In recent years, many CPA & Accounting firms have started to outsource their finance and accounting operations to offshore locations. While offshoring can provide significant cost savings, it also comes with various risks and challenges that CPA & Accounting firms need to be aware of.
In this article, we Finsmart – trusted globally for offshore bookkeeping services – will discuss the potential risks and challenges associated with finance and accounting offshoring and provide some tips on how to mitigate them. Let’s begin with our guide!
The Risks of Finance and Accounting Offshoring
Accounting is an inherently risk-prone profession, with firms facing a range of potential hazards that could threaten their clients, their finances, and their reputation. The AICPA’s 2022 PCPS CPA Firm Top Issues underscores this point, revealing that managing risks is one of the top concerns for CPA and accounting firms over the next 5 years.
#1 Security Risks
One of the biggest risks associated with offshoring finance and accounting operations is the security risk. Offshoring means that sensitive financial data is being sent to a third-party, often in a foreign country, which can increase the risk of data breaches and cyber-attacks. This can result in the loss of critical data, financial fraud, and reputational damage.
#2 Compliance Risks
Another major risk associated with offshoring finance and accounting operations is compliance risk. Many countries have different laws and regulations when it comes to financial reporting and tax compliance. This can lead to non-compliance issues if the offshore team is not fully aware of the laws and regulations in the home country.
#3 Quality Risks
Offshoring finance and accounting operations can also bring quality challenges. The offshore team may not have the same level of expertise and experience as the onshore team, which can result in errors and inaccuracies in financial reporting. This can lead to delays in financial reporting and can also damage the reputation of the company.
Watch how the leading accounting firm of Chicago has to say about offshore bookkeeping
#4 Communication Risks
Offshoring finance and accounting operations can also lead to communication risks. The offshore team may not have the same level of language proficiency as the onshore team, which can result in misunderstandings and miscommunications. This can lead to delays in financial reporting and can also result in financial inaccuracies.
These offshoring risks clearly underline why it makes sense to be thorough while choosing a partner for finance and accounting offshoring. Now that you have a clear idea of accounting offshoring challenges, let’s discover the best tips and ideas to mitigate the risks.
Mitigating Finance and Accounting Offshoring Risks
#1 Conduct Proper Due Diligence
Before outsourcing finance and accounting operations, it is important to conduct proper due diligence. This includes thoroughly researching potential offshore vendors and conducting site visits or virtual meetings to assess the quality of the offshore team’s work.
#2 Implement Strong Security Measures
To mitigate security risks associated with finance and accounting offshoring, it is important to implement strong security measures. This includes using secure communication channels, ensuring that data is encrypted, and implementing strong access controls.
Read on for more risk management strategies or take the time to check this article on managing regulatory compliance
#3 Provide Adequate Training
To mitigate compliance and quality risks, it is important to provide adequate training to the offshore team. This includes training on financial reporting and tax compliance regulations, and providing training on the company’s specific accounting systems and processes.
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#4 Establish Clear Communication Channels
To mitigate communication risks, it is important to establish clear communication channels with the offshore team. This includes ensuring that the offshore team has strong language proficiency and providing regular communication to ensure that there are no misunderstandings.
#5 Monitor Performance
To ensure that the offshore team is meeting the company’s expectations, it is important to monitor performance. This includes regularly reviewing financial reporting and tax compliance data and conducting periodic audits of the offshore team’s work.
Connect for Accounting Offshoring Support
Finsmart Accounting with its 15 years of outsourced accounting space uses its own proprietary framework called DPPT – Definition, Process, Precision & TAT that has been the success mantra for supporting the firms in the US to stay ahead of the competition.
By partnering with one of the top accounting outsourcing companies in India , CPA firms can access a team of professionals who are knowledgeable about the latest technologies, up to date with ever-evolving accounting norms, and also domain experts in US accounting.
Share your thoughts
Would you like to know more about the DPPT framework or have you or your company worked with offshore accountants during the accounting talent crunch? What was the experience like? Join the conversation below or check out our recent blogs on business growth and offshore hiring:
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