The Full Overview of Offshore Accountants: Top Countries for Outsourcing

Anyone in the accounting industry has experienced what experts call a 'talent shortage,' a challenge that has been increasingly impactful since 2020. 

According to the American Institute of Certified Public Accountants (AICPA), approximately 75% of CPAs retired during or immediately after the pandemic. Combined with a steady decline in new students choosing to pursue accounting majors, has left firms grappling with significant challenges in meeting their human resource needs.

What Does Offshoring Accountants Mean?

The talent shortage and the 'great resignation' have impacted the industry in both directions. This is basic economics: the harder it becomes to find experts locally or in close proximity, the more prohibitively costly it becomes in a shrinking job market. Despite mixed macroeconomic signals, labor costs continue to skyrocket in the red-hot F&A labor market. As a result, more than 30% of CPA and finance firms are choosing to outsource at least one role or process.

At its core, offshoring accounting talent involves employing remote staff based in a different country, typically to leverage better labor costs. These offshore accountants can provide the same services as domestic ones, including bookkeeping, tax preparation, auditing, payroll services, and financial reporting, among others. 

Offshore vs Nearshore Accountants

Outsourced remote accountants and financial teams can be found all over the world, meaning most firms end up hiring talent from across the ocean. However, it doesn’t always have to be this way. Let’s review the two options a firm must consider:

• Offshore: Hiring talent from a country with a different time zone.
• Nearshore: Hiring talent from a neighboring country, usually within the same or similar time zone.
  

Let’s see which option is more convenient for your firm.

Hiring Offshore Accountants

This type of outsourcing of remote talent involves hiring a service provider or accountant, located in a different country, in most cases in a different time zone. 

Pros

• The primary advantage of offshore hiring is cost-effectiveness. By selecting countries with lower labor costs, firms can find talent while significantly reducing expenses and maintaining similar skill quality.
• Offshore hiring enables access to a global pool of skilled professionals from various backgrounds.
• A larger talent pool means more specialized expertise and skill sets, allowing firms to be more selective in their hiring process.

Cons

• Distance can be a challenge here, as differences in time zones and language barriers can result in miscommunications.
• Cultural differences can also impact collaboration.
• This option can be particularly difficult to implement when leadership requires physical oversight and control over the process, which is virtually impossible through digital means.

Hiring Nearshore Accountants

There is a middle ground where firms can outsource remote talent from cost-effective countries but lower the difficulties that different time zones create: outsourcing to a nearby country.

Pros

• The cost-effectiveness in this case usually has to do with where the main office is located and coin exchange policies. For example, US firms can leverage labor markets from South America, while Europe has it more difficult to lower costs by hiring close by. 
• The primary advantage of offshore hiring is time zones of course. can facilitate overlapping work hours, and proximity allows for easier communication and collaboration.

Cons

• Depending on the specific countries involved, there might still be some language and cultural challenges.

The choice between offshore and nearshore for financial roles depends on various factors, including the firm's staffing needs, its culture and tech-driven approach, budget and organizational structure, and, of course, business dynamics. It's different to hire back-office talent than a client-facing manager.

The Advantages of Offshore Accounting

Let’s see why hiring offshore is becoming a preferred model for firms that want to scale in this accounting market. 

Cost Efficiency

One of the primary reasons companies opt for offshore accounting is cost savings. Wages in many countries, particularly in Asia and South America, are significantly lower than in countries like the US, UK, or Australia. Therefore, hiring an accountant offshore can result in substantial reductions in labor costs without compromising the quality of work.

Another important aspect is headcount. Offshore hiring includes providing the necessary equipment to work, such as computers and regular office setups, while eliminating office costs, commuting expenses, and time off the table. 

Endless Global Talent

If we are talking about sorting the talent shortage, the world provides an endless remote talent pool. This is particularly valuable for specialized accounting roles that may be hard to fill domestically and might generate common questions among firms. Offshore accountants often have international exposure and understand global financial regulations, making them an asset for firms with international operations or aspirations. 

A vast labor market also allows firms to be as specific as they need about what they are looking for and expect from their candidates, from combining different tools and skill sets to managing various accounting standards.

24/7 Operations

Depending on the offshoring model you choose, offshore accountants may work in a different time zone, enabling activity while the domestic team is off-duty. This allows for either offering services to clients round-the-clock or completing heavy work during the night so that the domestic team can fast-track progress when they return to the office.

This arrangement is advantageous for time-sensitive tasks and facilitates faster turnaround times. However, firms need to be very careful when choosing this business dynamic and must understand and respect employees' local business hours in order to maintain a healthy work schedule.

Scalability and Flexibility

Tax season is always stressful, but it becomes unmanageable when you’re understaffed. During peak accounting periods or when additional support is needed, offshore teams can be quickly scaled up or down to meet the demand and handle the influx of increased work.

