Quality Trumps Cost - An outsourced accounting and bookkeeping provider service

As an outsourced accounting and bookkeeping provider, one of the first questions people ask me is what is the cost of the service.

The real question is what is the total cost. The outsourcing price is only one component of the total cost.

As the graphic shows, there are at least four significant elements of total cost:

1. Price paid to the outsourcer.
2. The cost incurred by the reviewer, which in turn has two parts;
   1. Ease of review, and
   2. The number of mistakes that need to be fixed.
3. Cost of delays

The only readily quantifiable of these costs is the first one. So people tend to focus on this. However, the reviewer’s time is more valuable than the time incurred by the outsourcer. So it is better to have the outsourcer incur the cost of properly labeling and linking the work papers so it is easier to review. Similarly it is better to encourage the outsourcer to review their own work before it is submitted to clients.

Both of these items will raise the outsourcer’s cost and therefore price.

Similarly cost of delays is real though less quantifiable. One way the outsourcer can protect against delays is by carrying excess capacity. This too has to be passed on.

Each accounting task, if done competently, should take the same time whether it is done in India or the US. If you say the total time required is 100 minutes, and the cost is $10/hr. in India and $100/hr in the USA, the way to minimize total cost is to incur most of the time in India.

So when you compare prices of outsourced services, keep in mind that Quality trumps cost.