outsourcing employs college-educated accounting professionals with ample experience in bookkeeping, accounts payable processing, and many other accounting operations.
The company boasts a rigorous hiring process, backed by a team of expert recruiters who can thoroughly vet candidates according to your preferred requirements. As a leading accounting BPO firm, KDCI Outsourcing endeavors to empower and support your in-house team with competent accountants who can drive efficiency and ensure compliance.
4. Access to Technology
US Accounting Firms
US accounting firms have the technology to perform accounting processes. When it comes to upgrading or experimenting with new technology, it’s a whole new league of time and monetary investment. As in-house accountants learn the ropes of new accounting software, they can make mistakes and compromise workflow efficiency.
KDCI Outsourcing
As a premier BPO accounting company, KDCI Outsourcing has the right financial services software for any accounting need. Need to shift to a new accounting program? This Philippine accounting firm can source or provide you with offshore accountants who are trained and proficient in a particular software, so you don’t have to invest in in-house professional development programs.
KDCI Outsourcing can also find Filipino accountants who are proficient in Quickbooks, Zoho Books, or any software your accounting department uses. This way, you don’t have to worry about disruptions in productivity caused by training new hires. With the company leveraging automation tools, manual accounting tasks such as expense reporting and accounts payable can be accomplished with little risk of human error.
5. Scalability
US Accounting Firms
Busy seasons — especially tax filing season — are a stressful period for accountants, who are overwhelmed with workload and tight deadlines on top of complex regulations, stress, and long working hours.
Although an increase in workload calls for scalability, local accounting firms are more difficult to scale. This is because hiring a new full-time employee is expensive, and internal hires may not possess the skills and technical acumen for high-level accounting tasks.
KDCI Outsourcing
KDCI’s outsourcing solutions can help you scale without ballooning costs. Thanks to the Philippines’ lower cost of labor, you can scale your accounting department according to demand and seasonality. During tax and audit seasons, for example, you can hire more outsourced accountants to help your accounting department prioritize tasks, meet deadlines, and optimize processes.
6. Regulatory Compliance
US Accounting Firms
Traditional accounting firms are familiar with accounting standards and regulations. Despite their knowledge, the lack of adequately trained manpower exacerbates the struggle of accounting companies in avoiding reissues and keeping up with complex regulatory changes.
KDCI Outsourcing
Philippine accounting firms like KDCI Outsourcing are well-versed in US accounting standards and regulations. As a company that places value in offering world-class accounting services, KDCI Outsourcing’s accounting experts keep abreast of standard and regulatory changes, making it easier to create accurate and compliant financial statements.
The Verdict: KDCI Outsourcing Wins
When growing US businesses outsource accounting services, they can enjoy the same benefits they get from a traditional accounting firm, albeit at lower costs. Below is a summary of the benefits of collaborating with KDCI Outsourcing:
- Cost efficiency: KDCI Outsourcing shoulders overhead costs. You can also hire more accountants as salaries are lower than in the US.
- Operational Efficiency and Time Zone Advantage: KDCI Outsourcing’s offshore accounting team is built for efficiency as they work the night shift to deliver real-time accounting services.
- Access to Talent: Whether it’s a bookkeeper or a general ledger accountant, KDCI Outsourcing sources the best candidates for your needs.
- Access to Technology: KDCI Outsourcing has automation tools and cutting-edge accounting and finance programs to support any accounting process.
- Scalability: KDCI Outsourcing helps you build scalable teams to meet evolving accounting needs.
- Regulatory Compliance: KDCI Outsourcing’s accountants are meticulous, calculating and interpreting complex financial data correctly to ensure compliance with regulatory bodies.
Whether it’s cost efficiency or talent accessibility, it’s clear that outsourced accounting services take the cake and drive the most ROI in terms of cost, talent accessibility, and efficiency. As growing businesses produce compliant, error-free financial reports, they can build their reputation and gain the trust of investors.
Outsource Accounting Services to KDCI Today
US businesses that outsource accounting services enjoy higher cost savings, more accurate financial reporting, and faster turnaround times. Outsourcing solutions, though promising, carries an inherent risk. Working with the wrong service provider can be a costly investment, one that creates a negative ROI.
But with the right one? Your growing business will get its much-deserved ROI. So, take a leap of faith and start collaborating with KDCI Outsourcing. Our high-quality offshore accounting services are designed to streamline operations, bolster productivity, and meet our clients’ highest standards. In addition to accounting and finance, we also offer outsourced professional services in the creative, real estate, and IT industries.
Get in touch with KDCI Outsourcing today so we can up your accounting game with the help of our ever-reliable offshore accounting team!