Cultural Diversity

Diverse cultures introduce various innovation and creativity frameworks. While firms often fear cultural clashes disrupting team stability, global tech companies have demonstrated that diversity within teams fosters fresh perspectives and problem-solving techniques.

How legal is it to Hire Offshore accountants?

Given the historical association of 'offshore' with tax evasion and questionable financial practices, some may wonder, 'Are offshore accountants legal?' The answer is unequivocally yes. In this context, 'offshore' simply denotes a location outside of one's home country and does not imply any involvement in asset concealment or illegal activities.

Engaging with offshore accountants is entirely legal, provided they adhere to relevant accounting standards and regulations in both the employee’s and employer’s home country. Compliance with these standards depends on the chosen recruitment model for finding and employing staff. It is crucial to have a thorough understanding of these requirements. Let's delve into what each of them entails.

Offshore Recruiting Models

PEO provider: Setting Up an Accounting Office Offshore

In a PEO arrangement, the client firm and the PEO form a co-employment relationship. This means the company sets up its financial office in a foreign country that works as an extension of the firm’s organization and is dedicated to handling specific tasks or roles.

The firm has control over the day-to-day operations and management of its accountants, while the PEO is responsible for HR functions. This model can be particularly beneficial for small and medium-sized businesses that may not have the resources or expertise to set up an HR team on their own in a new country. 

Key characteristics of this model include:

PEOs offer a wide range of HR services, including payroll administration, employee benefits management, and regulatory compliance, providing businesses with a one-stop solution for their HR needs.

Pros:

• Long-term partnership between the client and the PEO provider.
  
• The model allows for scalability on demand.
• Firms can often reduce costs compared to hiring dedicated HR staff or managing HR tasks internally.
  
• The offshore office works head-to-head with domestic teams retaining the company’s know-how.
  

Cons:

• Co-hiring employees in a different country demands not just establishing a local entity, but also investing in infrastructure and resources to initiate operations. 
• The co-employment relationship can create legal and liability concerns, as both the client company and the PEO share certain employer responsibilities.
• Not all PEOs have entities in every country, leaving firms to contend with the limited options provided by their chosen provider. This constraint reduces the diversity of available countries for expansion.

When the PEO model makes sense:

• Your staffing needs require a large-scale plan. 
• You have the budget and structure to set up your own office offshore 
• You need to establish a market presence in a new region.

EOR provider: Hiring a Dedicated Accounting Team  Offshore

An employer of record (EOR) is a third-party organization that takes responsibility for certain employer-related responsibilities, such as payroll, and benefits administration. This means you hire a dedicated team that works the same way as a PEO or a domestic one but takes HR compliance, and other administrative tasks, on behalf of another company. The contract is solely between the EOR and the employee.

Key characteristics of this model include:

Companies often use employer-of-record services to manage their workforce in foreign countries where they may not have a legal entity or the expertise to handle local employment regulations. This arrangement allows companies to expand their global footprint without the complexities and risks associated with setting up legal entities in each country of operation.

Pros:

• Simplified global expansion without setting up legal entities.
• Expertise in compliance and local labor laws.
• Allows focus on core business activities.
• Scalability to adjust workforce size quickly.
• Access to specialized expertise and resources.

Cons:

• As you set a long-term relationship with the EOR, this is the most costly model for outsource hiring. 
• Just like with PEOs, firms must contend with the variety of countries provided by their chosen provider. 
• Getting out of an EOR arrangement is complex as it may mean losing most of your offshore team.

When an EOR model makes sense: 

• Your staffing needs require a large-scale plan. 
• You have the budget and structure to set up your own office offshore, but not a legal entity.
• You need to establish a market presence in a new region.

Staffing provider: Building a Contractors Team Offshore

A staffing provider that hires offshore contractors for an accounting team operates by connecting businesses with qualified accounting professionals located in other countries. They act as a bridge between businesses seeking cost-effective employees and skilled professionals in offshore locations while also absorbing HR compliance risks and other administrative tasks. This means the contract is solely between the Staffing Agency and the employee.

Key characteristics of this model include:

Staffing providers recruit and retain the workforce in a foreign country where the client firm may not have a legal entity or the expertise to handle local employment regulations. They work closely with employers to understand their staffing needs and requirements, and then match them with suitable candidates from their talent pool.

Staffing providers may specialize in specific industries, job types, or levels of employment, such as temporary, contract, or permanent placements.

Pros:

• The contract is between the Staffing Provider and the employee. 
• Expertise in compliance and local labor laws.
• Scalability to adjust workforce size quickly.
• No office setup or initial investment. 
• A wider variety of countries to choose from as they don’t require a local entity. 

Cons:

• Dependency on the reliability of the provider.
• Employees may not all be located in the same country, leading to more complex work arrangements and potential cultural differences.

