India: The future of offshore accounting and bookkeeping?

It is becoming increasingly common for CPAs and accountants from across the world to offshore ('outsource') their bookkeeping and accounting services to India. This strategic option is particularly popular with firms in the US, Asia Pacific, Europe and Canada. India has therefore been able to maintain position as a major outsourcing hub for outsourcing. 

With this growing trend towards outsourcing comes the question of just how much business will be transferred to India in the next 10 years. A number of indicators give us an idea as to the future, specifically, competitive pricing, global accounting standards, the globalization of accounting software and changing technology. Pankaj Dave, partner at BMC Support & Accounting Services in India explains more. 

India's share of the global outsourcing market

India's outsourcing businesses control a major share of the global outsourced Business Process Sector (BPS) i.e. the Knowledge Process Outsourcing (KPO) market which is a 55% share of the US$185-190 billion global sourcing business in FY18. India's internet sector is likely to double in size to reach US$250 billion by 2020, growing to 7.5% of GDP. The number of internet users in India is expected to reach 730 million by 2020, supported by the fast adoption of digital technology, according to a report by National Association of Software and Services Companies (NASSCOM).

Indian IT exports increased to US$126 billion in FY18 while domestic revenues (including hardware) advanced to US$41 billion. India's IT and BPM industry is expected to grow to US$350 billion by 2025 and BPM is expected to account for US$50-55 billion out of the total revenue.

The leading KPO segment is finance and accounting. It is anticipated that growth in the need for high end processing such as analytical processes will further increase BPS outsourcing in the retail, shipping and logistics, consulting and professional services sectors.

Why are firms choosing India?

With its ability to adapt to the changing needs of the BPS market, India continues to be the preferred destination for offshoring business and accounting processes.

According to NASSCOM, (National Association of Software & Service Companies) the apex body of India's premier IT software and service (IT & BPO) companies, India's share of the global outsourcing market has risen significantly.

India has an edge over its competitors due to the advantages offered in terms of levels of customer service and efficiency. India's outsourcing businesses match clients' requirements not only in terms of price, but also in terms of skilled professionals, enhanced productivity, service quality and business process excellence. 

A major contributor to these achievements are the country's large English speaking population and the availability of multi-skilled workers. 

India is experiencing growing competition from countries in Eastern Europe and China, Mexico and the Philippines. This trend is likely to continue as the demand for knowledge manpower in developed economies outperforms supply.

However, as markets worldwide become ever more knowledge-intensive, India has evolved to become the preferred destination for knowledge services. In fact, Knowledge Process Outsourcing may soon become India's largest revenue source. Its pool of skilled manpower is immense– there are a wealth of Chartered Accountants, MBAs, doctors, lawyers and research analysts. This strengthens India's position in the knowledge service industry.

The general advantages of offshoring to India

• Improving levels of technology
• Good workforce communication skills
• India's location positions it approximately 12 hours ahead of the US, enabling firms to achieve a 'follow the sun' client service approach 
• Infrastructure improvements and lower communication costs result in the ability to work anytime, anywhere
• Globalization removes the geographical boundaries to accessing resources and talent worldwide
• Global collaboration and new opportunities in businesses are provided by the Internet revolution
• Global standardization of the finance and accounting function
• Cost reductions in the finance and accounting function without sacrificing efficiency and quality
• Enables the CFO to evolve beyond compliance to different financial disciplines and improved decision making
• Ability to achieve step changes and streamline unnecessarily complex business processes, systems and structures.

India's big opportunity

Knowledge Process outsourced services such as IT infrastructure management services, application operations, IT security and the maintenance of accounting, legal, content and medicine will continue to perform well, with India set to establish itself as a global hub for knowledge services in the near future. India is also developing into a front runner with many Fortune 500 companies, many of whom have already outsourced their captive operations to India.

CPA firms under growing pressure

CPA firms are under tremendous pressure to maintain the quality of their services and are expected to deliver results in the areas listed below:

• Routine auditing, accounting and tax services for their clients
• Setting up processes, ensuring compliance and providing help in implementation of effective controls
• The adoption of technological tools and cost saving methodologies without compromising quality or professional ethics
• Meeting the needs of existing and prospective investors, shareholders, lenders and regulatory agencies who all place trust in the financial statements prepared and provided by accounting firms
• Maintaining the growth of their own accounting businesses to achieve year-on-year ROI. 

Furthermore, firms in the US must meet their responsibilities as set out by the AICPA, state societies, state boards of accountancy and various other regulatory agencies in terms of ethics, public interest, integrity, objectivity, independence and due care.

READ

• Outsourcing accounting services to India: Frequently asked questions
• Success story: Outsourcing the accounting function - A USA/India collaboration. 

Specific advantages to be achieved through outsourcing to India

• The costs related to building infrastructure and manpower that are involved in setting up the division for outsourced activities will not be borne by the foreign accounting firm  
• The firm will have opportunities to service clients using different software platforms. Outsourcing companies will tend to offer various software options including QuickBooks, XERO, MYOB, Quicken, Peachtree, Sage, IRIS, LaCerte, etc. 
• Skilled accountants and bookkeepers are usually available in India at very short notice
• Employee turnover in India is low, ensuring consistency and reducing costs related to training and set up
• Costs can be cut by 40% to 60%, increasing margins, particularly when compared to hiring in-house. 

Focus on your core business

Most CPAs are swamped with routine, time consuming tasks such as reconciliation, bill processing, bookkeeping, payroll accounting and filing tax returns. None of these are particularly profitable activities.

While bookkeeping for example, must be rigorous and accurate, outsourcing bookkeeping services empowers CPAs to invest their time and effort more efficiently and focus on various other activities such as investments, wealth planning, financial disclosures, tax planning, and marketing their businesses.

Many accounting firms have adopted the outsourcing model and now send their high volume, low-skilled work to India - the trend is increasing with concerns over control and data confidentiality being allayed by a growing number of outsourcing businesses that are highly efficient through their people, processes and technology platforms. 

For advice on outsourcing to India

Please contact Pankaj Dave, partner at BMC Support & Accounting Services, a leading local firm that has offices in many of India's largest cities.