| Fortune 500 companies have been off shoring the | | | | etc, then it is possible for offshore vendors to |
| financial and accounting business processes (BPO) | | | | directly access your accounting data directly from |
| to countries like India, Philippians, China, etc. These | | | | the ASP vendor. In this case there is no need to |
| companies have big budgets and a big team of | | | | use secure FTP software. |
| consultants who analyzes the total cost and ROI | | | | 3.4. Backup Server |
| of sending their financial and accounting work to | | | | Once small businesses start digitizing their |
| the service providers in offshore locations. Though | | | | accounting documents for their offshore vendors, |
| smaller companies have started off shoring their | | | | they need to start planning for the backup server |
| financial and accounting work to offshore locations | | | | to backup all their accounting documents. Most of |
| but like big corporations small businesses do not | | | | the small businesses will have this feature already, |
| have huge budget to hire consultants to identify | | | | if not it is a good investment to have a backup |
| the total cost of off shoring their financial and | | | | server to backup all their accounting and financial |
| accounting work to offshore locations. But small | | | | data from their main computer to the backup |
| businesses can still perform their due diligence in | | | | server. For any business “Business |
| calculating total cost of their offshore engagement | | | | continuity” is a vital task and the backup |
| and gain critical knowledge in finding ROI of | | | | server will help the small businesses to recover all |
| sending their financial and accounting work to | | | | the accounting data in case of main computer |
| offshore locations. In this report we will go | | | | failure. |
| through all of the hidden costs of offshoring | | | | 3.5. Additional Accounting software License cost |
| financial and accounting business processes. | | | | Small businesses use various accounting software |
| 1. Different Costs of Offshoring Financial & | | | | packages like QuickBooks, MYOB, Microsoft Office |
| Accounting Work | | | | Accounting etc, for doing all their accounting and |
| Small businesses mainly consider offshoring their | | | | financial work. When they offshore the work the |
| work, they will consider only the hourly rate they | | | | offshore vendor will use the same accounting |
| need to pay to the offshore vendor for various | | | | software to do the work. It is very difficult for |
| accounting works like bookkeeping, accounts | | | | the small businesses to find an offshore vendor |
| payable, accounts receivable, etc. There are | | | | who already owns the licenses for all the |
| several other additional hidden costs small business | | | | accounting software. As described in the offshore |
| have to face in their offshore outsourcing | | | | accounting models if small businesses decides to |
| engagement. Typically a small business goes | | | | use Remote Server or ASP then there is no |
| through following offshore accounting work cycle | | | | additional cost for small businesses. On the other |
| in their offshore engagement: | | | | hand if the small businesses decided to use |
| • Selecting an offshore accounting vendor | | | | Secure File Transfer then small businesses needs |
| • Sending the work to the offshore vendor | | | | to buy additional accounting software license for |
| • Answering questions for the offshore vendor | | | | the offshore vendor to use. Small businesses will |
| • Receiving the finished work from the | | | | incur this cost even if they outsource the work |
| offshore vendor | | | | to onshore vendors. This cost is truly soley based |
| • Verifying the finished work from the | | | | on the accounting software package used by the |
| offshore vendor | | | | small businesses. Accounting software packages |
| • Monitoring the quality of the finished work | | | | comes with various flavors types of software |
| from the offshore vendor | | | | licenses like concurrent users, fixed number of |
| 2. Cost of Selecting offshore accounting vendor | | | | users, CPU based, Network based etc., Some |
| The cost associated with selecting an offshore | | | | times small businesses can completely avoid this |
| accounting vendor will be small compared to other | | | | cost altogether. |
| costs. Most of the time small businesses can find | | | | 4. Managing Financial & Accounting offshore |
| a qualified offshore accounting vendor simply by | | | | vendor |
| searching in Google or by contacting other small | | | | Once you send your accounting and financial work |
| businesses those who are already using an | | | | to the offshore vendor, you need to constantly |
| offshore vendor, for detailed discussion on this | | | | mange and monitor the quality of finished work |
