If you’re fed up with your current system, a provider can even help you onboard a new one.Easy integration helps you get started quickly so you can see value immediately. According to one study, 78% of best-in-class businesses had adopted e-invoice processing technology compared to just 38% of their struggling competitors. The study also revealed that best-in-class AP departments who relied on procure-to-pay (P2P) automation derived the most strategic value.
How AP Outsourcing Works
Outsourcing accounts payable has become a popular business practice for many firms that lack the capability and means to handle their growing AP processes. Many outsourcing firms far and wide are available to offer a multitude of services. Accounts payable outsourcing is the process of hiring a specialised service provider who can take over multiple AP functions that businesses find difficult to handle in-house.
Four drawbacks of outsourcing accounts payable
Accounts payable outsourcing can increase the efficiency of your AP processes by streamlining vendor invoices and payments. Since everything is organized, you can also make early settlements of vendor bills to get better discounts. When considering a major change to your processes, it helps to explore all your options. AP automation (discussed later in this article) may provide the efficiency and visibility of outsourcing while allowing your company to maintain control of its processes. Since you are not physically present to supervise tasks, mistakes may not receive due attention. You may not even notice serious errors — such as duplication of invoice processing and exception processing — until it’s too late.
These metrics will serve as benchmarks for evaluating the provider’s performance and holding them accountable. Upon selecting a partner, the implementation and transition phases commence. This involves data migration, system integration, and comprehensive training for both the client’s staff and the outsourcing team.
- Apart from streamlining invoices, accounts payable outsourcing companies also reduce the incidence of errors in invoices.
- When upper management is looking at these costs from a high level, they will likely be interested in exploring all options for reducing those costs for invoice processing, including outsourcing.
- However, managing accounts payable can be a time-consuming and complex task, which is why many companies turn to outsourcing as a solution.
- ILM Corp. will have you wondering if they have secret access to a parallel dimension where time runs faster and paperwork is hilarious.
Gaining Control and Visibility with AP Services
If you’re just looking to solve some of the common issues organizations have with accounts payable—the ones we listed in the first section—we urge you to look at AP Automation. Uptime and accountability – Given that this is their sole purpose, your AP needs will receive a lot of attention. It’s not as if the vendor is a mix of roles from CFO and Controller, to AP Manager and AP Processor, which can happen at smaller firms—one person wearing many hats. Depending on where the vendor is located or if they have a distributed staff, what is balance sheet reconciliation you may find one with near-constant uptime when they are utilizing technology like AP Automation.
Data privacy and security
Companies that don’t use e-invoices and other electronic automation tools are likely to lose out to more productive competitors! Additionally, upgrading those old accounting systems to modern solutions such as Quickbooks can be costly and time-consuming. Accounts payable outsourcing is a form of outsourcing where a third party team manages your accounts payable processes. Proper preparation is crucial for a smooth and successful transition to an outsourced accounts payable model. This includes internal alignment and communication to ensure all stakeholders are informed and on board with the change.
Companies offering accounts payable services focus only on your AP processes; completing the work faster and more accurately. Also, with AP processes being taken care of, your employees can focus on higher value tasks with increased efficiency leading to better productivity overall. Skilled outsourcing providers can make a company’s AP processes more efficient; thus improving the cash flow. Case studies and real-world examples can provide valuable insights into the tangible benefits and improvements achieved by businesses that have successfully outsourced their accounts payable functions. These success stories can serve as inspiration and guidance for organizations considering embarking on their own AP outsourcing journey.
Some companies handle sensitive financial data, which makes it difficult or impossible for them to hand it over to third parties. Other companies prefer to adopt new technology and processes in-house rather than hand control of their operations to another organization. Asking for references and case studies can also provide valuable insights into the provider’s track record and effectiveness in managing accounts payable processes for other organizations. While there are many benefits to outsourcing accounts payable processes, it’s important to also consider the potential drawbacks and concerns that may arise.
If they experience any issues that interrupt service for you, there’s little you can do to make sure your own vendors are still getting paid on time. Potentially reduced costs – It’s possible that outsourcing your AP duties will be more cost-effective than hiring and training your own team. You won’t have insurance, pensions, or office space and equipment to worry about, so depending on your situation, outsourcing may save you money. Additionally, missed or late payments cost your staff time when they have to right the wrong by recovering erroneous spend, which in turn, reduces time available for other AP functions. In this post, we’ll define and add detail to the practice of accounts payable outsourcing, but also examine the alternatives to accurately and efficiently manage a backlog of unpaid invoices, including AP Automation.
