UK firm outsourced accounting work to India but quality dropped: Now established his own offshore unit

• Hi, I am Arun Mehra. In 2002, I quit Investment banking and started an Accounting firm serving only Dentists in the UK.
• I remember getting my very first client who came in with a massive box of papers, my first thought was, “Oh my goodness…”
• Over the years we grew and outsourced work to firms in India. However, the quality deteriorated. 
• In 2022, we started our own back office in India and now provide offshore services to other UK-based CA Firms.

Back story

I was born and raised in London, UK, but my connection to India runs deep through my parents, who were both born and raised there.

Despite being brought up in London, India’s rich cultural heritage and traditions have always been a fundamental part of my upbringing and identity.

Talking about my professional journey, I studied Chartered Accountancy at The Institute of Chartered Accountants in England and Wales (ICAEW) and began my career with PwC in 1995.

I enjoyed my time over there, met some good friends, and built meaningful connections.

Then in 2000, I made the switch to investment banking at Bank Of America as an equity analyst. That was my goal in my 20s, as it was a financially attractive career path.

2002: Entrepreneurial leap

After two years, the illusion began to wear off…I figured out that the quality of life mattered more to me than money!

I craved both flexibility and financial independence, so I decided to start my own business.

But what should it be? An accounting firm. Why? I could use my skills in finance and accounting…But I wasn’t sure of my niche.

Around that time, I got married to my wife, Smita, who is a dentist and has great business acumen.

The light bulb went off in my head, and I thought, ‘Well, I am going to build a professional services firm and be an accountant predominantly for dentists here across the UK.’

That’s how I started Samera, from my dad’s dining table in 2002.

As much as it was liberating, it was initially hard to navigate the world of entrepreneurship.

I had never been involved in anything similar before. Therefore, my initial responsibility was to recruit a team member.

Things started to fall into place and we kept growing.

2005: Outsourced to India 

The more we collaborated with dentists, the more we comprehended their challenges and excelled in addressing them.

We grew Samera as an accountant predominantly for dentists here across the UK to providing other services like commercial finance services.

I knew India to be the back office of the world, mostly in the IT sector since companies like TCS and Infosys dominated the outsourcing space.

So I thought, ‘Why can’t the finance sector also dominate the outsourcing space?’

With that in mind, in 2005 -06(early days), we began outsourcing accounting work to a few firms in India.

The necessary technology wasn’t also there, be it cloud accounting or the other software.

It was quite a cumbersome process of scanning documents and moving files across different servers.

The talent in India was not well equipped in UK Accounting so our team at Samera worked very closely with the outsourced firms. We set processes, trained the staff and monitored the work carefully.

It worked.

Samera expanded its reach through word of mouth. Other doctors, pharmacies, vets, and everyone in the healthcare sector in the UK began trusting us.

Underpinning this was a small back-office team at a third-party firm in India.

2020: Shut down our India back office

Everything was going well but the third-party outsourcing firms in India got big too quickly, and therefore the quality diminished.

It wasn’t as good as it was.

It was right before COVID that I thought that the outsourcing route wasn’t working out for us, hence we moved everything to the UK.

We somehow handled everything in the UK due to the chaotic situation caused by the pandemic.

Struggled to hire a team in the UK

I established my team in the UK, but I faced difficulties. It was challenging for me to recruit talented accountants in the UK.

I struggled to find good-quality staff.

I did hire people in the UK, but their quality of work wasn’t up to the mark, plus it was costly. Therefore, that was impacting my growth.

You can get clients easily, but if you haven’t got the manpower to do the work, then you are hitting a brick wall straight away. On top of it, hiring the wrong people cost me more.

It’s even more challenging for small to medium-sized firms like ours that are up against PwC, EY, or other Big 4 firms.

We can’t compete with the Big 4 on the salary and flexibility front.

What now?

Also read: This ex-BDO manager led offshore operations for UK & US markets. Here are the steps to establish an offshore practice.

2022: Re-entered India, but to set up our offshore office 

That’s when I came across the offshoring model.

I saw many CPA firms in the US and professional services firms in the UK build offshore offices in India and other countries.

This time I chose not to outsource our work to a third-party company, where there are uncertainties and concerns from clients.

Instead, I decided to establish our offshore firm in India where we have full control over the team and the rules.

