Understanding the three models
Onshoring: Hiring staff in your own country, usually in your local area. Onshoring meaning simply refers to keeping jobs within your own national borders.
Nearshoring: Hiring staff in nearby countries with similar time zones (like Mexico for US firms). Nearshoring benefits include cultural similarity and minimal time zone differences.
Offshoring: Hiring staff in far-away countries (like India or the Philippines) where costs are lower but time zones are very different. Many ask “is offshoring a good strategy?” – it can be when you have the right processes in place.
Outsourcing vs. Offshoring: While often confused, outsourcing means having an external company handle certain functions, regardless of location. Offshoring specifically refers to moving work to a distant country. The difference between offshoring and outsourcing is important – you can outsource locally or offshore your own team.
Quick comparison of key differences
| Feature | Onshoring | Nearshoring | Offshoring |
|---|---|---|---|
| Cost | Highest | Medium | Lowest |
| Time Zones | Same | Small difference (0-3 hours) | Big difference (8-12 hours) |
| Cultural Fit | Very similar | Somewhat similar | More differences |
| Communication | Easiest | Some language barriers | More planning needed |
| Face-to-face Meetings | Easy to do | Sometimes possible | Rare |
| Best For | Client meetings, complex advice | Mix of basic and complex tasks | Routine tasks, overnight work |
When comparing onshoring vs nearshoring for your specific needs, consider that nearshoring offers a middle ground on costs while keeping time zones manageable. Many firms find the sweet spot in a mix of all three approaches.
How global staffing has changed?
Accounting firms have used global staffing for about 25 years, but things have changed a lot recently:
1. Clients Accept It More: Fifteen years ago, many clients didn’t like the idea of their work being done overseas. Now, most clients are fine with it.
2. Remote Work is Normal: The pandemic showed everyone that accounting work can be done from anywhere, making global teams more accepted.
3. Better Technology: Today’s video calls, cloud software, and file-sharing tools make working with people in other countries much easier.
Benefits of global staffing
Lower costs
The biggest advantage of nearshoring and offshoring is saving money. Hiring skilled accountants in countries like India can cost 40-60% less while still getting good work. These savings help firms:
– Charge clients less
– Make more profit
– Grow faster
Work gets done while you sleep
A big benefit of offshoring is using different time zones to your advantage:
– Send work at the end of your day
– Get it back when you start the next morning
– Finish projects faster
– Keep work moving 24 hours a day
Studies show firms that use this “follow-the-sun” approach can finish projects up to 30% faster.
Your local team can do more important work
When routine tasks are handled by offshore or nearshore teams, your local staff can focus on more valuable work:
– Spend more time giving clients advice
– Build stronger client relationships
– Analyze data instead of just entering it
Advisory services make about 40% more profit than basic compliance work, so this shift helps your bottom line.
Teams grow and learn
Firms with global staffing often see:
– More hiring of local staff (10-15% growth)
– Teams that understand global business better
– More diverse and creative work environments
Answering common worries
Quality and communication
Many firms worry about quality control with far-away teams. About 65% of accounting firms say this is their biggest concern. Best practices include:
– Creating clear step-by-step processes
– Regular check-ins (but not necessarily every day)
– Using recorded videos to explain tasks
– Letting offshore team members talk directly with clients when it makes sense
Ethical concerns
Some worry about the ethics of global staffing. Good firms address this by:
– Paying fair wages for the local market
– Helping team members grow professionally
– Supporting good causes in offshore locations
– Treating all team members as equals
Client reactions
Most firms find being open and honest works best with clients:
– Tell clients upfront about your global team
– Explain how it helps them (better service, faster work, lower costs)
– Let clients meet your global team members
– Focus on results rather than where the work is done
A recent survey found that 78% of clients are comfortable with their accounting firm using offshore resources as long as quality and data security are maintained.
Going beyond basic Accounting
While bookkeeping and tax work were the first tasks to be offshored, CPA firms now use global teams for many services. Let’s look at offshoring vs outsourcing examples in accounting:
– Audit Help: Over 60% of mid-sized accounting firms now use offshore staff to prepare audit workpapers and do testing.
– Full Accounting Services: Tasks like paying bills, sending invoices, and creating financial reports are often handled by global teams.
