Pros and Cons of switching accounting service providers in China
As a foreign company doing business in China, it is fundamental to
have an trustworthy accountant who can not only help you with your
financial decision making needs, but most importantly will guide you
efficiently through the complicated Chinese tax and legal system.
China has an enormous potential and can be a promising country to establish a commercial presence and do business. However, such endeavor comes attached to a set of laws and regulations that changes frequently with the fast-pace evolution of the Chinese markets.
For this reason, the relationship with your accountant in China should be one that is built on a foundation of trust , transparency and open communication. You will need his or her expertise to understand cultural differences and to navigate the regulatory system successfully.
Sometimes, achieving that level of comfort is hard and you may find yourself wondering if it is time to move on and seek accounting help elsewhere.
There are a few key aspects you may want to consider before making the decision to switch to a new accounting firm.
In China, each industry comes with a different set of rules and regulations. If your accountant is not familiar with the specifics of your sector, this lack of basic knowledge may be an obstacle when it comes to understanding your company’s needs. In this case, hiring a firm that specializes in your industry may be the right answer.
Having access to your accountant is crucial to help you make the most informed business decisions, in a timely manner. Some foreign business owners become understandably frustrated if they cannot get in touch with their accountant by phone or email or when there is a language barrier. Finding professionals in China that are fluent in English is getting easier, but this can still be difficult in the provinces.
One of the main purposes of hiring an accountant is to receive guidance on how to move forward with investments, maximize ROI, and boost income, throughout the year. They should be able to help steer your business in the right direction and should not be there only to put out fires. An accountant who just helps you to make reactive moves is not providing the right service for your needs.
The way and tone that your account uses to communicate with you should always be respectful and correct. Sometimes, accountants can be intimidating and talk down to business owners or make them feel as if they don’t understand their finances. This style of communication may cause them to lose their clients.
A fresh start at a new accounting firm could be an opportunity for growth, especially when a trusted accountant decides to retire, is no longer available, moves out of the firm or is replaced.
Another situation that could force you to consider a change is when you find yourself paying too much for accounting services that may not be meeting your needs. Whether you have hired an in-house accountant or if you are working with a firm that has locked you into a cumbersome contract, paying exorbitant fees is not acceptable.
Your accounting firm should be familiar with current technology, which can make the processes more efficient, and thus help you grow your business. If your accountant is behind the times in terms of expertise, you might consider a firm that can service your business needs more efficiently with new technology.
If any of the aspects described here concerns you, it may be time to think about finding a new firm to meet your accounting needs. With a better understanding of the pros and cons, you can feel more confident in making your decision. Transferring your business to a new service provider can involve some drawbacks, but in many cases, the pros outweigh the cons.
Partnering with an accounting firm that specializes in your industry, offers the type of support you seek when you need it and helps you maximize your investments, will give you peace of mind when it comes to ensuring business continuity.
Here are a few examples of pros and cons:
1. When your relationship with your accountant spans several years.
Con: Transferring information to a new accountant can be cumbersome
If your accountant has worked for you 5 years or more, they may have specific knowledge about your business, capital expenditures, taxes, etc. That information will have to be transferred and relearned by someone new. For this reason, it can sometimes be tough to make a switch.
Pro: New accountants can help your business grow
If the same accountant has been with you 5 years or longer, they may be out of touch with the needs of your business. Having a fresh set of eyes can prove to be particularly beneficial to achieving your growth objectives. In China, if you are exploring new lines of business, you may need to work with an accountant that has industry-specific knowledge that will help you with this transition.
2. When the fees for accounting services are too high
Con: You could lose out on valuable services
It is important to evaluate the list of services that your accountant is currently providing. As a business owner you may want to watch your budget but cutting costs should be a secondary consideration to the quality of services your accountant offers. You do not want to make a switch only to find out that the cost savings comes from cutting corners.
Pro: You could save money
By researching different companies, reading reviews online and doing proper due diligence, you may come across an accounting provider that offers the same services at a lower cost. In China, outsourced accounting services can lower your costs and be the answer for your company during the early stages of your business, until you decide to hire in-house.
3. When your accounting firm is small and struggles with busy seasons
Con: Large firms have more clients and offer less personalized services
Big accounting firms tend to have large numbers of clients and dedicate less time to each of them. This could make you feel as if you are just a “number”. In China, it is important to build a personal relationship with your accountant to be able to understand and navigate the cultural differences that are predominant in the business world. If you are a small business owner and prefer to have a direct communication with your provider, it may be better to stay with a smaller firm or consider an outsourced accounting company.
Pro: Outsourced accounting services have more resources
Hiring a firm with more bandwidth can ensure that your accounting needs are met efficiently and promptly no matter the season. They have enough resources to ensure that bottlenecking does not occur around tax time, fiscal year-end, or another peak season.
Pro: Larger firms tend to invest in the latest technology
You may want to consider, according to your needs, an accounting firm that focuses on using new technology for bookkeeping services. Bigger firms tend to have more funds to invest in technology and infrastructure in place to support it. In addition, most outsourced accounting firms will invest in state-of-the-art technology that allows you to access your financial information whenever you need it and from any location.
4. When your accounting firm does not offer sufficient customer services
Con: Organizational structures can change
Sometimes the accountant you trust and know may retire, leave the firm, or get transferred to a different part of the management structure. In these situations, you will have to decide if you are comfortable being assigned to another accountant within the organization or if it is advantageous to switch firms. In China, it is important to find the right accountant and get the quality service you need.
Pro: A new firm may offer experts with more in-depth knowledge of your industry
Your accountant does not have to be your best friend, but you should feel you can trust this person with your business. Conducting an interview and reviewing client testimonials will help to give you a sense of the type of personalities you may be working with at a new firm.
5. When your accountant manages business and personal taxes
Pro: You may prefer a firm dedicated to business accounting
If your current accounting firm splits its time between personal and business taxes, you may prefer a provider that is dedicated exclusively to business customers. In China, tax season can be stressful and the last thing your company needs is to be audited by the Chinese tax authorities. You should get the attention you need from an accounting professional that understands the local tax system and specializes in your industry.
How do I transfer for my companies' books?
As a foreign business professional, you may have worked with just one or two firms in China and do not know the best way to transfer your business information to a new service provider.
You can start by notifying your current accountant that you have decided to change firms. This would give them an opportunity to resolve issues and make necessary amendments. If your concerns can be addressed, this may save you time, stress, and effort. But if you are determined to leave, it is the right move to inform them first.
The next step is to let your current accounting firm know where to send your files. Regulatory bodies mandate that accountants turn their files over to the new firm of your choosing. Once this is done, you should confirm that all your files have been transferred successfully to your new provider.
Another possibility could be to hire an in-house accountant. This option has a few advantages such as bringing an often-forgotten value to your business - loyalty. An outside accountant will have other clients and may not give you their full attention. An external provider might follow a process that may not be the same as yours or even fit with the way your business operates.
Hiring someone means you will have to foot the bill for the complete package - salary, benefits, office space, accounting software, etc. When outsourcing, you pay a monthly fee that frees you from all these added costs.
If you go the in-house route, it will be a major plus for your company if your accountant is more than just a bookkeeper. Any extra knowledge such as managerial accounting, budgeting or financial planning is a benefit.
To learn more about you can change accounting providers in China or Hong Kong or more smoothly, complete our online inquiry form here below.
DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.