I remember explaining my plan to my uncle, who is based in Delhi. And he replied with, “Are you sure? You’re going to lose money straight away. It’s going to be challenging.”

But I didn’t back down. I said, ‘You know what? I’m going to try it and see how it pans out.’

And let’s just say, I am glad that I did.

Building the India team

My first hire would be a team lead.

And so very naively I posted a job advert on Naukri.com! And guess what I was flooded with 750 applicants. A week later, it increased to 3,000 applicants.

To give you context, when you put an advert on an online job portal here in the UK, you might get 5 to 10 applications.

I was overwhelmed at first; which candidate should I pick?

Eventually, we narrowed it down and found our first team member. Then from there on we built our India office from the ground up.

We hired other team members, some of whom had been working in the offshoring sector for almost 20 years.

That’s how we started off the ground.

Lawyers got involved to help us understand the implications. We connected with IT providers and set up our infrastructure.

We had looked into Data privacy, cybersecurity and all the regulations.

It was quite a long and laborious process, as it took us about 9 months….But that’s the way it’s done!

Today we have a growing and thriving team in team.

Our operation isn’t massive, but we’re steadily expanding.

Long-term plan is to build an International Firm helping Accounting and other global CA & CPA Firms looking at India.

Also read: This ex-Big 4 Auditor shares opportunities for Outsourced Accounting & Tax firms in India. Here is how to tap into them.

Does the UK provide a big opportunity in offshoring?  

A big YES.

The offshore opportunity that the UK market creates is not as large as the US market. (The US market is around 5-6 times bigger than the UK market.)

However, in the US, India might encounter competition from other offshore destinations such as the Philippines, Mexico, Malaysia etc.

But when it comes to the UK, India can be the first preference mostly due to the time zone. We do see a lot of offshoring and outsourcing work being done in South Africa too!

Hence the UK market is still considered a sizable opportunity despite being smaller than the US.

Here is why firms in the UK are betting on the offshore route, and focusing on India.

Aging population

We’ve got an aging population in the UK. People with grey hair like myself, are looking to retire in a few years, and the output of younger accountants isn’t coming through.

So that creates a need for young people to join accountancy firms.

No manpower

Most CA firms in the UK want to grow big but there is a limited supply of good talent. So how would they scale?

Inflation

The UK is facing inflation right now. Interest rates have risen to the highest they have been in 16 years. There’s a cost-of-living crisis going on at the moment.

Rise in regulations

There’s an increasing compliance requirement here in the UK.

Many firms in the UK are not performing audits anymore due to too much regulation. It has become too costly to perform audits making it difficult to profit off the division.

That’s where the Indian talent pool comes into play.

High-tech adoption in India

Technology adoption is developing rapidly in India. That combined with the Indian workforce, if trained well, could present an opportunity.

In a nutshell, firms in the UK are looking to keep their costs low. And how can they achieve that? Through offshoring or outsourcing.

Also read: Mid-sized US CPA firms are looking at setting up satellite offices in India. There is a need for consulting firms!

How can you get international clients?

Acquiring clients in the UK requires patience and building trust.

You can’t rush such big decisions, especially when it involves moving client’s data to the other side of the world.

For businesses in the UK, in the US, or anywhere else, cost-benefit plays a major role, but the overriding factor is the quality of the work.

When you focus on that, that’s when you’ll get the right clients and the right profit margins for your offshoring or outsourcing business.

Spamming emails or cold calls won’t work. Instead, I focus on providing valuable content, sharing experiences, and positioning myself as an expert in a particular area through social media.

In terms of marketing, my team and I invest significantly in YouTube videos, articles, newsletters, and events both in the UK and abroad.

Events have played a key role in client acquisition strategy.

For those starting small, investing in social media marketing and gradually expanding outreach can be effective.

It’s essential to view client acquisition as a long-term investment, understanding that results may take time to materialize.

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Wrapping up

Today India is known as the accounting back office of the world.

However, I am a firm believer that India will eventually become the middle office.

And who knows, maybe in the future, it can even become the front office, given its large population of young and driven people and its innovative vision.

If anyone is thinking of starting their own offshoring or outsourcing services firm, there is one advice I have for you: Quality has to be at the heart of what you are doing.

Now it’s your Turn.

Do you think the UK is a good market for Indian firms providing outsourced services?