Account Payable Outsourcing: Pros & Cons For Accounting Firms

accounts payable outsourcing

Vendor relations should be taken as a customer service approach, because vendors can (and will) pull contracts from your company if they find it difficult to work with your business. From missed due dates or non-payments, vendors will be in touch with the AP department to track down the status of their payment which again, takes away valuable time from accounts payable. No matter the circumstance, when a vendor is missing a payment, it’s always your fault. Vendors will sometimes resend the same invoice and through multiple mediums to ensure they are paid, which as mentioned in the previous listed issue, can result in double-paying an invoice. For many firms, the AP personnel tasks are not always as integrated into the business as another function such as operations, so it can be an attractive offering to outsource some of the paperwork.

An accounts payable outsource company can have certain terms and conditions which may not make work flexible for your business. If a contract with the vendor does not cover the ultimate guide to us economic nexus exceptions in processing, then your business has to deal with it separately. AP processes, if interrupted due to employee absence, can multiply and burden the business.

accounts payable outsourcing

AP outsourcing companies don’t just follow best practices when doing their work. They incorporate technologies that identify errors before they become liabilities. According to one study by the American Productivity and Quality Center, the bottom 25% of organizations surveyed were paying $10 or more for each invoice they processed. However, those businesses which can incorporate automation, e-invoicing, and other efficiency tools will gain an edge over their competitors. They’ll even negate many of the problems that have plagued AP departments for decades. In cases where your provider is facing issues with payments, there’s little you can do but wait for them to resolve the problems themselves.

Initial Challenges in Outsourcing Accounts Payable

Accounts payable outsourcing is the business practice of using a third-party vendor to administer invoice or bill related processes. The list of services varies but the vendor will generally perform functions such as invoice capture, purchase order (PO) matching, and processing, payments, archiving records, and reporting. If you don’t have access to technologies that give you AP automation, workflows, and other time-saving tools, your outsourced provider can step in to deliver them at a fraction of the cost. If you’re still reliant upon cumbersome processes and old technology, outsourcing could help you see results faster and more clearly.

  • Despite offering a wide suite of services, the cost savings for using Paymo for accounts payable (and a number of other things) could be remarkable.
  • Imagine reducing your Accounts Payable processing expense without capital investment while gaining better control over the entire process.
  • Even a small error, such as an inaccurate payment to a vendor, can cause serious problems during an audit.
  • When it comes to ACH payments, it’s not only a hassle for your team to collect and update vendor bank account information, but this process also exposes your business to greater fraud risk.
  • The outsourcing provider takes over tasks such as invoice processing, data entry, invoice validation, payment processing, vendor management, and reporting related to accounts payable.

Outsourcing your accounts payable processes represents a significant time and monetary investment. Information collection, data centralization, provider selection, and implementation all require time and effort. When considering outsourcing, answer the following questions to get a better idea of your needs and what’s possible. One of the best things about BILL is that you can choose our intelligent business payments platform as your AP automation solution whether you decide to automate your own processes or outsource them.

Why Accounts Payable Matters – What Every CFO Needs to Know About AP

By hiring a third-party service provider that specializes in this area, you can be sure that your payments are being processed accurately and on time. The best account payable outsourcing companies use strict standards for data entry and validation, so you don’t have to worry about mistakes or omissions in your AP processes. With an AP automation solution, companies are able to improve efficiency and accuracy, reduce manual labor and errors, and save time and money, while still having control over the accounts payable processes. Besides that, no important and sensitive data is shared with an external provider.

In a nutshell, it simplifies each invoice so that they’re readily available, tracked, and paid on time. When automating accounts payable, a company will rely on a third-party software to automate the process, but the business keeps all AP processes in-house and requires staff training within the AP department. With a platform like MineralTree, all invoice data is available to use in data analytics, upon invoice capture. As a result, financial leaders can leverage more accurate cash forecasting models based on better information. As companies increasingly recognize the benefits of outsourcing accounts payable (AP) functions, those who choose not to embrace this strategic approach may encounter future challenges.

In these cases, there is sometimes a possibility that certain entries will be duplicated. Before outsourcing, it’s wise to educate your employees about the new process so they can work in tandem with your outsourced provider. Although some of the differences related to these costs are based on the organizations’ industries, organizations that had adopted accounts payable automation tended to see reduced costs. When you’re outsourcing accounts payable to an external provider there’s always the caveat of sharing sensitive, financial information with them. With an external accounts payable solutions provider you’re not only giving up transparency and visibility but also a majority of the control you may otherwise have over systems. Hiring accounts payable team can come with overheads that you may not always want to bear.

