Written by Rene Mallari
Many offshoring providers set up shop in the Philippines. They find running outsourcing operations in this Southeast Asian country profitable. One outsourced activity they offer is accounting services.
Outsourced accounting services refer to delegating bookkeeping, financial information recording, auditing, and tax compliance work to accounting professionals in another nation.
Keep reading to discover why more companies outsource accounting services to the Philippines and why the Philippines is the right place to delegate yours.
Reasons To Outsource Accounting Services to the Philippines
Check out the following benefits of outsourcing to the Philippines, particularly when it comes to your accounting processes. Compare it to other outsourcing destinations or handling these tasks in-house:
Constant Supply of Accounting Professionals To Handle Outsourced Processes
To date, the Philippines has over 175,000 certified public accountants (CPAs), according to the Board of Accountancy, the public agency for the accountancy practice. The number represents the accountants who regularly renew their CPA licenses from the government. This number excludes the thousands of CPA holders who have no longer renewed their licenses.
Colleges and universities across the country churn out tens of thousands of accounting graduates every year. Not all of them take or pass the CPA board examination held twice a year (in May and October). For every board exam, at least 1,000 pass. So over 2,000 new CPAs are produced in the Philippines annually. That’s a conservative estimate.
In addition, most of these graduates are millennials (born between 1981 and 1996) and Generation Z (between 1981 and 1996). This means you can easily hire an outsourced accounting team composed mainly of energetic, motivated, and skilled individuals proficient in the latest technologies.
Accountancy is a popular undergraduate degree and will continue to be so. With the continued uptrend in the supply of accounting professionals, you are assured of an abundant workforce that can manage your outsourced processes. Sufficient labor reserves also mean wages are stable and unlikely to increase in the foreseeable future.
Various Outsourced Services Offered for Your Accounting Needs
Access to a wide range of services is one reason to outsource accounting services to the Philippines. Below are examples of these services:
- Accounting audit. A business process outsourcing (BPO) provider manages your financial statements, records, and receipts. It monitors and updates financial data to prevent malpractice or fraud.
- Bookkeeping. A third-party vendor regularly records your financial transactions. It tracks all information in your books to help you make financial, investment, and operational decisions.
- Financial analysis. A service provider uses your company’s financial statements to conduct reviews of product costs, credits and bills, sales contracts, and similar records. It evaluates your historical and projected cash flows and profitability.
- Financial controller services. A BPO company oversees your accounting operations, ensuring that records correctly show the cash inflow and outflow. Its outsourced accounting professionals can make financial recommendations based on your accounting data.
- Forensic accounting. An independent company, such as a BPO firm can investigate the finances of your business. Forensic accountants search for evidence of fraud, embezzlement, or financial deception.
- Management accounting. A BPO provider prepares reports about business operations to help you make decisions. It identifies, analyzes, interprets, and measures accounting data, informing you about your operational metrics.
- Payroll services. A third-party provider takes responsibility for all your payroll processes. It helps free up your valuable time and ensures that your employees and taxes are paid properly and on time.
- Statutory reporting and compliance. A service provider assists you in preparing and submitting financial and non-financial information to different government agencies. It ensures that you comply with the laws and standards.
- Tax accounting. A BPO company takes care of your tax income returns and other similar statements based on your industry procedures and your location’s tax laws.
Low Salary Rates To Save on Compensation Costs
The Philippines offers one of the lowest salaries among the outsourcing hubs. This advantage enables local service providers to charge clients reasonable fees for outsourced account services.
Below are the average monthly salaries of the popular positions in outsourced accounting services in the Philippines compared to the U.S., Australia, and the UK (in U.S. dollars):
|Internal audit manager
(Note: Philippine and UK salary figures were converted to U.S. dollars for uniformity. The exchange rate used 53.05 PHP to 1 USD and 1£ to 1.21 USD as of February 04, 2023.)
Based on the table above, the average salary of a Filipino accountant is about $538 per month or $6,456 annually. In the U.S., an accountant’s average monthly salary is $5,927, or roughly $71,124 per year. You can save $65,197 ($71,124 to $5,927) per head annually when you outsource accounting services to the Philippines.
