Building a Fractional Accounting Department with Outsourced Virtual Accountants from the Philippines

Today more than ever, accounting organizations are driven to better manage costs, improve productivity, and maintain financial accuracy. With a national shortage of accountants though, that’s become challenging. One solution that’s gained significant traction with many US firms is outsourcing accounting processes to countries like the Philippines. Companies can build a fractional accounting department overseas by strategically outsourcing accounting functions to complement in-house team members.

Leveraging outsourced accounting firms provides access to specialized skills, reduces operational costs, and enables scalability, while maintaining the flexibility that modern businesses need. Here’s a guide to building a fractional accounting department with outsourced virtual accountants from the Philippines.

Why the Philippines?

The Philippines has become a popular destination for outsource accounting services due to a combination of factors, including:

Highly Skilled Workforce: The Philippines produces a large number of accounting graduates each year, many of whom are Certified Public Accountants (CPAs). The educational system is robust, and the curriculum aligns closely with international accounting standards.
Cultural Compatibility: With strong cultural ties to Western countries, the Philippines has a workforce that is familiar with Western business practices and communication styles. The proficiency in English is another major advantage.
Cost Efficiency: Outsourcing to the Philippines allows businesses to save significantly on labor costs (up to 70%). The average salary for accounting professionals in the Philippines is much lower compared to Western countries, while still maintaining a high level of competency.
Time Zone Alignment: The Philippines is situated in a time zone that allows for flexible working hours that can overlap with business hours in North America, Europe, and Australia. This makes it easier to manage remote teams and ensure real-time collaboration when needed.

Step-by-Step Guide to Building Your Fractional Accounting Department

Identify Your Core Needs

Before engaging with an accounting services outsourcing partner, it is essential to identify which accounting functions can be outsourced and which need to remain in-house. Typically, organizations outsource functions like:

Accounts payable management
Payroll processing
Bookkeeping
Financial reporting and analysis
Tax preparation and filing
Budget preparation
Audit support

Your in-house team might continue to handle sensitive functions that require hands-on management, such as financial strategy, internal auditing, or stakeholder communication.

Choose the Right Outsourcing Partner

Selecting the right outsourcing partner is crucial to building an efficient fractional accounting department. The right partner will understand your business needs, provide the necessary talent, and offer services that align with your goals. When evaluating outsourcing firms in the Philippines, consider the following:

Industry Experience: Look for an outsourcing provider that has experience working with companies in your specific industry. They will be more familiar with the unique challenges and regulations you face.
Technology and Infrastructure: The provider should have a strong technological foundation, including secure data handling, accounting software integration, and reliable communication tools.
Scalability: Choose a provider that can scale their services as your business grows or changes. This flexibility will allow you to expand your fractional accounting department without the overhead of hiring full-time staff.
Communication and Collaboration: The provider should prioritize clear communication and seamless collaboration between your in-house team and the outsourced staff. They should offer regular updates and transparent reporting.

Recruit a Qualified Team

Once you’ve chosen an outsourcing partner, the next step is to recruit a qualified team of professionals. The key to success here is ensuring the outsourced staff integrates smoothly with your in-house team. Here’s what to consider:

Technical Skills: The outsourced accountants should have the technical knowledge to handle the specific tasks you need. This might include proficiency in accounting software, local and international tax regulations, and financial reporting standards.
Certifications and Education: Many accountants in the Philippines are CPAs, which assures a high level of expertise. You should also verify that the team has relevant certifications for specific tasks, such as tax preparation or financial compliance.
Cultural Fit: The outsourced team must be able to adapt to your company’s culture and communication style. Cultural fit is important for ensuring smooth collaboration and minimizing friction between in-house and outsourced team members.

4. Set Up Communication and Workflow Processes

A successful fractional accounting department relies on strong communication and effective workflows. Because your team will be spread across different locations, setting up the right tools and processes is essential.

Collaboration Tools: Utilize tools like Slack, Microsoft Teams, or Zoom to ensure seamless communication between your in-house and outsourced staff. These tools can help bridge any communication gaps, allowing your teams to collaborate in real time.
Task Management Systems: Task management platforms like ClickUp, Asana, Trello, or Monday.com can help track the progress of accounting tasks and ensure that deadlines are met. These systems provide transparency and accountability across teams.
Regular Meetings: Schedule regular virtual meetings to review tasks, address issues, and provide feedback. These meetings should include both in-house and outsourced staff to maintain a cohesive department.
Document Sharing: Cloud-based systems like Google Drive or SharePoint are crucial for securely sharing and accessing financial documents. This ensures that both teams can work on the same data in real time, reducing the risk of errors.

Ensure Compliance and Security

Outsourcing accounting processes involves handling sensitive financial data, so it’s vital to ensure compliance with local and international regulations, including data privacy laws. You’ll want to:

Review Data Security Protocols: Verify that your outsourcing provider uses secure systems for data handling, storage, and transfer. Encryption and two-factor authentication should be standard practices.
Compliance with Local Laws: Ensure that the outsourced team is knowledgeable about local tax laws, accounting regulations, and compliance requirements in both the Philippines and your home country. This reduces the risk of costly mistakes or penalties.
Audit Trails and Accountability: Maintain an audit trail of all financial transactions and communications. This will provide transparency and help in identifying any discrepancies or errors quickly.

1. Manage and Optimize Performance
Once your fractional accounting department is up and running, the key to long-term success is continuous monitoring and optimization. Regularly assess the performance of your outsourced team and the overall workflow.

Key Performance Indicators (KPIs): Set measurable KPIs to evaluate the performance of the outsourced team. This might include accuracy rates, timeliness, compliance rates, and the efficiency of financial reporting.
Feedback and Improvement: Maintain an open channel for feedback between in-house and outsourced staff. Encourage continuous improvement and address any issues promptly.
Periodic Audits: Conduct regular audits of both in-house and outsourced accounting work to ensure accuracy and compliance. This helps prevent errors and ensures that the department functions smoothly.

Conclusion

Building a fractional accounting department by leveraging outsourced virtual accountants in the Philippines offers numerous benefits, from cost savings to access to highly skilled professionals. By carefully selecting an outsourcing partner, establishing strong communication workflows, and ensuring compliance, you can create a seamless accounting department that complements your in-house team.

As your business grows, the flexibility of this model will allow you to scale up or down as needed, providing a strategic advantage in an ever-changing business landscape. By leveraging the expertise and cost efficiency of outsourced accounting, you can focus on driving growth and achieving long-term financial success.

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