Tuesday, September 18, 2007

Small Business Offshore Accounting - Myths v/s Realities

To increase the efficiency and profitability of the business small business and big business both equally off sourcing their work mostly their Accounting work. But still There are some myths about accounting business process outsourcing; particularly among small business entrepreneurs who are still not sure whether such step can really create value for their enterprise, as in their perception, only big business can benefit form these initiatives. Confusion still prevails on selection of accounting functions that can be outsourced to maximize returns. But, the fact remains that accounting business process outsourcing is absolutely viable for small businesses too and has tremendous possibilities of cost saving and value. This article explores them one by one:

Myth: Accounting Outsourcing is exclusively for Big Business Reality: Small Business equally can share their the same stage in Accounting Business The popular perception that accounting outsourcing is only for big business with abundant wealth, profound resources and multiple locations is misleading. The fact remains that small business can reap great returns too by outsourcing accounting functions. In today’s fiercely competitive global industry, every second and every dollar that you save is very important for your business. By outsourcing non-core business activities like Bookkeeping, Accounts Receivable, Accounts Payable, Accounts Reconciliation, etc, to destinations like India, China, Philippines, etc, where there is abundance of technically skilled manpower at almost one-tenth labor cost as that of US, small business organizations can save substantially on operational costs. Simultaneously, they generate more time to devote to core business issues like procuring orders, improving technology and raising resources.

Myth: Accounting BPO has no place in Offshore business
Reality: False. Accounting BPO can be outsourced
After its start a decade ago, big business houses mostly outsourced transaction processing activities using high-end technology platforms. The situation has now totally changed. Big and small companies routinely outsource Accounting, HR, Financial Services, PR and similar functions to cost-effective destinations like India. Accounting is particularly a domain that has witnessed tremendous growth over the past few years and has immense possibilities as small business entrepreneurs with strong sales often need a full-time bookkeeper to oversee the books. But, in fact, such services have little to do with the volume of sales and more to do with the level of accounting activity, such as invoicing, bill paying, payroll and the like. Companies with a full-time bookkeeper can save about $30,000 a year by using outsourced bookkeeping services to highly competent service providers in India.

Myth: Complex IT integration is needed
Reality: Just a Server and Internet Connectivity can work
It’s a misconception among small business that outsourcing requires extensive IT integration. For management of outsourced accounting portfolio of a small business, just server and Internet connectivity is sufficient to procure value-added services. The outsourced service provider can use Remote Server model to access client’s computer securely to perform services like Bookkeeping, Accounts Receivables, Accounts Payables, Tax Returns, Account reconciliation etc. In the Secure File Transfer all the accounting records are transferred securely from customer’s computer to the outsource vendor to perform the work. After performing the work the offshore vendor will upload the files back into customer’s computer securely.

The trend has risen sharply as more and more companies are increasingly outsourcing accounting and financial services and the sector is growing very strongly. An IDC study entitled US Finance and Accounting Outsourcing Market Forecast and Analysis 2003-2008 has predicted that the global market for finance and accounting outsourcing services, which reached over $30 billion in 2003, will reach $47.6 billion in 2008.

Myth: Accounting Outsourcing is not secure
Reality: False. The services are 100% Reliable
No offshore service provider would risk his business possibilities by unauthorized use of accounting data of the outsourcing company. Through secure FTP software, offshore units transfer all the documents securely into the client server. Using customer specified accounting software; the client performs all the work and export the finished accounting files back in to customer's server securely. The customers will import the accounting files into their Accounting Software. Thus there is no possibility of any breach of data security.

Most accounting packages involve general data handling like daily sales figure, preparing an outstanding statement, maintaining expense register, preparing tax returns etc. Small business outsourced accounting services do not ordinarily involve handling of business critical data. Even if they are there, a reliable service provider with proven experience and credentials can handle the assignment with trust and confidentiality to secure efficiency and cost saving for small business units.

Myth: Accounting BPO harms economy of outsourcing country by cutting jobs
Reality: False. It promotes Growth and Efficiency
Small business outsourcing accounting services is a major budget-balancing act and an option for increasing business returns and lowering process time that does not call for job losses. The efficiency gained through fast and less expensive outturn makes end-price competitive. More products at affordable prices improve consumer dynamism and ultimately, everybody; from the manufacturer to the customer to the government accrue significant benefits. This is particularly more relevant for the small business sector because by outsourcing functions like accounting, they can save costs without compromising on quality and channel this cost saving to hiring people for operational areas to increase productivity and market sales. Ultimately, there is no loss of employment opportunities. Moving away from non-core functions, jobs become available in high-end sectors and to meet the requirements of such jobs, levels of professional expertise, skills and knowledge of the human resource base of the country increase significantly. The host country is the ultimate gainer from outsourcing.

Small business outsourced accounting has immense possibilities to secure greater business efficiency and higher returns and is proven all over the world. Highly enabled service providers aided by cutting-edge technology in offshore destinations can provide extremely reliable and value-added accounting services to ensure greater returns for small business. It’s a trend that will altogether change the face of doing small business for good.

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Mani Malarvannan is cofounder of Cybelink, a company specializes in small business financial and accounting outsourcing like Bookkeeping, Tax, Accounts Payable, Accounts Receivable, etc. For more info visit www.cybelink.com

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