China accounting work: Outsourcing vs. in-house?

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Follow us on wechat www.hongdaservice.com /blog/china-accounting-work-outsourcing-vs-in-house How to go about your China accounting work? When it comes to the setting up and running of a business in China, there are so many different aspects that owners need to consider for their business to run smoothly. Whether it is staffing up and navigating local labour laws , or ensuring that one’s company is in line with government regulations, to preparing the relevant documents for monthly tax filing and the annual audit, the reality is that one can only really manage a certain number of staff and business functions before a company’s ‘business’ starts to be affected. It is for this reason that more owners and companies are turning to outsourcing business functions. This enables focus on what really matters, their core competencies. Let's take a look at outsourcing accounting work vs. in-house to showcase how outsourcing may benefit your company in the following key areas below... Costs and liability This is invariably one of the biggest reasons why most business owners initially consider outsourcing their accounting work, and for good reason. A salary report conducted in 2015 by J.M Gemini, one of China’s leading recruitment companies, placed local employees salaries in the following positions (amount in RMB): Junior Accounts Clerk 3,500-5,000 1-2 years experience Senior Accounts Clerk 4,500-8,000 2-4 years experience Assistant Accountant 7,000-10,500+ 5-6 years experience Accountant 11,000-16,500+ 5-6 years experience (Chief) Accountant 18,000-28,500+ 1/4

Transcript of China accounting work: Outsourcing vs. in-house?

Follow us on wechat www.hongdaservice.com /blog/china-accounting-work-outsourcing-vs-in-house

How to go about your China accounting work?

When it comes to the setting up and running of a business in China, there are so many different aspects that ownersneed to consider for their business to run smoothly. Whether it is staffing up and navigating local labour laws, orensuring that one’s company is in line with government regulations, to preparing the relevant documents for monthlytax filing and the annual audit, the reality is that one can only really manage a certain number of staff and businessfunctions before a company’s ‘business’ starts to be affected.

It is for this reason that more owners and companies are turning to outsourcing business functions. This enablesfocus on what really matters, their core competencies. Let's take a look at outsourcing accounting work vs. in-houseto showcase how outsourcing may benefit your company in the following key areas below...

Costs and liability

This is invariably one of the biggest reasons why most business owners initially consider outsourcing theiraccounting work, and for good reason. A salary report conducted in 2015 by J.M Gemini, one of China’s leadingrecruitment companies, placed local employees salaries in the following positions (amount in RMB):

Junior Accounts Clerk

3,500-5,000

1-2 years experience

Senior Accounts Clerk

4,500-8,000

2-4 years experience

Assistant Accountant

7,000-10,500+

5-6 years experience

Accountant

11,000-16,500+

5-6 years experience

(Chief) Accountant

18,000-28,500+

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5 years (Auditing & Accounting Experience)

Finance Analyst

14,000-29,500+

3-6 years experience

Internal Auditor

13,000-27,000

3-5 years experience

Associate RMB Funds

36,000-41,500+ (plus 20% bonus)

3+ years (Investment background necessary)

Sr. Manager, Accounting Services

38,500-60,000+

8+ years experience

Finance Manager/Controller

29,500-60,000+

5+ years (managerial grade)

Commercial Business Manager

33,000-43,500+

8+ years (Accounting background)

Finance & Admin Manager

24,000-48,000+

10+ years experience

Tax Accountant

8,500-12,500

2-4 years experience

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Tax Manager

24,000-50,000+

5-10 years experience

If you consider that on top of these base salaries more money needs to be set aside for things such as socialinsurance, office space, expensive bookkeeping software etc. the overall costs work out significantly more thanoutsourcing accounting work to a third party (as you will see below), especially for SME’s.

The typical costs behind outsourcing your China accounting work

Accounting services in China typically range from 1000RMB/month (subject to volume of transactions). The tablebelow shows a typical sliding scale based on the number of transactions:

Volume of transactions per month Service Fees (in RMB)

30 and less 1000/month

30 to 50 1500/month

50 to 70 2000/month

70 to 90 2500/month

90 and above 3500/month

Outsourced accounting services typically include:

1. Preparing and posting journal entries

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2. Preparing bank and cash reconciliation

3. Compiling Balance Sheet, Expense Summary and bank account reconciliation schedule on a monthly basis

4. Declaring individual income tax (IIT) for staff

5. Filling tax forms (monthly, quarterly)

6. Applying for VAT rebates

While there are clearly benefits to an in-house accounting team, especially to multinational corporations, fledglingservices companies and trading companies can both save money and remain compliant through outsourcedaccounting. Outsourcing your company’s accounting work to a third party accounting firm can help companiessignificantly reduce staffing expenses and help avoid costly accounting errors.

Accountants at these bookkeeping firms, and the firms themselves, are liable for the standard of their work and theirreputation. A local employee may not be able provide you with the same amount of security and peace of mindunless you yourself, or your accounting department, have the resources to effectively manage them.

Standard reporting in your own language and selecting a firm

Finding and hiring a CPA in China that possesses the necessary qualifications and language skills required to workcomfortably with your company may prove to be difficult on your own. Regardless of whether you outsource or hirein house or outsource you should ensure that they are experienced in navigating the complexities of accounting inChina by performing adequate background checks and due diligence on either the prospective employee oraccounting firm. More reputable firms will have a number of reliable testimonials from companies that they will behappy for you to contact. Similarly, employees with stellar track records will have no problem speaking with previousemployers. Finally, interviewing in your language will also help you ascertain whether you can communicate wellwith the firm or employee.

In addition to basic background checks and ensuring that filing deadlines and regulatory deadlines are organized,checking that the accounting firm is able to actively help you reduce tax liability is a key indicator of an accountingfirm that is more than just an ‘accounts calculator’. Such a firm should be able to provide you with clear examples ofwhere you can reduce tax liability based on your current business and corporate structure.

Overall, outsourcing accounting work is the most cost effective and safe option for most small to medium sizedenterprises that are unfamiliar with China. Finding the right firm will ensure your company remains compliant in theever changing face of China’s corporate law reforms. In addition, it enables you to save both on employee costs andtax liability.

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