Top 8 Challenges of Offshore Accounting and How To Overcome Them

Small and large businesses alike have been outsourcing their accounting to foreign countries for years, handing over complex financial data to offshore experts who can manage it efficiently.

Offshoring finance operations brings a number of benefits, including cost savings, access to accounting professionals with specialized expertise, and scalability.

But along with these benefits come some unique offshore accounting challenges that need careful consideration and strategic management. These are crucial to understand if you’re thinking about taking your accounting offshore.

This article will explore the details of offshore accounting, examine eight common challenges it brings, and offer some solutions to overcome them. We’ve also compiled a list of potential partners who have experience helping companies like yours avoid these issues in the first place. 

What Is Offshore Accounting?

Offshore accounting refers to hiring external firms or accountants located in different countries to handle financial and accounting tasks, such as:

• Bookkeeping
• Payroll processing
• Tax compliance and preparation
• Financial analysis

This approach is often employed to reduce operational costs, leverage a larger talent pool, or achieve more efficient financial management. US-based companies commonly offshore to India, the Philippines, and Vietnam for their low labor costs and relatively high English proficiency.

8 Challenges of Offshore Accounting

While offshore accounting presents some clear benefits, partnering with providers in distant countries presents some unique accounting offshoring challenges. Here are eight examples you might face:

1. Cybersecurity risks

Accounting outsourcing involves sharing sensitive financial data, making cybersecurity a significant challenge. In 2023, 83% of Indian organizations experienced at least one cybersecurity incident, underscoring the risk involved when offshoring. 

US companies must work with reputable offshore service providers that offer robust security measures, encryption, and regular security audits. Implement awareness training for both your in-house staff and offshore team to tighten your security culture across the board. 

2. Language and cultural barriers

Though regions like India and the Philippines boast high English proficiency, cultural differences can still lead to communication barriers and misunderstandings. 

These disconnects often hinder workflow, productivity, and mutual understanding between US companies and their offshore counterparts. To mitigate these issues, maintain well-documented processes and promote regular video calls to build a natural rapport. 

3. Unclear goals and expectations

Those language and cultural barriers can further complicate accounting activities with ambiguous instructions, goals, and expectations. A miscommunication on either end can lead to errors in financial reporting or a delayed workflow. 

Establish clear, detailed communication channels and document your goals, deliverables, and specific expectations. Regularly revisit these documents to make sure everyone is on the same page. 

4. Time zone differences

Time zone differences can create significant communication and operational challenges. Synchronizing work schedules between US-based companies and offshore partners requires careful planning. 

The examples in the following table illustrate the significance of the time differences between US cities and common offshore locations.

This is one of the toughest hurdles of offshoring and leads many companies to consider countries closer to home instead. By working with outsourced accountants in Latin America (LatAm), for instance, US businesses can take advantage of real-time collaboration and immediately complete time-sensitive tasks. 

5. Regulatory compliance issues

Regulatory compliance is another significant challenge of offshore accounting. For example, the Sarbanes-Oxley Act (SOX) mandates rigorous standards for all US publicly traded companies concerning financial transparency and fraud prevention. 

An offshore accountant might not be familiar with these stringent regulations, risking noncompliance for the US business. To avoid issues, ensure that your offshore partners are well versed in the relevant accounting laws and regulations, and consider investing in targeted training programs.

6. Quality control and oversight

Quality control and oversight can become challenging when working with offshore accounting teams, especially due to time zone differences. Asynchronous work schedules mean that real-time supervision and immediate feedback are not always possible. 

To manage this, set up clear quality standards and detailed checklists to guide the offshore team. Implement regular quality audits and establish periodic review meetings to assess and discuss performance.

7. Dependence on external parties

Relying on external parties for your accounting functions can introduce an element of uncertainty and loss of control. This dependence can be problematic if the offshore partner faces issues such as staffing shortages, technology failures, or other disruptions.

For example, Bangladesh, another top destination for offshoring, experienced civil unrest in July 2024, leading to a five-day country-wide internet blackout. 

When offshoring accounting, develop contingency plans and ensure that knowledge transfer mechanisms are in place so that critical information and accounting processes can be maintained even if the external party encounters difficulties. 

