Accounting Offshoring Guide: Services, Pros, Cons, & Leading Providers

Introduction

Offshore accounting has become a crucial aspect of the accounting landscape, offering firms strategic advantages for managing and optimizing their operations. This guide explores the nuances of offshore accounting services, highlighting its various accounting, tax and audit services, the benefits it offers, potential drawbacks, and top providers that can assist you in navigating these waters.

A Concise Guide to Offshore Accounting Services

Accounting offshoring is a complex subject with multiple dimensions to explore. In this guide, we'll break down the key aspects under different headings to help you gain a comprehensive understanding:

Understanding Offshore Accounting

So, what is offshore accounting? Offshore accounting for accounting firms involves hiring skilled professionals in different geographic regions to join your in-house team. These remote staffing team members work exclusively for your accounting firm, adhering to the firms’ policies and procedures.

This model offers the advantage of having dedicated staff members who align with the firm's culture and goals. Offshoring means the work is done outside of the host country. Building an offshore accounting team allows you to take advantage of a global workforce to optimize your firms’ processes and increase revenue.

What Accounting Services can be Offshored?

1. Bookkeeping

Includes the organization of financial transactions. This service includes invoices, bills, expenses, and deposits.

Key Skills:

• Recording transactions (Daily - Weekly - Monthly - Yearly)
• Payroll Reconciliation
• Sales Tax Reconciliation
• Accounts Payable - Account Receivable Management
• Bank and Credit Reconciliation. (Daily - Weekly - Monthly - Yearly)
• Reconciling books to third-party records
• 1099 Form Preparation
• Computer Literacy - Moderate to Good
• Quickbooks or Xero Experience
• Basic Microsoft Excel Literacy

2. Tax Preparation

An offshored tax preparation service involves outsourcing the responsibility of creating and submitting tax returns to a service provider in a different country. Accounting firms forward their financial records and pertinent details to an entity or individual in another nation. Here, skilled experts manage tasks such as tax calculations, form completion, and adherence to the tax rules of the home country.

Key Skills:

• MS Office Suite, with strength in MS Excel
• Fundamental Understanding Quickbooks and US Accounting.
• Individual Tax Preparation (Moderate to Complex)
• Business Tax Preparation (Moderate to Complex)
• Multi-State Tax Preparation (Moderate to Complex)
• Consolidated Tax Returns
• Year-End Accounting and Adjustments (Moderate)
• Exempt Organization Tax Preparation (Complex)
• Trust Tax Preparation (Complex)
• Basic Gift & Estate Tax Returns Preparation
• Foreign Forms Preparation - 5471, 5472, 1116, 2555
• Foreign Partnership Form - 8865,3520
• Foreign Corporation Form - 1120-F
• Tax Planning & Tax Research
• Computer Literacy - Moderate to Good
• Relevant Tax Software Experience

3. Financial statement preparation

This includes preparing financial statements such as income, balance sheets, and retained earnings. It's one of the last steps in the accounting cycle, utilizing information from previous reports to understand the current financial situation. Financial statements can be filed monthly, quarterly, and yearly depending on the requirement.

Key Skills:

• Balance sheet reconciliations
• Month-end journal entries and adjustments
• Month-end close and financial reporting
• Review and Preparation of Monthly Bank Reconciliation
• Month-end financial statements for internal and external users
• Tax Return Adjustment
• Payroll / Sales Tax / Loan / Investment Account Reconciliation
• Administer Concur Time & Expense system
• Assist with business taxes, registrations, and compliance filings
• Proficient with Microsoft Office Suite and accounting software
• MIS Reporting
• Cashflow Analysis and Reporting
• KPI Reporting and Analysis (Operational and Core Business KPI)
• Budgeting and Forecasting.
• Inter-company Reconciliation and Consolidated financial statements
• Reconcile Control Accounts

4. Accounts Payable/Receivable (AP/AR)

Accounts payable and receivable services include recording, computing, and classifying the revenue data to ensure a complete financial record. This service is crucial for receiving income and paying expenses.