When a Staffing Provider model makes sense: 

• You have a tight budget and need to reduce headcount costs.
• Your staffing needs do not necessitate an offshore office setup or legal entity.
• You require your team to work head-to-head with your domestic team and do not need to establish a market presence in a new region.

What Accounting Roles Can Be Outsourced Offshore?

Before going into where to find your ideal offshore accountants, let’s discuss some of the most common roles firms are hiring offshore. 

Accountant

The Accountant plays a pivotal role in ensuring accurate financial records and compliance with regulatory standards. Responsibilities include preparing and examining financial statements, analyzing accounts, and ensuring financial transactions are properly recorded. 

Additionally, they may be involved in tax preparation, auditing, and providing financial advice to optimize profitability and minimize risks. Attention to detail, proficiency in accounting software, and a thorough understanding of accounting principles are essential for success in this role.

Bookkeepers

The Bookkeeper is primarily responsible for maintaining financial records, including purchases, sales, receipts, and payments. Their duties typically involve recording financial transactions, reconciling accounts, and generating basic financial reports. 

Bookkeepers play a crucial role in ensuring the accuracy and completeness of financial data, which serves as the foundation for informed decision-making by management. Strong organizational skills, attention to detail, and proficiency in accounting software are key attributes for a successful Bookkeeper.

FP&A (Financial Planning & Analysis)

FP&A professionals are responsible for supporting strategic financial decision-making within an organization. This role involves financial forecasting, budgeting, variance analysis, and providing management insights to support business planning and performance evaluation. 

FP&A analysts collaborate closely with various departments to develop financial models, assess investment opportunities, and optimize resource allocation. Strong analytical skills, proficiency in financial modeling, and the ability to communicate complex financial concepts to non-financial stakeholders are essential for success in this role.

Analysts

The Analyst role encompasses a broad range of responsibilities depending on the specific focus area, such as financial, business, or data analysis. Analysts leverage financial data and statistical techniques to provide insights and recommendations for improving business performance.

They may conduct market research, evaluate financial risks, and develop forecasts to support strategic decision-making. Analysts play a crucial role in identifying trends, opportunities, and potential threats to the organization's financial health. Strong analytical skills, proficiency in data analysis tools, and the ability to communicate findings effectively are critical for success in this role.

Virtual CFO (Chief Financial Officer)

The Virtual CFO serves as a strategic partner to business owners and management, providing high-level financial expertise and guidance without the need for a full-time, in-house CFO. Virtual CFOs oversee financial planning, budgeting, and forecasting, as well as financial reporting and analysis. 

They play a key role in developing and executing growth strategies, optimizing capital structure, and managing financial risks. Virtual CFOs also provide advisory services on mergers and acquisitions, fundraising, and other strategic initiatives. 

Strong leadership skills, extensive financial expertise, and the ability to provide actionable insights to drive business growth are essential for success in this role. Additionally, proficiency in leveraging technology for remote collaboration and communication is critical for effectively serving offshore clients.

Best Countries to Hire Offshore Accountants in 2024

The Philippines

When it comes to hiring offshore bookkeepers, the Philippines is a popular choice for small to medium-sized businesses due to its abundant supply of highly skilled professionals with strong English language proficiency.  With a population of over 100 million, the country has a large pool of potential candidates.

Many international companies have recognized the potential of the Filipino workforce and have set up operations in the country. 

Pros:

• English is widely spoken and understood in the Philippines, making communication seamless for US businesses. 
• Time zone differences may allow firms to work during US nighttime. 
• The Philippines produces a large number of skilled professionals in the accounting field. 

Cons:

• While English proficiency is generally high in the Philippines, cultural nuances and accents may still pose occasional communication challenges.
• A time zone difference of 12 hours can be difficult for offshore client-facing roles due to the firm’s need to work during US business hours.
• While some firms establish a working schedule during US business hours, in the long-term, this can create an unhealthy work environment for employees.
• Despite shared cultural elements, cultural differences may affect work dynamics, expectations, and approaches to problem-solving.

India

India has been a hub for outsourcing services for many years, and bookkeeping is no exception. With a population of over 1.3 billion people, India has a massive workforce that is well-versed in offshoring services. The country is home to some of the world's most prestigious business schools, which means that the country's workforce has a strong foundation in accounting and finance principles.

Pros:

• India is the most widely outsourced provider in the world with the biggest talent pool available.
• English is widely spoken and understood in the Philippines, making communication seamless for US businesses. 
• Time zone differences may allow firms to work during US nighttime. 

Cons:

• Being the most chosen country to outsource to, the labor market may seem more saturated. 
• Time-to-hire may go over 90 days due to local regulations. 
• Cultural nuances and accents may still pose occasional communication challenges.
• A time zone difference of over 12 hours can be difficult for offshore client-facing roles due to the firm’s need to work during US business hours.
• While some firms establish a working schedule during US business hours, in the long-term, this can create an unhealthy work environment for employees.

