Are you thinking about offshoring accounting services to the Philippines? Or do you already have an offshore team, but you want to know how to make the most out of your offshore partnership? Today let’s look at one of the main factors in choosing where to offshore: literacy.
The Philippines leads in accounting outsourcing
Bond University’s research Offshoring of Accounting Services in Australia (Offshoring Research) reveals that majority of accountants outsource to the Philippines and when compared to the global offshoring leader, India, the reason has nothing to do with skill or quality of work. It has everything to do with culture and communication.
The Offshoring Research shows that 53% of firms send work to the Philippines, 39% send their work to India, and the rest of the locations trail behind, with Vietnam getting 16% and China getting 2% of the work.
Globally, India is and has long been the leading destination for offshoring—particularly for call centres and IT. It has the second largest population, therefore also a sizeable talent pool. The Philippines has a population of 103 million, and like India has invested heavily to build its BPO successfully with 19% growth from 2011-2015. It’s strong in Finance and IT—for example, there are 188,203 CPAs in the Philippines as of 2018.
It all boils down to language & literacy
The Offshoring Research showed that when it came to quality of work, loyalty and ability to meet deadlines, both India and the Philippines scored highly with very little differentiation score-wise. However, when it came to culture, literacy and communication, the gap widened.
The ability to communicate well with offshore staff impacts everything—the ability to integrate with your team; to engage in training; to raise issues; to work quickly and to deliver what is expected.
The EF English Proficiency Index (EF EPI), which attempts to rank countries by the average level of English language skills, ranked the Philippines number 20 on the 2019 list with a score of 60.14—high proficiency. The only other Asian country in the top 20 was Singapore at number 5. India ranked number 34 with score of 55.49—moderate proficiency.*
The Offshoring Research reflects similar findings with 91% of offshoring accountants satisfied with the English Literacy of the Philippines versus 76% of India based teams.
Offshoring accounting firms make extensive use of virtual communication tools to manage workflows, training, client interaction and problem solving—so literacy is absolutely critical.
Good literacy and communication also benefit business workflows. Communicating simple questions and information via a middle onshore party slows the process and is therefore inefficient.
So where communication is good, firms allow direct offshore-client communication which improves the workflow, especially for compliance work.
Cross-cultural issues exist
Cross-cultural issues are ever present when offshoring and can lead to barriers and unmet expectations. Finding the right cultural fit, building and nurturing that cross-border culture is essential.
Despite both India and the Philippines being colonised by Western nations—Britain and the US, respectively—it was the Philippines that loved and fully adopted Western ways. This is true even though US colonisation of the Philippines lasted only 50 years, while Britain’s lasted 89 in India. The cultural similarity is one of the reasons why the Philippines has grown its BPO sector so rapidly.
The Offshore Research found that 83% of those who offshore in the Philippines were satisfied with the cultural fit compared to 63% of those offshoring in India. Still, all firms offshoring regardless of location will experience the inevitable cross-cultural issues which vary across different markets and cultures.
One accountant who had offshored in both India and the Philippines reflected:
“Apparently… India is such a hierarchical culture that people don’t get out of their box. The bookkeeper’s job is to bang through the work, then that’s what he’ll do and he expects someone else then to review and to tell him if he’s made any mistakes. …Whereas the Filipinos are a bit more relaxed about that, so people will work up to their capacity rather than stay within their lines.”
Cultural fit depends on you too
Regardless of which location you choose, offshoring firms play a big part in building cross-border culture with their remote teams. It’s not a matter of set or forget—in fact, the firms interviewed all reflected upon how their offshore teams had to be treated the same as those onshore, and just how important training and business processes are.
Get this and more insights from Offshoring of Accounting Services in Australia. The full report is available for download here.
*UPDATE: The Philippines ranks 27 on the 2020 list with a score of 562—high proficiency. It is only surpassed in Asia by Singapore, which ranks at number 10. India, on the other hand, ranks at number 50 worldwide with a score of 496—low proficiency. The country ranks number 8 in Asia.
An Australian Business Process Offshoring (BPO) organisation focused on supporting small to medium businesses, Staff Domain, Inc. is committed to helping its partners overseas achieve cost savings and rapid growth through end-to-end offshore recruitment and operational management.
Based in Pasig City, Metro Manila, Philippines, Staff Domain outsource teams feature the best talent who take pride in the work and the professional choices they make. The company’s State of the Art Facility exceeds the expectations of working professionals and ensures productivity- a space where smart professionals and businesses can grow together.
Considering offshoring for your business? Visit Staff Domain to get learn more and get started.