Key Skills:

• Accounts Payable Management
• Processing the Payment and Managing Vendor Credit Period
• Accounts Receivable Management
• Processing the Receipt and Managing Debtors Credit Period
• Regular Interval Reporting of Aging Report
• Coordination with Team Members / Vendors / Customers
• Enter missing bill/invoice for payments received
• Reconciling Balance with Third-Party Confirmation
• Follow-Ups through Email as well as Calls for Invoice Payment
• Follow-Ups through Email as well as Calls for Collection of Bills
• Quickbooks, Bill.com and Excel

5. Payroll services

This includes compiling summaries of employee earnings, taxes, deductions, vacation, and disability. The payroll associate must ensure that employees are paid on time and accurately.

Key Skills:

• Process client payroll and produce checks, vouchers
• Input all payroll-related data to meet payroll processing deadlines
• Process payroll garnishments, vacation time, insurance, 401(k), and other deductions
• Prepare single and multi-state quarterly and annual payroll tax reconciliations
• Prepare payroll compliance returns 940 - 941
• Filing payroll client information
• Maintenance of payroll software as assigned
• Maintaining detailed daily time records of work performed
• Assist with payroll audits
• Prepare and Submit Report Regularly
• Proficient in Microsoft Excel & MS Office

6. Year-end accounting

Year-end accounting entails compiling financial statements, addressing overdue invoices, organizing business receipts, cross-referencing payroll and bookkeeping records, and other related tasks at the end of a fiscal year.

Key Skills:

• Recording transactions (Daily - Weekly - Monthly - Yearly)
• Bank and Credit Reconciliation. (Daily - Weekly - Monthly - Yearly)
• Reconciling books to third-party records
• 1099 Form Preparation
• Computer Literacy - Moderate to Good
• Quickbooks or Xero Experience
• Basic Microsoft Excel Literacy

7. Auditing Services

It includes the examination or inspection of various books of accounts by an auditor, followed by checking the inventory to ensure that everyone follows the correct system of recording transactions.

Key Skills:

• Perform audits for business operations, finances, and compliance with policies and procedures
• Oversee audit planning and reporting activities according to established policies
• Supervise audit team to ensure quality and on-time delivery.
• Evaluate the performance of audit staff and provide appropriate feedback
• Assist in risk assessment and mitigation activities
• Organize training for the audit team for skill development
• Coordinate with the team to review audit findings
• Prepare reports with audit findings and recommendations
• Assist in developing budgets and timelines for upcoming audits
• Evaluate current audit procedures and recommend improvements
• Evaluate and enhance internal controls to improve operational efficiency
• Communicate audit status to management regularly
• Discuss with management about audit observations, recommendations, and actions to be taken
• Prepare clear and complete audit work papers and store them in the department repository

Pros of Offshore Accounting Services

• Cultural Alignment: An offshore accountant can be integrated into your firm's culture, leading to better collaboration and communication.
• Data Security: Since offshore accounting staff works exclusively for your firm, you have greater control over data security measures.
• Flexibility: You can scale your offshore accounting team according to your firm's evolving needs by utilizing offshore accounting services.
• No Infrastructure Costs: Accounting firms can optimize resource allocation and prioritize strategic initiatives over infrastructure expenses.
• Provider covers benefit costs: Firms don’t need to pay for benefits such as health insurance, retirement plans, or paid leave as the offshore accounting service partner covers this.
• Save on HR & Overhead costs: Offshore staffing for accounting firms significantly trims HR costs—recruitment, training, and overheads—enabling accounting firms to redirect savings into more impactful investments.
• Easy Scalability: offshore accounting services allow accounting firms to scale quickly depending on seasonal increases or decreases of work.
• Reduce Workload on Onshore Team: By delegating routine and time-consuming tasks to offshore accountants, the onshore team can concentrate on strategic and high-value activities, leading to innovation and creativity within the core team. Hiring and retaining staff in CPA firms also increases as the onshore teams burden reduces.