8. Potential hidden costs

While offshore accounting is often pursued for its cost-saving benefits, potential hidden costs can erode these savings. The challenges listed above can cause misunderstandings, result in expensive data breaches, or waste resources on misaligned work schedules. 

To make sure you actually are saving, conduct a comprehensive cost-benefit analysis before entering any offshore agreement. Include all potential hidden costs in your budget and monitor expenses closely to ensure that the offshore partnership remains financially viable.

Top 5 Offshore Outsourcing Companies To Solve Accounting Challenges

We’ve curated a list of five top offshore outsourcing companies with a strong track record of avoiding these accounting challenges. 

The list is not ranked in any particular order and includes both specialized offshore accounting firms and broader recruitment companies with a history of finding skilled accounting professionals. 

1. Near

Hey, that’s us! Near is technically a nearshore outsourcing company, which means our clients don’t have to deal with many of the challenges traditional outsourcing markets present.

Our nearshoring model connects you with LatAm accounting professionals who speak English, are in similar time zones, and share a lot of cultural similarities with US companies. 

We’ll help you source, screen, hire, interview, and onboard a bookkeeper, payroll specialist, staff accountant, or other finance expert in around 21 days—saving you time and money. 

Just ask Kordis, who initially tried hiring from the Philippines but just couldn’t make the 12-hour time difference work. They partnered with us and, 14 days later, hired a staff accountant with more than five years of experience working with North American firms. 

2. CapActix

CapActix is a dedicated offshore accounting firm with locations in India, Australia, Dubai, and East Africa (along with corporate headquarters in the US). It employs a robust quality assurance process, ensuring accuracy and compliance with relevant accounting standards. 

With its flexible engagement models, businesses can scale accounting outsourcing services up or down based on their needs, making CapActix a versatile partner.

3. Entigrity

Entigrity specializes in offshore staffing for accounting firms, providing skilled professionals to handle bookkeeping, payroll processing, tax preparation, audit support, and more. It emphasizes compliance and security, ensuring that all financial data is handled according to strict protocols. 

Entigrity’s rigorous selection process guarantees that only highly qualified professionals are matched with clients, providing reliable and efficient accounting support.

4. Velan Bookkeeping

Velan offers comprehensive accounting and bookkeeping services to businesses of all sizes. Its service offerings include accounts payable and receivable management, financial reporting, payroll processing, and bank reconciliation. 

Velan’s team of skilled professionals ensures accuracy and efficiency, maintaining high standards of quality and compliance. 

5. Infinzi

Infinzi provides specialized offshore accounting solutions tailored to meet the requirements of international clients. 

With a focus on service quality and accuracy, Infinzi helps businesses navigate the complexities of international accounting, making it a trusted accounting outsourcing partner for global financial management.

Final Thoughts

From security concerns to language and cultural barriers, offshore accounting challenges can be difficult to deal with. By being proactive and choosing the right offshore accounting partner, you can overcome these obstacles and leverage the full potential of outsourced accounting.

Nearshore hiring can help you bypass many of these issues by giving you access to culturally aligned accounting professionals located in a similar time zone. Ready to streamline your financial operations without the headaches of offshoring? Book a free, no-commitment call with Near today to learn how to get started. 

Frequently Asked Questions

What’s the difference between offshoring, onshoring, and nearshoring?

Offshoring refers to outsourcing services to a different country, often far away, to capitalize on lower labor costs. Onshoring involves hiring third-party service providers within the same country to maintain closer geographic proximity and often simpler logistics and more effective communication.

Nearshoring is the middle ground, where services are outsourced to neighboring or nearby countries to balance cost savings with more manageable time zone differences and cultural similarities.

Is nearshoring as affordable as offshoring?

While nearshoring offers benefits like reduced time zone differences and cultural similarities, the labor costs may be higher than in traditional offshore destinations in Asia. 

However, the trade-off often results in improved collaboration and quicker turnaround times, leading to long-term savings and efficiencies.

How do I know if an offshore accounting service provider will be worthwhile?

An offshore accounting provider is worthwhile if they demonstrate strong accounting expertise in your industry, a clear understanding of relevant regulations, robust security measures, and transparent communication practices. 

Don’t forget to review client testimonials and case studies to ensure they offer scalable solutions that can grow with your business.