Accountants argue for and against offshoring work

Offshore accounting is highly controversial. We hear from accountants with varying views on it.

Offshore accounting – where a practice subcontracts work to an overseas third-party provider – has really taken off over the past ten to fifteen years. Yet it’s highly controversial and has attracted intense debate.

Proponents say offshoring can help deliver cost savings due to reduced labour costs overseas and can fill skills gaps and help to solve recruitment challenges, particularly if certain specialist areas are otherwise unavailable.

In addition, offshoring the more routine, yet time-consuming accountancy tasks to an overseas provider can free up accountants to focus on providing more value-add services and developing client relationships.

But critics argue offshoring has huge ethical implications. Some say it exploits overseas workers, many of whom are on lower wages and experience poorer working conditions than their UK-based counterparts. At a time when businesses are under pressure to take full accountability for the ethics of their supply chain, this is a big concern.

Offshoring also raises questions about transparency, client trust and accountability.

And yet, it can bring economic benefits to developing countries and provide workers with opportunities they may not otherwise have.

So what are the views of accountants themselves? We spoke to a small sample of UK-based accountants, some of whom offshore some of their tasks and some who don’t, to find out their views on this hotly debated issue.

AGAINST: Offshoring comes with ethical and security concerns

Julie Pocock MAAT, Kingfisher Services

Offshoring client work is not something I would do. I wouldn’t allow any third party outside of the UK to access client data due to security concerns. I would also worry about the lack of control when you’re passing work over to somebody somewhere else in the world.

There could also be communication problems due to language barriers and time differences. I’d also have concerns around ethics: are the offshore workers being paid a fair wage and what are their working conditions?

Also, if mistakes were to be made, it would have a negative effect on my brand reputation, a risk I am not prepared to take.

I can understand why some accountants choose to offshore their work. There is the money-saving benefit of operational and staff cost savings, and it can address staff shortages.

But the negatives of offshoring outweigh the positives. I am sure that some clients would share in the above concerns. Client trust is paramount to my business and transparency is essential. My clients can be assured that their data, and their work, are not going outside of the UK.

Verdict: I wouldn’t offshore work due to security concerns, ethics and risk to my business if mistakes were made.

FOR: Offshoring can fulfil an urgent business need

Claire Bartlett, Director, Arden Bookkeeping and Founder, Female Founders Collab

I have previously used offshoring services with a third-party provider for four years. During the pandemic, I was unable to find staff in the UK and it was becoming critical to gain extra resources for my business.

I did a lot of research before choosing a firm as I wanted to ensure it was an ethical and respectable firm. I had personal recommendations and this helped me make a decision.

I think offshoring is still such a taboo subject and people need to be much more open about their experiences to help others decide whether or not it’s for them.

It obviously can come with some financial gain to a business as generally the costs are lower than hiring a UK staff member, but this was never what led my decision. It was simply an urgent need for staffing which I had been unable to fill within the UK.

I think it is incredibly important to be honest with your clients about it, which I have been throughout my offshoring journey. I have integrated them the same way as any other member of staff, which has helped my clients feel comfortable with it, too. It has never caused any problems for my firm or my clients and I would do it again as and when my business needs.

Verdict: Assuming you do due diligence and talk to clients, offshoring can help businesses with urgent staffing issues.

AGAINST: Offshoring work isn’t ethical – it’s misleading clients

Lydia Read-Potter FMAAT MD, BookSmart Accounting

We do not offshore client work – I believe very strongly that clients would not be happy knowing that a firm were doing this. It is entirely misleading to clients – we all know that they are not going through our engagement letters with a fine-tooth comb.

I also believe that there is an ethical issue with pay. If the client went directly to the offshore accountant, they would be getting the same service for a lower fee – yet the UK accountant is profiting from the pay divide between different countries in the world. We pride ourselves on our relationships with our clients, which is built through our team.

Additionally, I worry that practice licences obtained in the UK from UK regulatory bodies, cannot sufficiently cover work completed by a third party in a foreign country.* I think that the regulatory bodies need to take this issue more seriously than they currently do.

Verdict: Offshoring work isn’t ethical as it misleads clients, and they aren’t the ones benefiting from lower service fees.

*AAT comments in response to this concern: We only license our members who are in a public practice in the UK, but we don’t have any policy around who they can and cannot employ at their firm.

There are many legislative and regulatory requirements to consider, including data privacy regulations, money laundering regulations, satisfying the employee screening procedure employer are required to undertake, doing due diligence on the offshoring country and being transparent with clients about such arrangements.

Members need to ensure that they have considered all the risks and threats to their ethics and compliance obligations before offshoring work. If AAT were to receive any related complaint from a client or the public, then we would be obliged to investigate misconduct as in any other case.

FOR: We work closely with our offshoring team in India to ensure ethical practices

Ellie McQuade, Technical Learning and Development Manager, Monahans

We began offshoring audit work because of the lack of audit resource here in the UK. We were finding it really challenging to recruit enough high-quality talent for the volume of work we had to complete.

Whilst our preference would be to hire in the UK, it is a strong employees’ market at the moment, making it difficult to compete with other firms for such a small talent pool.

The founders of the offshoring firm we now work with trained in the UK as accountants, so they already have extensive knowledge about the UK accountancy market.

At Monahans, our team is effectively not seen as an offshore resource, they hold the same email address as us and are very integrated into our team, attending virtual meetings just like the UK team does. We have also established working hours that are practical for the offshore team but also align with our working day to allow for regular communication.

I visited the offshoring partner’s offices last year to meet the team, carry out training and to check the offices and environment they are working in. This is critical in building strong professional relationships but also in ensuring that the employees’ working conditions are equivalent to ours in the UK.

Verdict: Offshoring is necessary because of the lack of UK audit resources. We work closely with our offshoring team in India and have visited the premises to ensure ethical practices.

Would you like to contribute to future articles like this one? If so, please get in touch with Annie Makoff-Clark at [email protected].

Annie Makoff is a freelance journalist and editor.