Cons of Offshore Accounting Services

• Communication Hurdles: Offshore accounting can encounter obstacles in communication due to variations in language or time zones, making effective collaboration and communication more challenging.
• Quality Control Challenges: Offshore Accounting Service providers might have different quality benchmarks than local counterparts, leading to potential issues in maintaining consistent quality.
• Security Apprehensions: Offshore accounting services raises security apprehensions, especially when handling confidential financial data. Ensuring that offshore providers have robust security protocols becomes imperative. Before contracting an offshore accounting partner, review their data security protocols and verify they are ISO, SOC certified, and GDPR compliant. 
• Legal and Regulatory Compliance: There may be instances when overseas accountants are unaware of local legal and regulatory compliance. However, a reputable offshoring partner will ensure their staff are trained in U.S. accounting practices, with many holding international qualifications such as CPA and ACCA.

Top Offshore Accounting Service Providers

Entigrity

With over nine years of experience working with 725+ small to medium-sized accounting firms in North America and the UK, Entigrity is a highly capable accounting offshoring partner. Having offices across 25 global destinations, including India and the Philippines, Entigrity is well-poised to provide comprehensive accounting, tax, and auditing services.

Xpitax

Is a renowned accounting outsourcing company that began operations in 2004. They cater to small and medium-sized accounting firms' global needs, providing comprehensive accounting solutions.

Paperchase

Paperchase is a well-established accounting outsourcing company that expanded its operations to India in 2011. Paperchase's services encompass accounts payable/receivable, bank reconciliations, financial reporting, and virtual CFO support.

Taxfyle

Taxfyle is a prominent offshore accounting service provider that entered the accounting market in 2015. They specialize in delivering tax preparation and advisory services to accounting firms, leveraging their skilled team of professionals.

Sureprep

Sureprep is a trusted name in the offshore accounting industry, having started its operations in 2002. With a client base of over 1,000 accounting firms, Sureprep has established itself as a reliable partner in meeting tax compliance and preparation needs.

Conclusion

In this comprehensive guide, we've explored the world of offshore accounting, covering its types, advantages, disadvantages, and top service providers. By understanding the nuances of offshore accounting, you can make informed decisions that align with your financial goals and needs.

FAQs

1. Is confidentiality guaranteed with offshore accounts? 
While offshore jurisdictions offer enhanced privacy, it's important to understand the extent of confidentiality within each jurisdiction.

2. How do I choose the right offshore accounting service provider? 
Consider factors such as the provider's reputation, experience, range of services, and the specific needs of your situation.

3. How to Build an Offshore Accounting Team?
To build an offshore accounting team, identify your needs and tasks, select a suitable location, and find a reliable outsourcing partner. Clearly define roles, onboard talent, and establish strong communication using technology tools. Ensure data security, monitor performance through KPIs, and consider legal and cultural factors. Continuously improve the team's efficiency and effectiveness through feedback and adjustments.

4. How to Overcome Common Challenges in Offshore Accounting?
To overcome common challenges in offshore accounting, emphasize clear communication, employ robust technology for secure data sharing, and establish well-defined processes.

Foster a strong team dynamic through regular virtual meetings and cultural sensitivity training. Address time zone differences through flexible scheduling and maintain a detailed documentation system. Regularly evaluate performance metrics and adapt strategies based on feedback for continuous improvement.

5. When Should You Consider Offshoring Your Accounting Tasks?
You should consider offshoring your accounting tasks when you're looking to reduce costs while maintaining quality, require specialized expertise not locally available, need to handle increased workloads efficiently, want to focus on core business functions, and are willing to invest time in setting up and managing an offshore team while ensuring effective communication and data security measures.

In addition to the above mentioned points it's also important to know the right time to build your offshore team. The summertime is the most recommended time to begin building your offshore team.

Entigrity™ is a trusted offshore staffing partner to 725+ accountants, CPAs, and tax firms across the US and Canada. Our flexible and transparent hiring model gives helps firms of all sizes to hire staff for accounting, bookkeeping, tax preparation, or any other task for 75% less cost. As a firm 'run by accountants, for the accountants,' Entigrity captures the hiring needs of accounting firms most precisely, providing staff that works directly under your control and management; still, you are left with the least to worry about compliance, payroll taxes, overheads or any other benefits.