Offshoring accounting and finance positions has become a popular strategy for CPA firms in the US looking to reduce costs and streamline operations. Recruiting offshore accountants and partnering with offshore staffing agencies can help firms tap into a pool of skilled professionals at a fraction of the cost of hiring locally.
However, measuring how economically convenient this strategy is can sometimes be difficult. Moreover, accounting firms need to face the decision of either outsourcing the entire recruitment process or just some steps of it. Should the staffing agency take care of payments too? To answer this and more questions, in this article, we will explore the various factors to consider when measuring the ROI of offshoring accounting and finance talents.
How to Measure ROI of Accounting Offshoring
#1. Define Your Expectations
Before delving into measuring ROI, it is essential to establish clear goals for offshoring accounting and finance talents. These goals could be set to save in headcount costs, streamline operations, support your in-site team during high-demand seasons quickly, or scale your workforce to reach more clients. Defining these objectives will determine which metrics you should pay more attention to and what kind of service can resolve your needs better.
On the way, you can find some offshore staffing solutions that might give you the cheapest price but have low professional skills which can be good to deliver low-risk repetitive tasks. Others might offer longer recruitment time schedules but a more selected pool of candidates for more permanent positions.
#2. Determine How Much Offshoring Costs
To calculate ROI accurately, it is vital to identify and analyze all the costs associated with offshoring accounting and finance talents. To do so, accounting firms must include not only recruitment but also onboarding expenses, training costs, technology infrastructure investments, ongoing operational expenses, and any potential risks or challenges.
Also, the intangible or non-tangible expenses, such as the time and energy of departmental leaders and managers dedicated to supporting the HR-related aspects of the hiring process, can sum up the overall costs. That’s why it is important to know what you are aiming for save time, save money, and save mental health by simplifying HR processes.
#3. IdentifyWhich Metrics to Monitor
Once you have an idea of what your goals are and how much can all of that sum up, measuring ROI involves identifying the appropriate criteria to monitor. Here are some key metrics to consider when evaluating the ROI of offshoring accounting and finance talents:
- Cost Savings: One of the primary motivations for offshoring is to achieve cost savings. Calculate the difference in labor costs between offshore and onshore accountants, taking into account factors like salaries, benefits, training, office, and overhead expenses. This will help determine the cost savings achieved through offshoring.
- Scale of Work: These have a lot to do with cost savings but also with your daily operations. Determine if offshoring has allowed your organization to handle increased workloads, peak periods, or expansion into new markets more effectively.
Measure the volume of work processed offshore and compare this information with cost savings to see if the outcome is positive. For example, if offshoring has resulted to be half the price of a local hire, it means you can hire more employees to take up more work for the same price.
- Time Saved: Offshoring can lead to significant time savings by leveraging a globally distributed workforce. Measure the time taken to complete various accounting and finance tasks before and after offshoring. This can help identify the impact on overall productivity.
On these metrics, take into consideration the time spent in the recruitment process as well. Conducting the search for offshore accountants internally can save money but take more time than a local hire as your HR team might not be used to offshore labor markets and job boards in each location. Offshore staffing agencies add up some expenses but can streamline the recruitment and onboarding process.
- Quality of Work: Evaluate the quality of work produced by offshore accounting talents. This can be done by comparing the accuracy, reliability, and compliance levels of offshore work against the standards set by the organization. Feedback from clients, stakeholders, and internal teams can also provide valuable insights into the quality of work delivered.
4. Analyze the Metrics and Adjust
Once the goals, costs, and metrics are defined, it is essential to establish a robust monitoring and analysis system. Regularly track and evaluate the identified metrics to measure the ROI of offshoring accurately. This could involve implementing performance management systems, conducting periodic reviews, and analyzing data to identify trends, patterns, and areas for improvement.
Continuous monitoring ensures that you have real-time visibility into the impact of offshoring on your accounting and finance functions.
The Example
Let’s see a scenario where an accounting firm decides to offshore its accounting recruitment process to a specialized offshore staffing agency. Here's an example of how the ROI of this offshoring initiative can be measured:
#1. Main goal: Reduce recruitment costs while maintaining or improving the quality of candidates hired.
#2. Costs associated with accounting recruitment:
- Agency fees
- Technology investments
- Training costs for the offshore team
- Overhead expenses.
#3. Metrics:
- Cost Criteria: Agency fees, salaries, benefits, advertising expenses, and other associated costs.
- Time Criteria: Time taken to fill the accounting positions.
- Quality of Hires: Retention rates, performance evaluations, and feedback.
#4. Monitor Metrics:
Ready to Try Offshore Accounting Talent?
Measuring the ROI of offshoring accounting and finance talents involves careful planning, monitoring, and adaptation. The time and effort invested by departmental leaders and managers in HR-related tasks during the hiring process can significantly contribute to the overall costs, potentially up to 60%. These costs are concentrated within a few months, rather than being spread evenly throughout the year. This investment of time and resources can impact productivity and hinder the achievement of organizational goals, ultimately affecting the company's ROI.
To optimize ROI, organizations can focus on process improvement, collaborate with staffing agencies, enhance communication, mitigate risks, and continuously evaluate their offshoring initiatives. These efforts can lead to increased efficiency, cost savings, and improved work quality. By maximizing the benefits of offshoring, organizations can tap into global talent and foster sustainable growth in their accounting and finance functions.
Kevin Mitchell, CPA
Senior Manager and CPA with over 20 years of experience in accounting and financial services, specializing in risk management and regulatory compliance. Skilled in managing audits and leading teams to deliver exceptional services. Proud father of two.
