- Hi, I am Hardik Chhabada, who led BDO India’s offshore team for the US and UK markets.
- In the last 2-3 years many outsourcing services firms have experienced exponential growth. However, only 5-7% of CPA firms in the US offshore their work.
- It’s time to explore the emerging market. Here is how you can build an Audit, Finance, and Accounting offshore practice.
My journey entering the offshore space
In 2014, after qualifying as a Chartered Accountant, I joined EY India’s off-shore Audit delivery centre, focussed on the US and Canadian markets.
I was stoked at the immense potential this space had.
In 2015, BDO also started their offshoring arm in India, to get a piece of the emerging market. I was offered a role with them to build their offshore practice. I took it up!
As one of the first few employees at BDO offshore practice, my role involved managing a remote audit, accounting, and other work for the US and Canadian markets along with team building and training.
Right from the initial phase, our focus was on delivering quality work. Our growth was gradual; to give you context, it took us approximately 3 years to reach a team of 100.
In 2021, five years later we launched BDO India’s UK offshoring business… Once again from scratch. We started with 9 article trainees and quickly built a 50-member team. This was easier as we had done it before!
However, there was one big challenge – finding and training the right talent. In May 2022, I founded TalentAdd.Ai, to support the offshoring scenario in India with the supply of the right team members.
Discussing the growth of the offshore market
In India the Big 4s are the big players in the finance, accounting, and tax offshoring business. (Interestingly many of the Big 10 firms have not embraced offshoring, even today.)
Between 2016 and 2018 offshoring firms that focused on US mid-sized CPA firms experienced 5x or even 10x growth.
2020 was a game changer as the world realized that there are no geographical boundaries. I have close associations with several such firms, that were once 200 people strong but now have expanded to 1,000 people in six months to a year.
Currently, just 5% to 7% of onshore midsize CPA firms in the US have resorted to outsourcing their work.
A significant number of mid-sized CPA firms in the US UK, and other developed countries, are facing cost and talent-related challenges. That’s why they are turning to outsourcing firms in India or other countries for similar or even better quality of work.
This means there are at least more than 80% to 90% of firms that are yet to try this cost-efficient model.
As a result, India is receiving significant outsourcing work, and the volume is projected to increase in the next 3 years.
If you are considering starting your offshore practice go for it.
Step-by-step process on building a Finance & Accounting Offshore practice
Setting up an offshore services firm from scratch is anything but a cakewalk. But with proper strategies, it can be achieved.
1. Identify your target market
This step is crucial.
Each country, whether the UK, Canada, Ireland, Australia, or the US, offers numerous opportunities for anyone looking for outsourcing opportunities.
2. Choose the kind of service(s) you want to provide
Understand what is your forte, be it accounting, virtual CFO work, tax filing, operations, or payroll. These services are gaining traction in the offshore space, by the way.
When you are onboarding outsourced work, I suggest you begin with simpler tasks and then progress to more complex ones.
For instance, if you’re starting with audit work, don’t immediately jump into IFRS disclosures and presentation. Instead, it’s recommended to spend at least six months focusing on onboarding all the work, including compliance and disposal checks.
Over time, you can gradually take on more complex work like VAT filing, GST filing, payroll, and tax compliance.
Pay close attention to the terms and conditions of each of these services, about the region you want to cater to.
3. Build a competent team
While working at BDO I found out that the game of offshoring is all about finding the right people.
Consider recruiting individuals with experience, whether they come from Big 4 or non-Big 4 backgrounds.
You can also employ well-trained staff on a contractual basis.
Focus on quality and ensure you have the right staff to handle the work. This approach will lead to the production of high-quality work rather than just focusing on quantity.
4. Invest in the firm’s infrastructure
When I was building the offshore team at BDO, I allocated all the infrastructure costs, including servers and software, to the onshore company.
I quoted the minimum cost associated with staff.
In this model, you cover only the staff cost along with IT infrastructure, such as VPN.
But I know that many of you do not have an onshore firm to pass on your expenses to. So, what can you do?
- In that case, invest in your infrastructure from your pocket.
- You might have to purchase software applications, such as QuickBooks and others, and consider them as part of your cost.
- Start small you will grow.
5. Focus on the pricing
Large players in this industry often generate more than a 35% net return per head.
In the beginning, don’t focus too much on your profits as clients may be hesitant to give work to an inexperienced person. Learn on the go and build a good reputation and trust with your clients.
Gain six months to a year of experience, understanding the expected quality standards, regulations, and the mindset of clients.
Your team will also become more proficient, creating a solid foundation. You can then confidently target a 3x rate.
6. Reduce costs
You could consider setting up your firm in a smaller city.
Starting in a smaller city and finding someone with excellent communication skills will lower your risk and reduce your costs.
7. Build your brand
In the US and UK market clients prioritize experience, quality and trust over pricing. Brand and trust building is key.
Just offering low cost won’t get you clients. Building trust is KEY if you want to attract clients.
Create a strong profile and share it with CPA firms, especially those you have a connection with.
If you don’t have connections, create a compelling flyer or brochure.
8. Acquiring clients for outsourced accounting work
Once you have built a firm from scratch, the next step is to acquire clients that would be willing to give you work.
Leverage your connections
- Tap your existing network of connections, especially the ones that are based outside of India.
- Here’s what I did, – I made a list of my connections based on the countries that were relevant to me and then reached out to them for potential work.
- I also explored if there were people in my network with similar experiences who might be interested in entrepreneurship and are willing to collaborate.
Opt for Gig work
- Many offshoring companies are looking for experienced individuals on a gig work or contract basis, especially during busy seasons.
- They typically expect 3 years of post-qualification experience and offer around INR 1 lakh per month.
- This path can be viable to achieve first-hand experience of how offshoring services function and understand clients’ needs.
- Platforms like Upwork or Fiverr offer opportunities, but the competition is fierce so you have to be patient.
Reach out to CPA Firms
- You can create leads by reaching out to mid-sized CPA firms or CFOs located outside India, with a strong profile.
- This is not easy unless you attend CPA events and have a good rapport.
- Remember to be specific about the services they are expecting it could be auditing, virtual CFO services, regular operations, or tax outsourcing.
- I recommend reaching out to onshore firms that may pay less initially but allow you to gradually build your experience.
Focus on steady growth and prioritise learning, opportunities are enough.
You should not go solo, as it can be challenging. Try raising funds.
If you’re starting offshoring services, don’t overwhelm yourself with too much work. Otherwise, if you cannot deliver quality work on time, just one piece of negative feedback can set your offshoring efforts back by a year.
It would then require a lot of effort to rebuild confidence in your team and the client to earn more positive feedback.
And remember, it’s not just about patience; it’s about hitting the right target with precision.
Last but not least, you are not late to the party… As of today only 5-7% of CPA firms in the US offshore their work. You still have the 80-90% market share that remains untapped.