Offshored vs Outsourced Accounting: What's the Difference?

While both offshore accounting and outsourced accounting allow companies to employ finance and accounting services from outside service providers, there is quite a difference between the two. Often used interchangeably, the way these two types of accounting services handle their operations vary, with each presenting their own strengths and weaknesses.  

Read: Outsourced Accounting Challenges and How to Overcome them  

What are Offshored Accounting Services? 
 

Offshored accounting services involve managing financial tasks in a different country to leverage cost savings, specialized skills, or market access. This approach relocates a company’s accounting operations abroad, covering functions like bookkeeping, payroll, or tax preparation for the company. It allows companies to tap into global resources while aiming for efficiency and financial advantages in a diverse market landscape. This approach removes limiting factors that companies must consider when outsourcing.  

What are Outsourced Accounting Services?  

Outsourced accounting services on the other hand, is the ability to outsource or employ a partner for your finance and accounting whether local or international. This strategy involves entrusting specific accounting functions, like bookkeeping, payroll, or financial reporting as well but focuses on looking for external experts or firms within their vicinity. This mode of service delivery removes routine tasks from your company’s finance department, empowering you to partake in other value-adding ventures. 
 
In a nutshell, all offshore accounting is a form of outsourced accounting but not all outsourced accounting is necessarily offshore.  

How can we differentiate Offshore and Outsourced Accounting? 
 

Mode of Services  

The primary distinction lies in the service delivery process of each company. Offshoring is about relocating operations to a different geographic location, whereas outsourcing pertains to the delegation of specific tasks or functions, regardless of location. Offshoring inherently involves a physical move for your company other than outsourcing services, while outsourcing emphasizes the engagement of external expertise or resources. 

Cost and Expertise 

While both is a way for a company to source their accounting needs in a cost-effective manner, they do so in different ways. Offshoring primarily seeks cost savings through factors like lower labor costs in a specific country, accessing cheaper resources or production facilities in different economies. Outsourcing, on the other hand, targets cost efficiencies by leveraging the expertise and specialization of external service providers, often with established processes in place to make sure that you are getting quality services at a cost-effective price .

Now that we know how to differentiate each, let’s see some of the benefits that offshore accounting and outsourced accounting may have for companies looking to employ an external finance and accounting partner:  
 

Offshoring Benefits 

Offshore accounting is a common solution for those looking for service providers outside their locality as it gives them the diversity to find a partner perfectly suited to their needs, here are some of the key factors that they look for:  

Cost Savings: Lower labor and operational costs in offshore locations. 

Access to Talent: Leveraging specialized skills or expertise available in specific regions. 

Market Diversification: Establishing a presence in new markets to access a broader customer base. 

Operational Control: Direct oversight and control over offshore operations. 

Offshoring Considerations 

Logistics: Managing operations across different time zones, languages, and cultures. 

Regulatory Compliance: Navigating diverse legal and regulatory frameworks in multiple countries. 

Quality Control: Ensuring consistent quality standards across different locations. 

Outsourcing Benefits 

Outsourcing on the other hand, is a common strategy for those looking for quality service providers whether within or outside their locality. Their focus when looking for outsourced partners is the partners’ capability to act as the extension of their company. Here are some of the benefits of outsourced accounting:  

Focus on Core Competencies: Allowing companies to focus on their core business functions. 

Access to Expertise: Leveraging specialized skills and resources without internal development. 

Cost Efficiency: Reducing operational costs by utilizing external resources. 

Outsourcing Considerations 

Dependency on Third Parties: Reliance on external vendors for crucial functions. 

Risk of Quality Control: Ensuring service quality meets company standards. 

Data Security and Confidentiality: Managing sensitive data shared with external partners. 

Companies must carefully evaluate their goals, operational needs, and risk tolerance when assessing whether to employ offshore accounting or outsourced accounting services. While both offer distinct advantages and reservations, it will still depend on your own company’s operations and capabilities to see what works best for you.  

Ultimately, employing offshore and outsourced accounting services aims to make sure that your company’s finances are managed well, protected from vulnerabilities and remain compliant with any laws and regulations you must adhere to.  

Read Next: When to Consider Back-Office Support for Your Company  

Interested in Getting an Offshore Accountant? 

We have a wide expertise in handling the numbers of companies across various industries. We also make it our duty to stay up to date on the latest trends in the accounting industry to make sure our clients’ data is safe with us. Contact us today and we’ll help you find the right solution for your needs. 

Download our Outsourcing: How to Make it Work guide today and discover how can help in managing your company’s finances.