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Deloitte warns accountants on offshoring

Deloitte has warned that the lower Australian dollar may jeopardise the quality of third-party offshoring services as providers seek to cut costs to offset recent currency movements.

News Michael Masterman 14 April 2015
— 1 minute read

Speaking to AccountantsDaily, Adrian Batty, partner at Deloitte Private, said he is concerned that some third-party offshoring service providers may compromise on quality in order to reduce their costs in light of the Australian dollar's recent fall.

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“I think there will be pressure applied in terms of trying to work out how you take other costs out to keep the same overall costs the same and one of the things that’s first to go often is that quality,” he said.

“Reviews of files and training of staff and things of that nature can sometimes fall by the wayside.”

However, Mr Batty also said that in some cases the falling Australian dollar may actually prove to be kind to Australian accountants, as demand for offshoring services falls, increasing price pressure on providers.

“It will leave some of those outsource providers in a situation where they don’t have the volume they once had, probably have too many staff since they’re geared up for expected growth in their businesses, and then find that the demand side slows down.

“It could well be that a whole range of things might happen, it might drive pricing down," Mr Batty said.

Speaking recently at a Chartered Accountants Australia and New Zealand conference in Sydney, Joseph Yeung, financial controller at Australian Government Solicitor, also questioned the value of some existing offshoring models, emphasising the need for process improvements to complement any currency benefits if an offshoring model is to remain sustainable.

“Going back a few years, offshoring was incredibly compelling with the high Australian dollar. I do wonder whether that continues to be compelling going forward because obviously the economics was an easy win," said Mr Yeung.

“I think for true offshoring and outsourcing, you actually need to have process improvements not just currency differences. So with currency differences gone, I wonder whether organisations can find true improvements by offshoring processes and controls overseas, especially if they lose control and lose their client interaction,” Mr Yeung said.

Deloitte warns accountants on offshoring
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