Today, the Philippines is a key strategic country for owners & executives of both small and large businesses. That’s because this country has positioned itself as a leading outsourcing and offshoring destination as reported by Tholons International. The sector currently accounts for approximately 10% of the country’s GDP, and services 10 to 13% of the global IT-BPM market demand.
The Philippines began by specializing in low cost services such as data entry, voice support, and virtual administration, but has since transitioned to complex IT-BPM services such as bookkeeping, payroll management, accounting & corporate finance. While currently known as the #1 BPO hub for voice BPM, it is poised to become a strong contender to lead the non-voice BPM category.
This article will be composed of two parts: why management should outsource their bookkeeping, payroll, and accounting in the Philippines. And how to do it.
Why Outsource Payroll, Bookkeeping and Accounting Services
Cost Reduction by up to 70%
Outsourcing in the Philippines is an economical way of fulfilling non-core processes. These business functions are standardized and can be done at a fraction of the cost compared to an in-house team. This leads to a reduction in working capital – labor and other administrative costs. Not only that, capital expenditures are also avoided.
Differentials in wages and cost of living alone significantly drive down operating expenses. Philippine wages can be as much as 70 to 90% lower for the same position. Meanwhile, rent of commercial spaces in a central business district such as Makati City can get as low as 10% of average rental in the USA (on average, it’s about 30%).
The government also initiated incentive programs and special economic zones to support foreign entities operating in the Philippines. More information can be found here – Incentives for Foreign Investors in the Philippines
Reduction of costs allows companies to allocate more of their limited budget to core competencies and revenue generating activities. They can pursue growth oriented strategic decisions that are otherwise held back by budgetary restrictions.
Further Revenue Growth because of the Country’s Deep Domain Expertise & Reinvestment
Cost savings is not the only benefit resulting from outsourcing in the Philippines. Setting up a team also allows a company to tap into the country’s resources and highly skilled talent pool.
Given that the Philippine IT-BPM industry is recognized as a global leader in service quality & capability, it naturally has far deeper domain knowledge as compared to a local in-house team. This allows you to tap their experience in industry best practices to standardize and simplify complex processes, thereby ensuring quality and reliability of work.
Why Philippines is the Best Outsourcing Destination for Both Talent & Legal Purposes
What’s the #1 reason why many Fortune 500 companies across America and Europe outsource in the Philippines?
The Philippines is home to a young, educated and talented workforce that is highly proficient in English. English is one of the primary languages in the Philippines and is the medium of instruction in school. It is widely used on a day to day basis, both for conversing and writing. This gives Filipinos a good command of English.
Outsourcing also reduces your exposure to legal and regulatory risks. By hiring your team as contractors rather than employees, you minimize tedious compliance requirements with labor laws. At the same time, they can be held liable for non-performance, essentially safeguarding you.
The Philippine government recognizes the potential of the BPO industry and has enacted laws to ensure that the industry prospers. One such initiative is the Data Privacy Act that protects information of both individuals and corporations regardless of where the juridical entity is formed. The Department of Information and Communications Technology was also established to help lead the ICT infrastructure development of the country.
On top of policy and infrastructure development, the Philippine government also invested in education. Universities and vocational institutions were called upon to create and offer BPO specific curriculum. Training centers promoting call center skills were also established.
How to Start Outsourcing in the Philippines – Non-Core Processes
Outsourcing in the Philippines provides companies an exceptional opportunity to secure higher ROI. Companies have saved up to 70% from outsourcing services, with little impact on quality output. Below shares how we consult our clients on how to start offshoring or outsourcing in the Philippines.
Step 1: Diagnostic Questions to Help you Assess if You Should Outsource or Not
The first thing to consider is the appropriateness of outsourcing. A simple cost benefit analysis can help you make the decision. Lower cost and efficiency are the most apparent but not solely the advantages. If these outweigh your costs, then by all means outsource.
Here are some questions to help you determine whether outsourcing is appropriate or not. Is it more cost efficient to outsource than to hire an in-house team? Do they have the technology that you don’t? Do they have the expertise that my team doesn’t possess? Can they finish the tasks faster and with better quality?
Likewise, the cost benefit analysis can be applied to compare outsourcing and offshoring. Much of the questions mentioned above are also relevant in evaluating offshoring, but additional questions are warranted. What amount of control are you willing to concede for payroll, bookkeeping and accounting? What amount of initial investment are you comfortable with?
Offshoring offers greater control over processes and implementation procedures as compared to outsourcing. However, it comes at the expense of needing more ground work and supervision to build the team. In the long term, cost reduction is exceedingly evident for offshoring, but initial capital outlay is greater. In most cases, offshoring is the more strategically sound decision for companies that can afford it.
When you’ve finally decided to outsource or offshore, drilling down and assessing the specific requirements and deliverables follows. You can start by clearly defining the type of service/s you need. Is it a single service or do you require a mix of different services? What level of expertise is needed? How many people do you think is needed to fulfill the work? Clearly defining the requirements help manage expectations and avoid miscommunication.
Step 2: Understand Cultural Differences through the Right Partners & Execute Accordingly
The success of integrating outsourced services with your business depends on partnering with the right institution. There is no shortage of good outsourcing service providers in the Philippines, nor is there a shortage of good consultants to help structure your offshore team.
Filipinos are by nature polite and adapt to the work environment quickly. They work flexible hours and are generally efficient and dependable. However, there are work culture differences that you have to consider. Filipinos are more accustomed to and generally thrive in a more rigid structure. Roles and responsibilities must be clearly defined and instructions must be given in detail.
A sense of community is also fostered. Coworkers go beyond work to form part of the social circle. Aside from that, public reprimand is not seen favorably in Philippine culture. They find it humiliating and associate it as a personal attack on their reputation.
Navigating through cultural differences require compromises on both ends. Addressing them early on leads to a lasting and mutually favorable relationship.
Before outsourcing in the Philippines, businesses already have their way of doing things. Maintaining the status quo and ensuring smooth integration requires comprehensive process documentation. This helps to standardize the work and to promote seamless workflow.
Execution can be a breeze if you choose a local partner that has the vast experience and network to help you find your way around the cultural and regulatory landscape of the Philippines. EnterPH is your one stop shop for setting up an outsourcing team in the Philippines. Click here for a Free Consultation.
Step 3: Monitoring, Milestone Setting, and Evaluation
The challenge in outsourcing is the lack of control over business processes. Having the service done on the opposite side of the world makes it even harder. That is why companies who choose to outsource should rigorously monitor and constantly evaluate the service they receive.
Control is less likely of an issue in offshoring, but rather, companies face greater complication with coordination and supervision. There is a greater need for constant and on time communication. Luckily, advancements in technology make cross border communication and project management a casual affair.
Milestones are a good way of monitoring progress in particular tasks. Setting measurable and attainable goals increase the probability of on time completion. Establishing Key Performance Index (KPI) is another way for the company to evaluate the performance effectiveness of their provider.
Cost to Outsource in the Philippines – The Detailed Wage Numbers
| Philippines | USA | Australia | |
|---|---|---|---|
| Call Center Agent | $3,807 | $31,087 | $32,104 |
| Software Engineer | $8,582 | $84,148 | $52,409 |
| Computer Programmer | $4,014 | $62,141 | $44,444 |
| Bookkeeper | $3,387 | $42,139 | $37,492 |
| Accountant | $5,821 | $50,857 | $38,599 |
| Payroll Officer | $4,858 | $51,072 | $41,447 |
Rocky Chan is a lawyer and business consultant who excels in corporate formation, immigration procedures, and client relations. In the last 7 years, he honed his craft in the field of foreign investment consultancy.