Argentina

Argentina is becoming an increasingly popular destination for businesses due to its large pool of English-speaking, college-educated professionals with expertise in accounting and bookkeeping. Most of these professionals have received training from the top universities in South America and can provide high-quality services at a competitive price.

This country also boasts a highly developed technology sector, with a growing fintech and startup scene. This means that many bookkeepers are familiar with the latest accounting software and technologies and well-adjusted to remote work. This can help businesses streamline their bookkeeping processes and improve efficiency.

Pros:

• Argentina is set as the most fluent English-speaking country in South America, which can facilitate seamless communication within your team and with clients or partners globally.
• Labor costs in Argentina are generally lower compared to the US, due to local labor regulations and coin exchange policies. 
• Argentina's time zone can overlap with US business hours.
• Argentina’s National Universities and investigation centers rank in the top 60 worldwide. 

Cons:

• Physical distance and potential language barriers may pose challenges in effective communication and collaboration, leading to misunderstandings or delays in project delivery.
• Managing Argentina's political and currency exchange regulations can be challenging and complex, tasks that are typically delegated to staffing providers.

Brazil

Brazil has a well-established regulatory framework for professions such as accounting, law, and finance. This framework ensures that bookkeepers in Brazil adhere to strict guidelines and professional standards, providing businesses with confidence in the quality and reliability of their services. Also, the country has a large and dynamic economy with a thriving startup scene, which has helped to cultivate a highly skilled and educated workforce.

Pros:

• Brazil has been experiencing recurrent economic growth for the past 3 years making it a preferred professional hub for US companies.  
• Labor costs in Brazil are generally lower compared to the US, due to local labor regulations and coin exchange policies. 
• Brazil's time zone can overlap with US business hours.

Cons:

• Physical distance and potential language barriers may pose challenges in effective communication and collaboration, leading to misunderstandings or delays in project delivery.
• Despite the benefits of cultural diversity, it can also lead to challenges in team dynamics and communication styles, requiring extra effort to ensure cohesion and understanding.

Colombia

Colombia is a rising star in the offshore bookkeeping industry. In addition to the quality of their work, bookkeepers are also more cost-effective compared to their counterparts in other countries. Colombia has a lower cost of living than many other South American countries, and this translates into some of the lowest wage rates for bookkeeping services in the region.

Pros:

• Labor costs in Colombia are generally lower compared to the US, due to local labor regulations and coin exchange policies. 
• Colombia’s time zone can overlap with US business hours.
• Colombians are among the most adjustable workforce considered by US-company leaders 

Cons:

• Physical distance and potential language barriers may pose challenges in effective communication and collaboration, leading to misunderstandings or delays in project delivery.
• While major cities in Colombia have developed infrastructure, access to reliable internet and advanced technology may vary in more remote areas, potentially affecting the efficiency of remote work arrangements.

Dos and Don'ts of Hiring Offshore Accounting Talent

Offshoring comes with some challenges that must be addressed to ensure success like: 

DON’T Limit the Work to Tactical Function: Offshore accounting talents can add significant value by performing high-level tasks and contributing to strategic decision-making. It is crucial to identify the necessary skills and qualifications to perform these tasks and provide them with the necessary training and support.

DO Craft Non-Financial Incentives: Acknowledging offshore team members' contributions is essential to building trust and promoting a sense of belonging.

DO Plan for Crisis or Accessibility Problems: Offshoring can be challenging due to factors like time zone differences and possible communication issues. It's essential to plan for these difficulties and have backup strategies in place for when the offshore team is less reachable or a crisis arises. 

DON’T Overlook Cultural Differences: Cultural disparities can lead to communication problems and misunderstandings when working with offshore teams. To ensure successful collaboration, it's crucial to appreciate and respect cultural differences and provide cross-cultural training and assistance. Communication tools and protocols should be adapted to the cultural context to prevent confusion and promote transparent communication.

DON’T Micromanage Offshore Teams: Overcontrolling offshore teams can lead to undermining trust and autonomy. Establish clear expectations and guidelines for offshore team members but also provide them with the freedom to innovate and contribute their ideas. 

DON’T  Set Unclear Expectations: Remote employees who work from home can feel the pressure to ensure the delivery of unrealistic goals to maintain the benefits of home working, and staying over our rebalancing their personal lives. Unclear project requirements and unrealistic goals can lead not only to misunderstandings but also to burnout and a feeling of isolation.

Before deciding to hire offshore accounting employees from either South America or Asia, it's essential to carefully evaluate every pros and cons in the context of your specific business needs, the nature of the roles you're hiring for, and your capacity to manage a remote team effectively.

Different models can bring a unique set of legal, HR, and cultural expertise in international hiring can help mitigate risks and ensure a successful offshore hiring strategy.