Outsourcing Financial & Accounting (F&A) Have some cost – A Report

Oct 5


Mani Malarvannan

Mani Malarvannan

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Often small businesses will consider only the cost paid to the offshore vendor in their ROI analysis when considering offshore vendors for their financial and accounting work


Often times small businesses will consider only the cost paid to the offshore vendor in their ROI analysis when considering offshore vendors for their financial and accounting work. But there several other one time and monthly costs they need to consider in their total cost calculations. This article explores what are all the different costs small businesses must consider in their Total Cost Analysis so that they can estimate the overall ROI of their offshore engagement.?


1.Financial & Accounting Work have some cost

While offshoring their work small business will consider only the hourly rate they need to pay to the offshore vendor for various accounting works like bookkeeping,Outsourcing Financial & Accounting (F&A) Have some cost – A Report Articles accounts payable, accounts receivable, etc.Typically a small business goes through following offshore accounting work cycle in their offshore engagement:

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

2. Cost of Selecting offshore accounting vendor  is very small The cost associated with selecting an offshore accounting vendor will be small compared to other costs through internet. For detailed discussion on this topic read Offshore Accounting Success. This cost is the one time cost and it will be similar to selecting an onshore vendor.


3. there is a cost of sending the work to an offshore vendor

Small businesses must consider various types of cost like Scanner, High speed Internet, Backup Server, etc, to send their financial and account documents to an offshore vendor, but the good news is that it will be a one time investment and most of the small businesses will have these in place already. There are three different offshore accounting modelsyou can use to send your accounting and financial work to the offshore vendors and for these you will incur following one time cost. 3.1. Scanner & Scanning software Most of the accounting and financial data will be in your accounting software like QuickBooks, Peachtree etc, but there will be other documents like Bills, Checks, Invoices, Goods received notes, etc will be on paper and these should be digitized using a scanner and a scanning software to convert it into PDF documents which will be stored in your computer. Once the documents are in your computer then you can give access to the offshore vendor to view the PDF documents or they can retrieve it from your computer to perform their work in the offshore location. 3.2. High speed Internet Connection Cost You need to have high-speed Internet connection to send and receive the work to and from offshore location. Again all most all small businesses already have DSL/T1 Internet connection if not they can get a DSL Internet connection for $60-100/month. 3.3. Secure FTP software Small businesses need secure FTP software to securely send accounting documents to offshore vendor and can receive it back from them securely. For this purpose small businesses can use several open source FTP software. The open source FTP software is free and small business need not spend any money to use it. The FTP software will be installed in the computer that is connected to the High speed Internet. If small businesses are using Application Service Provider (ASP) like Quickbooks online, cpaasp.com, etc, then it is possible for offshore vendors to directly access your accounting data directly from the ASP vendor. In this case there is no need to use secure FTP software. 3.4. Backup Server Once small businesses start digitizing their accounting documents for their offshore vendors, they need to start planning for the backup server to backup all their accounting documents. Most of the small businesses will have this feature already, if not it is a good investment to have a backup server to backup all their accounting and financial data from their main computer to the backup server. For any business “Business continuity” is a vital task and the backup server will help the small businesses to recover all the accounting data in case of main computer failure. 3.5. Additional Accounting software License cost Small businesses use various accounting software packages like QuickBooks, MYOB, Microsoft Office Accounting etc, for doing all their accounting and financial work. When they offshore the work the offshore vendor will use the same accounting software to do the work. It is very difficult for the small businesses to find an offshore vendor who already owns the licenses for all the accounting software. As described in the offshore accounting models if small businesses decides to use Remote Server or ASP then there is no additional cost for small businesses. On the other hand if the small businesses decided to use Secure File Transfer then small businesses needs to buy additional accounting software license for the offshore vendor to use. Small businesses will incur this cost even if they outsource the work to onshore vendors. This cost is truly soley based on the accounting software package used by the small businesses. Accounting software packages comes with various flavors types of software licenses like concurrent users, fixed number of users, CPU based, Network based etc., Some times small businesses can completely avoid this cost altogether.


4. Managing Financial & Accounting offshore vendor Once you send your accounting and financial work to the offshore vendor, you need to constantly mange and monitor the quality of finished work that comes back from the vendor. Initially you may need a full-time person educating the offshore accountants and bookkeepers about your accounting process and preparing proper instructions for them to follow in their work. Once you and the offshore team are comfortable in the working relationship then all you need is to verify the work periodically. Basically you need to consider the offshore team as your virtual team and educate them in your accounting processes and procedures, once you are comfortable with their work your own employee(s) will spend less time with the offshore vendors. 5. Offshore vendor wage

 Typically the wage cost will be 50-70% less than the cost paid to the onshore accounting and financial vendor.

Small businesses need to consider several costs in their financial and accounting offshore engagement. As shown in the table Small business F&A offshore outsourcing - Fixed Cost Vs Monthly Cost some of the costs are fixed and some of them are monthly expanses incurred by the small businesses