The illustration and salary figures are approximations. Contact a BPO company to learn about the exact costs.
Strategy To Address the Shortage of Accountants and CPAs
The Controllers Council, a Chicago-based organization of finance and accounting professionals, says in a blog post that the U.S. is dealing with an accountant shortage. Despite the job market expansion for the past several years, many companies and accounting firms have found it difficult to hire qualified individuals to meet their staff requirements.
The article notes that the baby boomers (born from 1946 to 1964), who comprise 75% of the current CPAs, are expected to retire in 15 years. Adding weight to this issue is that the accounting industry can hardly attract and keep younger professionals to fill in the widening talent gap. The pool of available candidates is insufficient for the industry.
The blog adds that U.S. colleges and universities produce more accounting specialists than generalists. Many chief financial officers (CFOs) look for general business skills that the current workforce lacks. Generalists perform various basic but important financial functions, including processing invoices and statements, maintaining accounting files, and tracking accounts.
Outsourcing accounting services to the Philippines can address the shortage issues besetting many U.S. companies. BPO firms can provide your business with professionals possessing diverse qualifications and skill sets to perform different accounting and finance tasks or duties.
As mentioned above, the Filipino accounting workforce abounds with millennials and Gen Z. These fresh, adaptable, and highly motivated professionals are technically literate and expected to be in the labor force in the next 30 years or more.
Upbeat Work Traits To Foster Better Team Spirit and Productivity
The healthy work attributes among Filipino professionals are a major reason to outsource accounting services to the Philippines. Due to culture and family upbringing, local workers inherently possess the following characteristics:
- Hardworking and creative. Many Filipino employees are diligent and handle work with responsibility and eagerness. They constantly look for solutions to address task-related problems or challenges with composure and simplicity.
- Service-focused. Local workers are naturally friendly and accommodating to strangers, newbies, and foreigners. Hospitality and warmth are ingrained in Filipino society and psyche. They always try their best to help visitors, guests, tourists, customers, and clients and make them happy.
- Optimistic. Filipino professionals usually look at the good aspects of a complicated case. Regardless of their conditions, they maintain a bright and smiling attitude to continue to serve employers, clients, and customers.
- Detail-oriented. Filipino workers are good at crunching numbers and are thorough in checking and recording information. That is why accounting and data entry services are among their strong suits.
The local professionals’ favorable work qualities help enhance team spirit and morale, leading to:
- Better income resulting from raised productivity and performance
- Improved staff health conditions due to reduced work stress
- Better employee retention because of high work satisfaction
- Reduced tardiness and absences as employees have solid motivation
- Stronger inventiveness and resourcefulness since most are inspired to work
- Higher savings or lower costs owing to fewer absences
Compliant With Accounting Standards for Consistency and Transparency
The Philippine accounting methods and practices conform with the International Financial Reporting Standards (IFRS). These are accounting rules issued by the International Accounting Standards Board (IASB), a London-based independent group of accounting experts.
Over 120 countries have recognized IFRS, which ensures consistency and transparency in a company’s financial reporting processes. The nation’s generally accepted accounting principles (GAAP), consisting of the Philippine Financial Reporting Standards (PFRS) and the Philippine Accounting Standards (PAS), are currently based on IFRS.
When the accounting profession was formally recognized in 1923, GAAP was patterned after the standards of the U.S. Financial Accounting Standards Board (FASB). The country’s accounting principles moved from U.S. GAAP in 1997 when the government became a member of the International Organization of Securities Commissions, which uses IFRS.
GAAPs differ from country to country due to economic, legal, cultural, and political distinctions. Despite these differences, Filipino accounting professionals are known among the neighboring countries (i.e., Indonesia and Singapore) for their adaptability. They quickly learn the government regulations and accounting standards of their client’s country.
Additionally, the Philippines is home to the world’s biggest accounting firms: Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young, and Klynveld Peat Marwick Goerdeler (KPMG). Their domestic presence is a testament to the local accounting workforce’s ability to work with any type of accounting procedures and standards.
Reduced Legal and Management Responsibilities To Reduce Spending
Opting to outsource accounting services to the Philippines as an alternative to establishing your own in-house accounting team safeguards you from the potential legal and financial risks of direct employment hiring. The U.S., the Philippines, and other democratic countries allow employees to organize unions or similar groups to negotiate with employers.
