Should You Outsource Accounts Payable?

outsourcing accounts payable

While these data storage approaches increase the accessibility of the data to the concerned parties, they make pertinent and confidential information more prone to security breaches and unauthorized access. Some companies handle highly sensitive information which can make it difficult to just hand over data to third parties. Outsourcing eliminates costs related to recruiting, hiring, training, compensating and maintaining a dedicated AP team. Increase your results, improve your operations, and extend your in-house capabilities. To do that, let’s look at the pros and cons of outsourcing versus automating your own AP and keeping it in-house.

outsourcing accounts payable

With Klippa SpendControl, you can easily manage your accounts payable to have a clear overview of your payments and ensure that all of your bills are paid on time. Another potential disadvantage of processes is the risk of over-dependence on the service provider. One of the potential drawbacks of outsourcing accounts payable is the loss of control over these processes. When a business outsources AP to a third-party provider, it relies on the provider to handle AP tasks accurately and efficiently according to their own terms and schedules. While accounts payable may seem like a mundane task, many business owners would be eager to offload this responsibility. By offering your expertise in accounts payable management, you can provide valuable insights into cash flow, early payment discounts, vendor relationships, and more.

Consider AP automation as an alternative to outsourcing

It also ensures records are kept of all financial aspects of purchases made by the company. If you would like to explore further how Near can help you outsource your accounts payable roles to professionals in LatAm, book a free consultation call today. While you may not be able to access the exact data about their projects, case studies and accounts of the provider’s previous work give you an idea about their quality. To outsource your accounts payable easily, here’re a few things to keep in mind. While this does take some of the supervisory duties off your hands, the lack of control can hinder communication, transparency and efficiency. Book a 30-min live demo to see how Nanonets can help your team implement end-to-end AP automation.

By following the best practices outlined in this guide, you can successfully outsource accounts payable services and create a win-win situation for both your firm and your clients. Business owners seek to hire offshore teams to manage all financial transactions, from fixed payments and variable expenses to bank deposits and budgets, while allowing the business owners to save and do more. Analytics tools will become essential for gaining valuable insights into accounts payable operations.

By running proper checks & validations, they can identify errors in invoices and prevent wrong payments. The use of AP experts and sophisticated technology helps them identify risks and reduce the incidence of fraud. The ultimate solution to future-proof your business is to consider installing an accounts payable solution.

Also, with AP processes being taken care of, your employees can focus on higher value tasks with increased efficiency leading to better productivity overall. AP Outsourcing involves handing over accounts payable processes to a third-party business provider. This means that you use the accounts payable services of an external entity to perform your business transactions. AP Automation, in comparison, is the adoption/integration of an AP software to extract, validate and approve accounts payable invoice processes. Before your business decides to use a third-party accounts payable outsourcing provider, compare the potential savings and increased privacy of AP automation software today. Whether you outsource to a third-party provider or purchase AP automation software, the cost savings are there.

Tips For Choosing the Right Accounts Payable Outsourcing Partner

In this deep dive, we’ll explore the upsides and downsides of outsourcing accounts payable. We’ll break it down so businesses can make smart decisions about whether to jump on this financial trend or give it a pass. But before we get into the details, let’s get a grip on what accounts payable outsourcing actually means.

An AP team can easily track critical accounts payable metrics for accurate forecasting and opportunities for improvement. However, one main issue is whether companies can entrust their most essential financial processes and highly confidential data to a third-party firm. When a business outsources accounts payable processes, it is providing access to sensitive financial information. Outsourcing is a tempting alternative for organizations that want to remove the hassle of processing accounts payable. It cuts down costs, eliminates errors, and avoids the pain points of a traditional process, like manual data entry, document storage, and training new employees. Outsourcing accounts payable means your accounting department will have fewer tasks to accomplish since activities such as managing short-term debts are conducted by qualified third-party AP teams.

