The Pros and Cons of Outsourcing Accounts Payable: An In-Depth Analysis

This flexibility negates the need for internal staffing adjustments, which can be both time-consuming and costly. By carefully considering the cost and value of different accounts payable service providers, you can make an informed decision that will deliver the best return on investment for your business. So while implementing an accounts payable automation system in-house can help reduce invoice processing costs and improve efficiency, you will still have to have in-house employees dedicated to AP functions. Therefore it’s unlikely to provide the same level of cost reduction as outsourcing.

According to the Accounts Payable Report by Levvel, 33% of companies are still manually processing invoices. Traditionally, an accounting professional manually reviews and verifies invoices, sorts them into batches, enters payment information, and issues payments to vendors. While managing an internal AP team is simple, it is more difficult to manage outside service providers.

Providers with experience in your industry or similar business sizes can offer tailored solutions that better fit your needs. Accounts payable outsourcing is the practice of hiring a third party to handle your organization’s AP processes. AP providers come fully equipped with the tools, skills, and technology https://www.quick-bookkeeping.net/ not only to manage your existing accounts payable functions but also to integrate new capabilities to give you a more streamlined environment. When assessing the cost and value of outsourcing AP services, it’s important to consider not only the upfront costs but also the long-term benefits.

AP automation streamlines invoice processing workflows, from invoice receipt to approval routing, to PO and receipt matching to the invoice, to review and exception management, to final approval for payment. 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 the right provider, companies can streamline their business operations, refine their processes and grow revenue.

1. Some of the most frequently outsourced processes include invoice receipt and processing, vendor management, and payment processing.
2. Identify if the outsourced solution is leveraging complete AP automation or manually keying in data.
3. The accounts payable outsourcing partner should also have robust expertise working with a substantial clients base with proven track record of success in your market.
4. 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.

While outsourcing can lower costs and improve services for your business, relying too much on outside sources increases risk. Your accounting services may be interrupted, and vendor relationships may be impacted if a third-party company experiences poor management or insolvency. Leveraging detail-oriented outsourced staff knowledgeable in accounting software to process invoice records enables efficient day-to-day operations of accounts payable management.

Accounts Payable Outsourcing vs AP Automation: Which Fits Your Business Needs?

For example, back-office employees don’t have to spend hours on manual data entry, recording disbursements and bookkeeping. Book this 30-min live demo to make this the last time that you’ll ever have to manually key in data from invoices or receipts into ERP software. Businesses should remember that they lose privacy when they are divulging financial information and providing access to sensitive data while opting to outsource AP processes. While outsourcing your accounts payable may seem problem-free there are some issues that a business can still face with outsourcing. Listed below are some of the disadvantages that can arise with AP outsourcing.

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. An increasing number of businesses are outsourcing their accounts payable processes to a specialized third-party team. Accounts Payable outsourcing and automation sometimes get used interchangeably, but there is a difference between the two. Both can help take a load off of your Accounts Payable department, reduce errors, streamline processes, and save your company money in the long run.

They should offer advanced solutions like automation, electronic invoicing, and cloud-based systems. These technologies not only streamline the AP process but also provide greater visibility and control. Inquire about their data security measures and compliance with regulations like GDPR or HIPAA, if applicable. Outsourcing accounts payable offers unparalleled scalability, allowing businesses to adjust their AP operations in alignment with their growth trajectory and seasonal demands.

Below, we explain why you need to consider the following three areas and what you can do to mitigate any potential challenges. When you’re outsourcing Accounts Payable, you’re hiring an outside team to fully take over and run your AP department. An Accounts Payable outsourcing company will utilize automation software to maximize efficiency and accuracy. Alternatively, automation technology can be implemented in-house and be operated by your Accounts Payable team. If your outsourcing provider charges by invoice, take extra caution to avoid duplicate submissions.

Tips For Choosing the Right Accounts Payable Outsourcing Partner

Outsourcing accounts payable processes can lead to significant improvements in efficiency for businesses. By leveraging the expertise and technology of a third-party provider, organizations can streamline their AP workflows and reduce the time spent on manual tasks such as data entry and invoice processing. However, accounts payable automation may not be suitable for all businesses, as it may not offer the same level of human oversight and adaptability as outsourcing accounts payable processes. Additionally, implementing accounts payable automation software may require a significant initial investment (or recurring SaaS fees) in software and training of in-house employees.

Make sure you go through your provider’s privacy policy and data protection measures carefully. This lets you determine if the provider matches your security standards before you outsource work. Most businesses have a few exceptions and business rules in their accounts payable workflow. https://www.online-accounting.net/ takes most of this workload off of your AP team supervisor. Even if some employees are absent, the stress of covering up does not land on a sole supervisor.

Is Accounts Payable Outsourcing the Best Choice for Your Business?

Understanding your existing processes will help you determine whether outsourcing can provide tangible benefits in terms of cost savings, accuracy, and efficiency. Outsourcing accounts payable relies on a third party to manage this crucial accounting function. As previously mentioned, it involves hiring a third-party provider to manage all AP operations. It avoids the cost of adopting accounts payable software and does not use up company resources to run the show when it comes to the AP process. It also provides a business with a repertoire of  technology and tools, which usually includes AP automation, offerings that create a competitive edge.

Even small businesses must rely on vendors in numerous locations to deliver their products and services to customers. 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. But by considering factors such as cost, scalability, and the level of control desired, you can make an informed decision about the best approach for your business. Businesses should establish clear communication channels and expectations with their outsourcing provider from the outset to address communication challenges. This may include regular progress updates, meetings, and clearly defined points of contact to ensure that any issues or concerns are promptly addressed and resolved. By selecting a reliable provider and implementing additional security measures, businesses can reduce the likelihood of data breaches and financial losses.

What is Accounts Payable Outsourcing?

If a third-party company experiences mismanagement or bankruptcy, it may disrupt your accounting services and affect vendor relationships. An alternative https://www.bookkeeping-reviews.com/ to outsourcing your AP function is implementing AP automation. When you outsource accounts payable, a third-party company runs your AP department.

Cutting down on paper invoices and manual data entry

If these factors of outsourcing scare you, then the automaton of Accounts Payable with P3 Cost Analysts is the solution for you. For example, you lose full control of your business, you have to rely on a third party, and you have to share sensitive information. Set up touchless AP workflows and streamline the Accounts Payable process in seconds.

When you outsource, you don’t have as much visibility over the process, nor do you have as much control over how the process works. As you outsource AP tasks that were previously carried out by the in-house team, your employees might have different responsibilities and day-to-day tasks. While these don’t give you the full picture, checking reviews and testimonials is a great place to start. Read about the benefits and drawbacks people have faced when hiring a particular provider. This goes without saying, but the quality of work done depends on the service provider you choose.

The AP department of a company is involved with tasks such as entering data, processing invoices, creating purchase orders, and more. These activities are important for companies as they help keep track of the bills and invoices that need to be paid on a regular basis. More businesses are emphasizing sustainability and green practices in their operations, including accounts payable. Outsourcing providers may offer solutions that align with sustainability goals. Consider factors such as the volume of invoices, the complexity of your accounts payable processes, and your budget constraints. Data security and compliance are critical considerations in accounts payable.