3 Benefits of Offshoring Financial Functions
Ranking among the first services to get outsourced, financial functions continue to thrive in the offshoring industry and help many companies gain a competitive edge. The Service 2020 report from BDO reveals that 46% of business leaders decide to outsource in the Asia-Pacific region for the next decade, and 40% of them would consider offshoring when interviewed. This strategic and significant approach could be attributed to three following benefits:
The perspective of cost savings always stands in the front line when a business delegates its financial functions to an offshore team. The global labour arbitrage currently allows offshore companies to cut up to 70% of labour costs, in comparison with operating in the country of origin. For example, the hourly and even monthly rates for a senior accountant in Asian countries are much lower than in Australia while the labour force can stay considerably stable. Imagine you can have a team of four qualified accountants in the Philippines with the same cost of hiring a CPA in Australia. Of course, the offshore financial functions can only operate successfully if your company has been well-prepared and in partnership with experienced, professional service providers in destination countries.
Table 1: Salary Comparison, Australia and the Philippines (May 2015)
|Position||PH Staff Annual Salary (AUD)||AU staff Annual Salary (AUD)||Annual Savings (AUD)||Annual Savings (%)|
|Financial Planning Assistant||$15,200||$61,500||$46,300||75|
Unlike common assumptions that offshoring is for repetitive, mediocre tasks without quality standards, Australian companies have successfully delegated complex, strategic financial functions to destination countries. This is due to the fact that many offshore vendors recruit CPA-certified accountants who study abroad and / or have a thorough understanding of Australian financial regulations. In reality, offshore functions to Asian countries now span from accounts payable, accounts receivable, back office tasks to decision support activities (e.g. financial accounting, management reporting) and expert functions (e.g. planning analysis, tax compliance). More importantly, with the increasing practice of onsite training and technological advances, companies can confidently transfer these complex financial functions to offshore teams while maintaining a quality and confidentiality standard like in Australia.
Focus on Competencies
Offshoring has always been an optimal approach when companies aim to delegate value-preserving tasks and focus instead on core competencies, or so-called ‘value-creating activities’. That is the case for Australian start-ups and SME’s where the business maturity is not enough to simultaneously handle multiple tasks with limited personnel. With the support from the offshore team in bookkeeping, financial statement preparation or supplier invoice payments; your Australian staff can devote themselves to functions involving customer contact and new business opportunities (e.g. claims settlement, business briefing). Offshoring to Asian countries, therefore, not only helps maximise the workflow but also increases employee retention, as your staff will stay away from stress and overload.