A common question we get asked by foreign clients who want to incorporate a company in Mexico is whether it is more convenient for it to hire and employ its own accounting department or else, engage an accounting firm and outsource this work.
In general, the answer is the same for any company, regardless of the source of the capital or the nationality of the shareholders. When companies are starting their operations, they want to keep costs at a minimum and maintain themselves lean and agile. With few operations at the beginning, companies probably don’t need a big structure and fixed cost in its accounting department; regularly, engaging an independent accounting firm will be more cost efficient considering the reduced work; also, the firm will surely have the experience in helping companies set up, knowing all legal requirements, notices and reports to be filed. These may not be known by an in-house accountant.
Once the operations increase and the need for timely current information by Management is present every day, having an internal accounting department might make more sense and will justify its fixed cost. By this time, employees managing daily operations will have experience in the company and could be able to handle the accounting functions properly. When operations increase considerably, outsourcing costs also increase much, often exceeding what the in-house payroll would cost.
However, we mentioned “in general” above. We do see additional advantages when a foreign holding company engages a local accounting firm for its bookkeeping and tax filing.
- No conflict of interest.- Independent accounting firms will not have a conflict of interest when performing their work. It will be a client to be served adequately, regardless of work atmosphere, personal relationships, line of reporting, etc.
- Communication.- Reporting becomes fundamental and should not be an added burden, especially when reporting in English. Accountants that can speak fluent business-English in Mexico are not that common; a professional accounting firm will surely have that requirement covered.
- Advisory.- Having an outside accountant will also give access to the foreign corporation to new legal and financial requirements for the Mexican entity. Otherwise, the company must maintain its staff trained, with the logic added cost.
- Increased internal control.- when engaging an independent accounting firm to do the bookkeeping, the internal control is naturally increased since the firm will not be biased when sending its reports. Also, Mexican staff will know that the accounting firm has direct access to higher levels. In the best scenario, the staff will develop a support relationship with the independent accountants, establishing a very efficient work team.
In TGS Mexico we see ourselves as the “bodyguards” of our foreign clients. We safeguard our clients’ investments and help them grow their businesses taking care of legal, tax and reporting requirements. We treat them the same way we would like to be treated, were we to open a subsidiary in a foreign unknown country. We see this as one less thing to worry about, letting them concentrate on ways to make their business projects grow.
Feel free to contact us to explore these solutions together.