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Outsourcing and Its Effects on Accounting

Outsourcing and Its Effects on Accounting

Outsourcing is when a company decides to perform some of its functions overseas in order to cut down on labor costs. Many I.T. jobs can be outsourced while most service jobs need to be done on U.S. soil. One of the main advantages of outsourcing is the cheaper cost of labor. However, that is not the only advantage. Outsourcing can also be a key business relations tool that has the potential to open up new foreign markets for a business. The United States’ economy is interconnected with foreign markets so gaining relations in one of those markets could bring great economic benefits (Weidenbaum.) Another positive effect of outsourcing is the lower regulations in foreign countries. One of the reason products can be made so cheaply in China is because of their child labor laws. While exploiting that might be unethical from a financial standpoint for a company it can seem like a smart move because of the lower costs associated with making the product. Another example of regulation differences would be in the disposal of hazardous materials (Ashe-Edmunds). Each country has different laws concerning the issue and if a countries laws were more relaxed about the disposal that could save a company lots of money.

There are also negatives with outsourcing jobs to foreign soil. The first is the loss of jobs of those working in the United States. While the job is getting done cheaper, it is at the cost of someone in the U.S. having work. Another negative element is that the quality of the product goes down. It is much harder to control a product’s quality when it is being made overseas. Another major negative is the public relations and ethics of outsourcing (Ashe-Edmunds). Some people dislike outsourcing and will stay away from companies that do so. Many people also buy products strictly because they were made in America. There also is the ethics of outsourcing. First with the company’s accountability to its employees, who would not have a job if outsourcing were to occur. There are also the issues of taking advantage of labor laws and regulations for an economic benefit. Yes it is convenient for a company to have workers that can work for dirt cheap. Some consider it unethical to use child labor overseas simply because it is legal, especially when a company would not do so in the United States.

Outsourcing can have a very large effect on the accounting field. It was one of the first fields to be outsourced, and as technology improves it only makes it easier and easier to outsource these jobs. There was a time when a company’s books were kept by hand, but with the improvements in I.T. an accountant could be on the other side of the globe and still input data in real time. This makes it all the more tempting for a company to have someone take care of accounting functions across the world for a lower price. This constant need for overseas accounting jobs has created a huge business. Many companies overseas now have state of the art facilities and technology makes it possible for the outsourcer to remain in control and updated (Mullich). While products made overseas might have a lower quality accounting information is doing the opposite. Not only is this option now cheaper but some companies might consider outsourcing simply because they know of the quality of work they will be getting. In a field where accuracy is everything that can mean a lot.

While outsourcing has continued to grow I believe that this field will keep doing so at a continually growing rate. In 2011 outsourcing for financial and accounting jobs grow 15% and the market was valued at around four billion dollars (accountingtoday). This trend has continued and I believe it will keep growing. The outsourced accounting market is becoming a very regular part of business, from Fortune 500 companies, to small business. As technology increases and more efficient accounting systems are put in to place, outsourcing will continue to spark debate and continue to be a major part of conducting business in the 21st century.

Work Cited

Ashe-Edmunds, Sam. “Pros & Cons of Outsourcing Manufacturing Jobs.” Small Business. Demand Media, n.d. Web. 08 Nov. 2015.

“Finance and Accounting Outsourcing to Grow 15-20%.” Accounting Today News. N.p., n.d. Web. 11 Nov. 2015.

Mullich, Joe. “Benefits of Outsourcing.” Forbes. Forbes Magazine, n.d. Web. 11 Nov. 2015.

Weidenbaum, Murray. “Outsourcing: Pros And Cons.” Executive Speeches 19.1 (2004): 32-37. Academic Search Complete. Web. 09 Nov. 2015.

Source by Sam Hendrix

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