| topic read Offshore Accounting Success. This cost | | | | that comes back from the vendor. Initially you |
| is the one time cost and it will be similar to | | | | may need a full-time person educating the |
| selecting an onshore vendor. | | | | offshore accountants and bookkeepers about |
| 3. Cost of sending the work to an offshore | | | | your accounting process and preparing proper |
| vendor | | | | instructions for them to follow in their work. Once |
| Small businesses must consider various types of | | | | you and the offshore team are comfortable in |
| cost like Scanner, High speed Internet, Backup | | | | the working relationship then all you need is to |
| Server, etc, to send their financial and account | | | | verify the work periodically. Basically you need to |
| documents to an offshore vendor, but the good | | | | consider the offshore team as your virtual team |
| news is that it will be a one time investment and | | | | and educate them in your accounting processes |
| most of the small businesses will have these in | | | | and procedures, once you are comfortable with |
| place already. There are three different offshore | | | | their work your own employee(s) will spend less |
| accounting models you can use to send your | | | | time with the offshore vendors. |
| accounting and financial work to the offshore | | | | 5. Offshore vendor wage |
| vendors and for these you will incur following one | | | | For the accounting and financial work performed |
| time cost. | | | | by the offshore vendor, small businesses will pay |
| 3.1. Scanner & Scanning software | | | | either an hourly rate or a monthly rate to the |
| Most of the accounting and financial data will be in | | | | offshore vendor. This will be the actual direct cost |
| your accounting software like QuickBooks, | | | | small businesses will pay to the offshore vendor |
| Peachtree etc, but there will be other documents | | | | and all other costs are indirect cost of sending the |
| like Bills, Checks, Invoices, Goods received notes, | | | | work to offshore vendor. Typically the wage cost |
| etc will be on paper and these should be digitized | | | | will be 50-70% less than the cost paid to the |
| using a scanner and a scanning software to | | | | onshore accounting and financial vendor. For small |
| convert it into PDF documents which will be | | | | businesses this cost savings is one of the major |
| stored in your computer. Once the documents | | | | reasons to use the offshore vendor for their |
| are in your computer then you can give access | | | | financial and accounting work. |
| to the offshore vendor to view the PDF | | | | Small businesses need to consider several costs in |
| documents or they can retrieve it from your | | | | their financial and accounting offshore |
| computer to perform their work in the offshore | | | | engagement. As shown in the table Small business |
| location. | | | | F&A offshore outsourcing - Fixed Cost Vs |
| Most of small businesses already have a scanner, | | | | Monthly Cost some of the costs are fixed and |
| if not a scanner (scanning software comes with | | | | some of them are monthly expanses incurred by |
| the scanner) can be purchased for less than | | | | the small businesses. Among the monthly cost |
| $1000.00. The cost of the scanner will go up | | | | only the offshore vendor wage is the direct cost |
| based on the volume of accounting and financial | | | | paid to the offshore vendor. While performing |
| documents to be scanned in a given day. It will be | | | | ROI analysis small businesses must consider all |
| a one time cost for the small business and also | | | | these costs to find the Total Cost of doing |
| by scanning all their paper based accounting | | | | business with offshore vendors. As shown in the |
| documents; you can improve the efficiency of | | | | table, for certain items finding out the exact cost |
| overall accounting process. | | | | may not be possible and it is highly based on the |
| 3.2. High speed Internet Connection Cost | | | | individual small businesses and the type of |
| You need to have high-speed Internet connection | | | | accounting and financial work that has been sent |
| to send and receive the work to and from | | | | to offshore locations. The total cost may not be |
| offshore location. Again all most all small | | | | a fixed amount and it can change from month to |
| businesses already have DSL/T1 Internet | | | | month. For example in some months there will be |
| connection if not they can get a DSL Internet | | | | more questions from the offshore vendor in |
| connection for $60-100/month. | | | | clarifications and in other months there will be less |
| 3.3. Secure FTP software | | | | questions, this cost will vary from month to |
| If small businesses are using Application Service | | | | month. |
| Provider (ASP) like Quickbooks online, cpaasp.com, | | | | |