Internal bookkeeping becomes more and more complicated as an enterprise expands. Recording transactions, bank reconciliation, account payables, account receivables, payroll support and financial reporting all need constant monitoring. Many U.S. companies and accounting firms take advantage of offshore bookkeeping as an opportunity to receive special accounting services without hiring a big internal team.
In this blog, we will cover offshore bookkeeping services, how U.S. businesses make use of them, what functions may be delegated, how to choose a provider and security issues to consider before disclosing any confidential information. A proper arrangement for an offshore company may help increase your efficiency, but choosing the right provider, maintaining communication, making sure about the security of your data and other aspects are crucial here.
Understanding What Offshore Bookkeeping Services Include
Offshore bookkeeping entails the use of accountants or an offshore service provider situated beyond the boundaries of the United States for the purposes of performing bookkeeping and accounting activities.
The exact nature of the service may be very different from one service provider to another. Some of the common activities include maintaining records of the financial transactions, reconciliation of the bank and credit card accounts, preparation of the general ledger, management of accounts receivables and payable, and preparation of the financial statements.
|
Offshore bookkeeping task |
Typical purpose |
|
Transaction recording |
Keeps books current |
|
Bank reconciliation |
Verifies recorded transactions |
|
Accounts payable |
Tracks and processes vendor obligations |
|
Accounts receivable |
Monitors customer balances and collections |
|
General ledger management |
Maintains organized accounting records |
|
Financial reporting |
Provides information for decision-making |
|
Payroll support |
Helps manage recurring payroll processes |
|
Cash-flow reporting |
Improves visibility into liquidity |
The exact scope must be decided before starting any engagement. The service agreement must clearly spell out the areas of responsibility, turnaround time, review process, software access, reporting needs, and escalation mechanisms.
Evaluating the Main Benefits of Offshore Bookkeeping
In addition to the cost-saving benefits, there are other reasons why businesses decide to consider offshore accounting. A proper setup would offer additional accounting capacity, specialized expertise, and scalability in case of the variation in transactions' volume.
The accounting tasks can be assigned to offshore teams in order to free up the time of company owners, controllers, CPAs, or senior accountants and let them focus on more complex work such as analyzing, serving clients, planning strategically, etc. This approach can be quite effective for accounting companies with fluctuating workloads due to seasons.
An offshore company could help the firm scale up or down, adding new employees or releasing some when needed without having to employ or dismiss full-time accountants. However, whether outsourcing would bring financial benefits depends on the price of service, scope, quality, control, and alternatives.
For instance, the Fino Partners, as an example of the offshore accounting firm, claims to serve 300+ CPA and accounting firms with 250+ professionals and provides bookkeeping, payroll services, accounts receivable and payable, tax planning, financial reporting, and forecasting.
Determining Which Businesses Can Benefit From Offshore Bookkeeping
Offshore bookkeeping is not an activity for just big corporations. Offshore outsourcing can be beneficial for small companies, startups, CPAs, and even accounting firms that have fluctuating accounting workload. Offshore outsourcing can help small and mid-sized companies keep their books but without developing a big accounting team.
Startups may use offshore outsourcing to get ongoing bookkeeping services while they are busy with product development, clients, and sales. Accounting firms may use offshore outsourcing for increasing their capacity during tax season or for handling their routine bookkeeping activities.
This way, they will have more time for planning, consultation, and client management. E-commerce, real estate, and professional service firms, nonprofit organizations, and any other company that has a high volume of transactions may consider offshore bookkeeping if they are satisfied with the understanding of their accounting needs.
Prioritizing Data Security and Access Controls with Offshore Bookkeeping
Financial information is very sensitive; thus, it is necessary to give priority to cybersecurity issues when choosing an offshore bookkeeping service provider. It should never be assumed that access provided remotely will ensure the security of information. It is important to set security parameters before the provider has access to the accounting system or financial documentation.
