Outsourcing Accounting Function in India- A Rising Trend by Companies

Certified Public Accountant (CPA) firms are increasingly outsourcing to streamline their operations and enhance efficiency. One particular area witnessing a surge in outsourcing is the accounting function, and India has emerged as a leading destination in providing these services to CPA firms worldwide. 

In this article, we will try to explain this sudden shift towards outsourcing and the reasons that triggered this trend along with the advantages of outsourcing the accounting function and how Indian outsourcing firms are leading in 2024. 

The Shift Towards Outsourcing

According to Everest Group, the global outsourcing market for accounting services is projected to reach $41.7 billion by 2025, with India playing a significant role in driving this growth. There is a boom in the finance and accounting market with an annual CAGR of 11-13% for the next 3 years. 

CPA firms, especially those based in the United States, Canada, and Europe, are leveraging the expertise and cost advantages offered by outsourcing their accounting functions to service providers in India. According to Deloitte, 51% of enterprises outsource their finance functions¹.

How Indian Outsourcing Firms Are Leading in 2024? 

• India has the largest accounting workforce in the world with over 10 million accountants and bookkeepers according to NASSCOM².
• Businesses that outsource their accounting functions to Indian outsourcing companies save an average of 50% on their accounting costs according to Clutch According to Deloitte, 90% of Fortune 500 companies outsource their accounting function to India³.
• According to KPMG, the Indian accounting outsourcing market is 50% of the global accounting outsourcing market².
• Over the next 3 years, the Indian accounting outsourcing industry is expected to grow at a CAGR of 11-13%¹. 

Reasons for Increasing Demand for Outsourcing 

Some of the reasons that are driving this increasing demand for outsourcing and offshoring are:

Shortage of talent 

According to US Chamber analysis, BLS Data for Labor force shortage by industry in April 2024, approximately 50% of jobs in the financial activities sector remain unfulfilled and 40% remain unfulfilled in professional and business services⁴. 

Cost Pressure

According to the 2023 PwC Pulse Survey, the top priority for 59% of CFOs in 2024 is cost reduction as compared to 38% two years ago. This is a huge jump in just 2 years and shows that finance leaders are focused to reduce operating costs and increase cash flows⁵. 

Accessibility of digital technologies

Businesses are shifting to outsourcers because they want to quickly access advancing capabilities such as automation, generative AI, etc. As per Gartner, 79% of CFOs in 2024 have an objective to lead transformation efforts⁶. 

Advantages of Outsourcing Accounting Function

Cost Efficiency

Cost efficiency is one of the main reasons why CPA firms and companies prefer to outsource their accounting functions to India. Labor costs are comparatively lower as compared to Western countries allowing firms to reduce their operational expenses significantly. This cost advantage allows CPA firms to offer competitive prices to their clients while maintaining profitability. 

Skilled Workforce 

India boasts a vast pool of highly skilled accounting professionals with expertise in various domains, including financial reporting, taxation, audit, and compliance. Their proficiency in international accounting standards, coupled with their dedication to delivering quality work, makes them invaluable assets for CPA firms outsourcing their accounting functions. 

Many of these professionals are Chartered Accountants, certified CPAs or hold advanced degrees in accounting and finance. Indian Chartered Accountants (CAs) and Certified Public Accountants (CPAs) share similarities in education and skill sets as both certifications require examinations in auditing standards, accounting principles, taxation laws, ethics, and rigorous training. The similarities in education and skill sets foster collaboration between Indian CAs and CPA firms seeking outsourcing and offshoring partnerships. 

Scalability and Flexibility

CPA firms can adapt to fluctuating business demands and workloads by outsourcing the accounting function as it offers them scalability and flexibility. Based on the client's requirements, the service providers can swiftly increase or decrease resources thus ensuring optimal utilization of resources and timely delivery of services. Due to this, CPA firms can focus on their core business activities while delegating routine accounting and bookkeeping tasks to professionals.  

Market Growth and Future Outlook

Continuous growth in the outsourcing landscape in India, especially the accounting function is being projected. Due to globalization and the expansion of digital technologies, it is expected that the demand for efficient and cost-effective accounting services will rise further. Therefore, CPA firms will continue to reap the benefits of outsourcing to India, achieving operational excellence and driving innovation. 

Advanced Technological Infrastructure

One of the main reasons that enhances India’s appeal as an outsourcing destination for CPA firms across the world is its robust technological infrastructure.  Service providers leverage advanced accounting software and tools to improve accuracy, ensure data security, and streamline processes. Efficient workflow management and timely delivery of services are ensured by the integration of artificial intelligence, robotic process automation (RPA), and cloud-based accounting systems into daily operations. 

For instance, Zoho is an Indian multinational corporation that is expanding its footprint across the world, offering a software suite including cloud-based accounting software, customer relationship management, etc. for businesses of all sizes. It is gaining traction due to its high quality and user-friendly interface and is being adopted by businesses to streamline their financial processes and benefit from features such as expense tracking, invoicing, and seamless integration with other applications.

North America is the biggest contributor to its revenue, followed by Asia, and Europe. 27.10% of Zoho customers(users) are in the United States and 14.30% are in India. In FY 2023, the revenue of the company soared by approximately 30%, Rs 8,703 crore (US$1 billion) and North America remained Zoho's top revenue source, accounting for INR 3,988.3 Cr (approximately $458 million), or 45.8% of its total revenue⁷.

The rise of companies like Zoho, among others, makes it evident that the technological infrastructure is advanced and robust. Furthermore, India's overall economic growth, with the country being the fastest-growing large economy in the world at 8.4% from October to December 2023 and ranked as the 5th largest, along with its abundance of skilled workforce, makes it the best option for outsourcing accounting services⁸. 

Conclusion

Outsourcing accounting functions to India reflects a strategic move towards cost-efficient, scalable, and technologically advanced solutions. India has become a top destination for such services, poised for sustained growth and innovation, with its skilled workforce, robust infrastructure, and cost-effectiveness.

Ready to optimize your financial processes? Contact Wealthovation today for a free 30-minute consultation call. Our team is committed to providing tailored accounting solutions to meet your needs. Schedule the call now and take the first step towards efficiency.

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