When hiring new employees for your bookkeeping business, you will need to make a number of decisions, including whether to onshore or offshore staff.
In a previous Bookkeeping Business FAQ, I answered the question Should I hire an employee or a contractor for my bookkeeping practice?. In this FAQ, I'll discuss some of the implications of having overseas staff, instead of local employees.
Offshore workers debate sends sparks flying in the bookkeeping community
No topic has been more hotly debated in our community than the topic of hiring offshore vs local. Rewind five years, and you couldn't mention this topic without causing arguments and being accused of betraying the profession.
However, these days the conversation has chilled out. Based in ICB stats, and by looking at my own bookkeeper clients: anywhere from 5-20% of bookkeepers may have employed offshore staff at some point, and as a community we have made peace with an idea that once triggered feelings of overwhelm and offence.
Pressures to compete on price
One major pain-point around this topic has been the pressure bookkeepers have been under having to compete on price.
Bookkeepers had already struggled with clients questioning their fees, so when overseas bookkeepers began advertising cheap rates, it was, understandably, a trigger for stressful thinking about the sheer impossibility of having to compete with such low prices.
Business owners have changed their minds
However, in recent years, business owners chilled out. It seems of those who complained about local prices, tried overseas bookkeepers, and came back with their tail between their legs.
After rescue jobs abounded due to poor quality work, businesses seem to have accepted local prices and returned to their local bookkeeper. Over the years I’ve spoken to too many business owners who had negative experiences with the quality of work, and communication difficulties that come with the territory of hiring overseas workers.
So, in general, the amount of pushback that bookkeepers were getting from business owners seems to have settled back to normal levels.
Collaboration technology has improved
On the flip-side, with regard to communication barriers with overseas bookkeepers, technology has also improved in the past five years, allowing businesses to collaborate with workers around the globe.
There are various apps for meetings and chat, and some platforms such as Upwork, allow you to even record the screen of a worker to make sure they are doing their job.
Offshore placement services are available
In recent years we’ve also seen the emergence of companies, such as The Outsourced Account, who have entered the bookkeeping segment of the accounting industry, to offer the service of placing offshore workers.
Despite all these changes, and the newfound acceptance in the community, bookkeepers still struggle to make the decision. There’s not a lot of unbiased information available, or data to support recommendations.
Is hiring overseas bookkeepers or local bookkeepers better?
So, given the changes that have happened, what's the conclusions these days, now that so many more bookkeepers are taking up this option? Is hiring offshore bookkeepers a good idea for you, or are you better off hiring a local?
Let's look at the two main reasons bookkeepers consider hiring offshore staff, and ask some tough questions;
Are the reasons for hiring offshore over locals valid? Is there evidence to demonstrate that hiring offshore workers solve the problem? What are the alternatives?
Will hiring offshore workers be a good move for bookkeeping practice owners who are hoping for reliable, productive staff who provide great service, and make the practice more profitable?
Offshore workers are cheaper
The first and most obvious reason bookkeepers hire offshore workers is to save money on wages. It’s a legitimate reason, but are they actually cheaper than locals. At face value the answer seems to be “yes”, because Offshore bookkeepers hourly rates are lower than local staff.
However, on closer examination I've discovered some interesting insights that show that offshore staff are more expensive than locals.
I discovered this during one of my programs that bookkeepers with local workers reach their profit goals faster.
One of my programs includes building a financial model of the bookkeepers practice, showing them whether they will reach their 5-year profit goals, and how many staff and clients will they need to reach their 5-year salary goals.
Bookkeepers with local staff consistently get better results on these worksheets, achieving their profit and salary goals faster, and with smaller teams and smaller client bases. Said a different way, bookkeepers with offshore teams need to build far bigger businesses, to achieve the same profit as those with local teams.
How is this possible and why is this happening?
Although offshore workers are cheaper by the hour, they are generally more expensive overall because they are less efficient. Many bookkeepers pay their offshore workers around $20/hr because gone are the days where offshore staff were $6/hr.
If you hire through an agency, which in my opinion is the best way if you want to avoid employee exploitation. Agency staff get paid public and religious holidays, military leave and a whole range of entitlements, which add up.
Although there are some efficient offshore workers have it there, in general they take longer to do everything. So, effectively many bookkeepers are paying their offshore staff as much as $60/hr, but they are completely unaware of this.
There are a few reasons offshore workers may take longer, but the main reasons include language barrier and lack of local knowledge. Another reality is that as overseas workers are now aware we pay them lower rates, they purpose either work slower, or charge more hours than they have actually done.
Compare this to hiring a highly skilled local person for $35/hr, who holds local knowledge, and is motivated to work efficiently, easy to communication with, and you're far better off hiring a local.
It's impossible to find good local staff
Often you will hear bookkeepers say "I can't find good staff", but if you press into this statement and ask them questions, you'll discover that the majority of bookkeepers don't have hiring processes in place.
The extent of most bookkeepers hiring strategy is to ask around, or post on Facebook. For the minority who do run an employment ad, it’s unlikely that they have a good filtering process.
Bookkeepers are often hired remotely these days, which means you may never meet your employee in person. So your hiring process needs to be designed in a way that helps you gain a lot of information about an employee before hiring them. But most bookkeepers don't even think about their hiring plan until they are already over capacity, so they often don’t have time to hire properly, let alone have these kind of resources available to them.
Finally, for many of us bookkeepers, it's easier to hire someone than to manage them. If we don't have things in place to facilitate managing a remote team, then employee relationships can go south and cause problems with clients.
The truth is, there are a good local staff out there, you just need to know how to find them!
So should you hire onshore or offshore?
As you've seen, from a profitability perspective, there aren't really any benefits of hiring offshore staff. Of course, the offshore placement agencies will tell you it's a great business model: I‘m sure it is profitable for their business, but so far I've not seen evidence of it being profitable for yours.
If you have good hiring processes, there's no reason you can't hire great local staff. Let me know if you need any help!
Thanks for joining me today. Can't wait to see you in the next instalment of Bookkeeping Business FAQs.
Until then, Stay Savvy.
About Amy Hooke
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