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Onshore Versus Offshore Outsourcing?


There are many benefits to outsourcing. But what you outsource and where you outsource it too has a lot to do with how success you will be at outsourcing.

Outsourcing is commonly thought of replacing employees with an outside company that provides the services formerly handled company employees. This is done by outsource provider by using offshore (foreign) labor. These offshore outsource companies operate in lower wage countries where the lower wages and lower labor standards allow them offer services for less.

Offshore outsourcing works well for manufacturing processes such as assembly and for clerical services and process like call centers. Workers can be provided with instructions or scripts and do not require a high degree of supervision for the outsourcer, the quality of the end product can be easily evaluated. Maybe most important of all is that the Outsourcer does not have to share any confidential information or trade secrets. It's important to remember that agreements with many of these offshore outsources are not governed by U.S. law and since their business and assets are offshore your only recourse may be through a foreign court. This coupled with the fact that many countries do not place the same importance on intellectual property and privacy that U.S. courts do.

Onshore Outsourcing predates offshore outsourcing. In the early days of computers many companies large and small outsourced their data processing, Payroll services have also been outsources by large employers for many years. Keeping legal counsel on retainer is also a form of onshore outsourcing. Today many companies also outsource their bookkeeping and accounting functions. All of these functions are best handled by an onshore outsourcing firm, because they allow the out-source company access to important confidential data. Much of this data is protected under us law and losing control of confidential data belonging to the company or its customers can be very costly. Onshore outsource firms are bound by U.S. law, and so are their employees this means that keeping your private information private is just as important to them as its is to you. It also means if they don't take the care to make sure that all your data is secure, you have recourse under U.S. law and in U.S. courts.

Because that many times offshore outsources are represented by onshore firms it's more important than ever today to find our just where they work will actually be done and how much the control the outsource provider has over those doing the work. For example we know of some accounting firms that have their accounting and tax data processed in India. Under new rules the AICPA now requires accounting firms using offshore processors to disclose this information. The IRS also requires tax preparers using offshore processors to disclose this information before sending client work outside the U.S.

Other important questions for an out-source provider are "Do you use employees or independent contractors?" "Are you employees located in your offices and under the direct control of their supervisors?" We have found that some out-source firms use independent contractors working from remote locations, this makes it much harder if not impossible for them to control access to data and provide adequate supervision.

In conclusion out-sourcing can and does save money, it can also increase the level and quality of service, but it’s important to get all the facts and choose an outsourcing firm that offers the safe guards necessary for the job that is being outsourced. Today it is more important than ever to safe guard your companies and your customer’s confidential information.


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