When you outsource tech solutions, bookkeeping and accounting, and other back-end activities, your BPO provider oversees the recruitment processes, from screening applicants to hiring. It also oversees personnel management, such as monitoring employee income taxes and staff attendance. All you do is to check the provider’s reports.
Below are some benefits of outsourcing human resources (HR):
- Time-saving strategy. HR processes are tedious and burdensome, taking much of your time and effort. You can delegate these tasks to a service provider.
- Cost efficiency. No need to worry about salaries, benefits, taxes, and other compensation costs. Your BPO partner employs its own accounting team and resources.
- Simplified operations. A BPO provider has human resources (HR) professionals who can help your accountants comply with laws and regulations.
- Extensive talent pool. A service provider has a wide recruitment network to provide you with more qualified candidates.
Competent in English for Smoother Communication and Better Interaction
Filipino professionals are proficient in written and verbal English. For the past several years, the Philippines has steadily landed in the top 30 of the EF English Proficiency Index (EF EPI), an annual rating of over 110 countries polled based on English skills. In Asia, the country places second behind Singapore. Its level has been categorized as “high proficiency.”
Aspiring Filipino accountants typically take a four- to five-year college course to complete the degree. The English language is the medium of instruction for accounting courses. Students also learn about similar standards and subjects taken by their counterparts in Australia, the UK, and the U.S. This is one reason local accountants are familiar with Western accounting practices.
Solid English skills enable Filipino accounting professionals to coordinate and interact more quickly with their clients. The communication barrier is hardly a problem, making it easier to transact, discuss business, and resolve customer issues. Back-office outsourcing activities are performed better when the third-party team and the customers understand each other.
Improved Communication Technology for Seamless Connectivity
The Philippines has progressed with its digital infrastructure for the past ten years. Seven internet service providers (ISPs) can now deliver high-speed connections nationwide. These ISPs harness fiber-optic technology to meet the growing demand in the country’s metropolitans and main cities such as Metro Cebu, Metro Davao, Baguio, Angeles, and Metro Manila.
Since the new Philippine administration began in July 2022, internet speed has improved significantly. This improvement can be attributed to the streamlined issuance of local government unit (LGU) permits. As such, telecommunications and tech providers can quickly build more cellular towers and fiber-optic networks to drive speed.
A fast and stable internet connection is required when outsourcing processes such as accounting, contact center as a service, and similar tasks. With breakneck speed, doing common tasks and communicating with others are more convenient. Communicating with clients is also more fluid, providing a better experience for both parties.
More Time for Your Core Business To Hone a Competitive Edge
When choosing to outsource accounting services to the Philippines, you can focus on the activities you are great at. Delegating processes enable you to spend more time, effort, and money on your core competencies. These could be market or customer base expansion, new product launches, service upgrades, or sales campaigns.
Outsourcing some of your back-end functions, including technical support outsourcing, bookkeeping and accounting, and customer service, permits you to improve your overall productivity, performance, and revenue. It allows you to concentrate more on growth and competitive strategies.
You can build and strengthen a competitive edge in the market by focusing on your core business. Obtaining a business advantage results in higher income. With better profits, you can:
- Enhance or update existing service and product quality to appeal to more buyers and increase sales;
- Plan, generate, and initiate new products and services to provide consumers with better choices;
- Invest in staff training and upskilling to improve efficiency, output, and morale;
- Spend on the latest technologies or upgrade current ones to help simplify production, improve processes, or keep pace with the market competition; and
- Widen market reach ahead of schedule to expand revenue stream and minimize dependency on your traditional markets.
The Bottom Line
You will reap some benefits if you outsource accounting services to the Philippines. Apart from substantial cost savings, Filipinos’ healthy work attributes, English proficiency, and a large number of accounting professionals are a few factors that make the country a top outsourcing choice.
Start small if it is your first time outsourcing. A small team at the onset will help you get acquainted with the process, Filipino workers, and ways of accomplishing tasks.
Contact a BPO provider such as Unity Communications to help you progress with your outsourcing plans.