In particular, the IRS informs tax professionals that they can be targets for cybercriminals and suggests several security steps such as using multi-factor authentication, encryption, backups, secure networks, and information security plans in writing. Additionally, the IRS notes that professional tax preparers have to develop an information security plan for clients' information.
It is important, therefore, to consider access-control procedures, authentication, encryption, backups, employee training, incident response, and vendor management at the service provider. There should be access only depending on job responsibilities, not for all employees of the provider working with offshore companies.
There should also be an agreement in writing concerning confidentiality and information management. When it comes to the companies processing taxpayer information, the (Internal Revenue Service)IRS notes that it is necessary for service providers to protect customers' information.
Choosing an Offshore Bookkeeping Provider Based on More Than Price
While price could be a factor to consider in evaluating providers, it cannot be the sole measure of quality since a lower-cost provider may turn out to be more expensive than an alternative of higher quality if a lot of supervision is needed or if its record keeping is unreliable.
The company should look at the provider’s experience, expertise in accounting, knowledge of U.S. accounting requirements, technology capabilities, process of reviewing, communication methods, and experience in the specific industry of the company. The availability of references, case studies, samples of reporting, and service-level expectations can all be helpful to due diligence.
Another thing to consider is the provider’s technology compatibility. It should be compatible with the company’s accounting software and have secure ways of gaining access to the company’s financial systems and sharing documents. Secure protocols, technology standards, cloud-based access, and integration of accounting and tax systems are the main aspects mentioned in the recommendations of the AICPA & CIMA on offshoring and outsourcing.
The communication process should also be determined beforehand. This includes the designating of contacts, holding of review meetings, and the expected response time among other things.
Following a Structured Offshore Bookkeeping Transition Process
The transfer of bookkeeping functions to an offshoring company needs to be approached as a process of implementing a change rather than merely transferring credentials for an accounting system.
One needs to start by analyzing the current processes involved in accounting. It must involve the analysis of the chart of accounts, accounting and reporting cycle, requirements for reconciliation, reporting cycle, invoice processing, approvals, etc.
Next, the pilot project should be introduced to measure the precision, delivery time, effectiveness of the communication, and adherence to the existing processes.
Lastly, it is critical that businesses introduce quality control measures by defining the key performance indicators of the process. They include the level of accuracy, delivery time, reconciling, open items, reporting completion, etc.
Preparing for the Future of Offshore Bookkeeping
Technology is transforming the way outsourced accounting teams function. Cloud accounting software allows financial records to be accessed remotely, while automation and artificial intelligence can help minimize the need for manual data entry and reconciliations.
Further development in offshore bookkeeping will most probably include more sophisticated use of automated transaction classification, workflow automation, detection of anomalies, automated reporting, and financial analysis done with the help of AI.
While such technologies increase productivity, they should be used as additional tools and not as a replacement for proper human evaluation.
That is why organizations should consider outsourcing accounting services that combine technologies with expertise in accounting and quality control processes. The idea is not to automate bookkeeping, but to establish a workflow where technology takes care of relevant routine activities, and professionals perform exception handling and ensure financial accuracy.
Since accounting will become more and more technology-driven, an organization should continue evaluating its controls, access permissions, workflows, and offshore service providers' performance. Offshoring of accounting processes should develop along with the organization's needs.
Just because the provider is the one that charges the lowest fee does not mean that this is the best choice. In making your decision, take into consideration the skills of the provider, their services, compatibility of technology, data security, communication, quality management, scalability, and experience in your particular industry.
When structured correctly, the offshore bookkeeping services can bring extra capacity of accounting services for the business while the American business firms and accountants can concentrate on more important issues. It all begins with clear responsibilities, access to the system, workflow documentation, periodic evaluation, and the provider who can adjust to the growth of your business.
The Fino Partners provides offshore accounting and bookkeeping support for U.S. businesses and CPA firms, including bookkeeping, payroll, accounts payable and receivable, tax planning, financial reporting, budgeting, forecasting, and cash-flow support. The company states that its team supports 300+ CPA and accounting firms and operates across 30+ industries.