  1. Outsourcing accounts payable helps businesses avoid these costs while using the best document management and business intelligence tools available.
  2. If a contract with the vendor does not cover exceptions in processing, then your business has to deal with it separately.
  3. Accounts payable outsourcing can be helpful for companies lacking the resources and automation software to manage their own AP process.
  4. Outsourcing allows businesses to scale their operations more effectively, resulting in increased profits and market share growth.
  5. This efficiency enables companies to capitalize on early payment discounts and avoid costly late payment penalties.

Switching to another outsourced accounting services provider may be time-consuming and costly. Or, you can choose to install intelligent AP automation software that poses little risk to your security. AP automation refers to the use/ integration of software and technology to streamline and automate the accounts payable process. The accounts payable software can be used to automatically process invoices eliminating dreaded tasks such as data entry, verification, and digitization. This makes the invoices accessible, easy to track, and most importantly paid on time, which results in an up-to-date overview of the AP workflow. As we have seen before, outsourcing your AP means hiring a specialized third-party provider to manage all your accounts payable functions.

Community Association Management Company Halves AP Processing Time

Demonstrating how your technology and automation solutions can reduce the likelihood of errors will help to alleviate these fears. By managing multiple clients’ accounts payable, your firm can offer proactive recommendations to optimize cash flow, enhance internal controls, and improve overall financial health. This can lead to increased profitability per client and create additional sources of recurring revenue through operational efficiencies. Outsourcing accounts payable can minimize human error, leading to improved supplier relationships, fewer late payment fees, and better financial performance.

This is like having extra sets of eyes on all of your vendor invoices before payments go out. The rules-driven nature of accounts payable processes make these procedures appropriate for third-party management. The assigned outsourced personnel are focused solely on a company’s accounts payable systems.

You have no influence over how they manage your accounts or carry out back-office operations. Instead of altering the system, they keep adding personnel to administer it to enter data, follow up on each approval, and spot mistakes made by humans. So, they locate an AP supplier and outsource those services in order to cut costs. In other words, they eventually alter their system by handing it off to someone else. And that outsourced AP team is presumably employing automation to ensure that the partnership benefits the customer and the AP team as well. When you successfully calculate accounts payable, your firm’s name appears on each check, transforming a once-challenging task into a value-adding partnership.

Compare the projected costs of outsourcing against the expected benefits, such as cost savings, improved efficiency, and reduced error rates. Consider both short-term and long-term implications to make an informed decision. By outsourcing, you can reduce the risk of data breaches and ensure that your accounts payable processes adhere to relevant legal and industry standards. With any change comes some hiccups and there might be some initial challenges when outsourcing the AP process. When a company takes its AP department from in-house to outsourced, there is the possibility that entries will be duplicated.

Accounts Payable SSC is a unit that handles all accounts payable transactions for more than one business unit within the organization, and sometimes, they control the invoice-to-payment processes for several entities. And the accounts payable outsourcing service usually has remote access to your accounting software to keep your general ledger and expense reports up to date. While it is easy to supervise an in-house AP team, the same cannot be said for third-party service providers. You cannot control how they handle your accounts or run back-office processes. Despite the benefits of using accounts payable outsourcing companies to relieve your internal accounts payable department, there are drawbacks to this approach.

They will help identify cost-saving opportunities, supplier performance trends, and compliance issues. Time zone differences, language barriers, and miscommunication can potentially impact the efficiency and accuracy of your accounts payable operations. This can result in fewer errors, reduced late payments, and improved relationships with suppliers and vendors. Companies opt for AP outsourcing for several reasons, such as reducing the administrative burden, accessing specialized expertise, and ensuring compliance with financial regulations.

In an earlier blog post, we explained that manually processing a single invoice can cost as much as $30. As vendor relationships grow ever more complicated, more and more businesses will need to rely on outsourced providers to re-architect their accounts payable operations. Outsourcing payment processing tasks to a reliable provider also reduces the risk of payment fraud and errors, as they employ advanced technologies and processes to identify, eliminate, and minimize such risks. This can ultimately save your organization time and money while maintaining a high level of accuracy and compliance. If you’re facing any of the above issues, it’s time to look into Accounts Payable outsourcing companies. Outsourcing is one option for business owners who want a third party to handle the entire process rather than taking the resources and time to overhaul the department in-house.

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