– Financial Analysis: Even complex tasks like financial modeling and performance reports are now being done by offshore specialists.
– Technology Help: Many firms use offshore IT experts to set up accounting software and move data.
– ESG Reporting: As more companies need Environmental, Social, and Governance reports, specialized offshore teams handle the data collection and reporting.
The offshoring and onshoring meaning can sometimes blur as firms use a hybrid approach, keeping strategic functions onshore while moving routine work offshore. Firms that expand beyond basic work to these higher-value services keep clients longer (35% better retention) and grow revenue faster (28% higher growth).
Which model is right for your firm?
The best approach depends on what your firm needs:
Consider Onshoring If:
– Your clients need face-to-face meetings
– You must keep data in your country
– You can find affordable local talent
Consider Nearshoring If:
– You want similar working hours
– Cultural and language similarity is important
– You want to visit your team occasionally
Consider Offshoring If:
– Saving money is a top priority
– You want work done overnight
– You have clear, well-documented processes
About 72% of successful firms use a mix of all three approaches, choosing the right option for different types of work.
Getting started
If you’re thinking about global staffing:
1. Write down your processes – Make sure your workflows are clearly documented
2. Start small – Begin with simple tasks like bookkeeping
3. Include your local team – Let them help interview and train new team members
4. Be open with clients about your approach
5. Visit your global team if possible to build relationships
It’s best to start with a small group of 3-5 staff members before growing your international team.
Conclusion
Accounting is becoming more global, and firms that embrace this change often do better than those that don’t. Instead of asking whether you should use offshore or nearshore staff, ask how you can use global talent to serve your clients better.
Industry leaders suggest thinking beyond geography and focusing on building the best team, regardless of location. When evaluating offshoring vs onshoring, remember that both strategies can work together in a balanced approach. The onshoring, nearshoring, and offshoring combination often delivers the best results.
In today’s connected world, the best CPA firms look beyond borders to build great teams that can serve clients effectively.
FAQs
What is the difference between offshoring and outsourcing?
Outsourcing means hiring an external company to handle certain business functions, regardless of location. Offshoring specifically refers to moving operations to a distant country to take advantage of lower costs. You can outsource locally (to a company in your country) or offshore your own operations (by hiring your own employees in another country).
What are some offshoring vs outsourcing examples?
Outsourcing example: Hiring a local bookkeeping firm to handle your clients’ monthly reconciliations.
Offshoring example: Setting up your own team in India to handle tax return preparation.
A firm can do both simultaneously – outsource some functions locally while offshoring others.
Is offshoring a good strategy for CPA firms?
Offshoring can be an excellent strategy when implemented correctly. It works best when you have:
– Well-documented processes
– Good communication systems
– Clear quality standards
– A plan for how to handle client questions
The key is treating your offshore team as true team members rather than as a separate entity.
What are the main nearshoring benefits compared to offshoring?
Nearshoring benefits include:
– Similar time zones for real-time collaboration
– Smaller cultural differences
– Easier travel for in-person meetings
– Often stronger language alignment
– Lower risk of communication issues
For US firms, popular nearshoring locations include Mexico, Costa Rica, and Colombia.
How do I choose between onshoring vs nearshoring for my CPA firm?
Consider these factors:
– How price-sensitive are your clients?
– How important is real-time collaboration?
– What languages do you need for client service?
– Do you have clear, documented processes?
– What type of accounting work needs to be done?
Many firms find that a blend of onshoring for client-facing roles and nearshoring for back-office work provides the best balance.
What services are best suited for offshoring in accounting?
Tasks with clear procedures and definable outcomes work best:
– Bank reconciliations
– Accounts payable/receivable processing
– Tax return preparation (especially simpler returns)
– Audit workpaper preparation
– Financial statement preparation
– Data entry and cleanup
How do I start implementing an offshoring or nearshoring strategy?
1. Begin with a needs assessment of your firm
2. Document your processes thoroughly
3. Start with a pilot project (one client or service line)
4. Invest in proper training and communication tools
5. Get feedback and adjust before expanding
Parul is a dedicated writer and expert in the accounting industry, known for her insightful and well researched content. Her writing covers a wide range of topics, including tax regulations, financial reporting standards, and best practices for compliance. She is committed to producing content that not only informs but also empowers readers to make informed decisions.