Take time to check and cleanse data for errors, duplicates, or issues that could hinder transparency in your AP processes. These include delegation of responsibilities, implementation of new software, and changes in the submission systems. When considering a major change to your processes, it helps to explore all your options.

Is Accounts Payable Outsourcing the Best Choice for Your Business?

If a business relies heavily on a single provider for these tasks, it could be at risk if that provider experiences challenges such as security breaches or bankruptcy. In such cases, the business’s AP processes could come to a standstill, potentially damaging vendor relationships and other aspects of the business. Outsourcing accounts payable can also lead to improved efficiency in the processing of invoices and payments. 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.

But adopting new technology presents an entirely new challenge in and of itself, especially for small and mid-sized businesses. With an AP provider on board, you can rest assured that your accounts are being handled with precision and acumen. While this does take some of the supervisory duties off your hands, the lack of control can hinder communication, transparency and efficiency. Outsourcing this department to a third party might be the best decision for your firm. To successfully look into this option and evaluate its benefits as well as disadvantages, one needs to understand the whole picture.

  • Klippa SpendControl uses advanced OCR technology to automatically extract and process key information from invoices with automated data entry, and speeding up the overall turnaround time.
  • While it serves as centralized access for both parties involved, the data is also prone to potential security breaches and hacks.
  • We provide your business with imaging and workflow tools to better manage your days payable outstanding (DPO) and enable you to realize early payment discounts by processing your account payable invoices faster.
  • In fact, according to the 2018 Payments Fraud and Control Survey by the Association for Financial Professionals (AFP), 78% of all organizations surveyed were hit by payments fraud in 2017.
  • The biggest players in the AP outsourcing industry include payment processing specialists, specialist software suppliers, and end-to-end outsourcing service suppliers.

Furthermore, the MineralTree team is extremely sensitive toward vendor relationships. We understand our clients depend on these strategic suppliers and do everything we can to strengthen and streamline those connections. Our team of trained experts understand the complex rules and regulations to have detailed, strategic conversations with vendors about digital payments.

Accounts Payable Services

Our solutions are geared toward helping you improve the operations of your financial back office. Outsourcing accounts payable entails relinquishing control over the entire AP process, including the ability to oversee the AP department’s day-to-day bookkeeping. The traditional practice of ‘popping in’ to check on operations becomes obsolete.

Duplication Challenges

Despite offering a wide suite of services, the cost savings for using Paymo for accounts payable (and a number of other things) could be remarkable. More and more businesses rely on AP outsourcing firms to redesign and streamline their AP processes despite mild hiccups along the way. The most common AP processes that are outsourced are purchase order or invoice matching (0r 3 way matching), invoice automation, discrepancy resolution, and AP administration. A business can opt for what it wants to outsource depending on the magnitude of work and budget involved.

Top Things to Think About Before Hiring a BPO Provider

The platform can be used to process invoices, automatically capture data, do approval routing, and process payments. The roots of any business lie strong in the financial growth after its values, and assuring smooth accounts payable services for your business is a must needed business strategy. By outsourcing your accounts payable requirements, you can get benefits of both accounts payable and outsourcing. MAVENTRUS leads an account payable outsourcing service team of domain experts and provides several other benefits of a mastered finance department.

Since everything is organized, you can also make early settlements of vendor bills to get better discounts. Choosing between accounts payable outsourcing or automation depends entirely on the size and nature of a business. While AP automation will make its in-house AP processes easier, outsourcing will be ideal for a business looking to reduce its AP workload. While accounts payable outsourcing is a viable option for some organizations, many can get the benefits of outsourcing while maintaining higher efficiency and security using a procurement platform. Since you are not physically present to supervise tasks, mistakes may not receive due attention.

Auxis is a Preferred Partner of the Top-Rated RPA Platform, used to automate such manual activities as Invoice Coding, Processing, 3WM, Payment Processing, Master Data Administration, etc. Read our Accounts Payable Process Improvement case study to learn how a leading cosmetics client completely transformed its AP function through outsourcing, automation & analytics.

Handling accounts payable in-house can be overwhelming, especially for small businesses dealing with a high volume of daily invoices. Common challenges faced by in-house AP departments include exceptions, lengthy invoice approval times, excessive paper usage, and significant time spent on supplier inquiries. In this article, we will explore the pros and cons of accounts payable outsourcing solutions to help businesses make informed decisions regarding this critical aspect of their financial operations. Accounts payable processes can become backed up and riddled with errors due to duplicate invoices, data entry errors, and even payment fraud if a rapidly-growing company isn’t careful. Bench does not provide the ability to outsource your accounts payable department, but they do provide an amazing suite of accounting services that can streamline your accounting operations and bookkeeping.

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