Accounts payable outsourcing: Pros and cons

outsourcing accounts payable

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. Of course, there are some downsides to using third-party accounts payable outsourcing services. When working with Genpact, businesses can expect a dedicated project manager and a team of experts to handle their accounts payable tasks, ensuring smooth communication and timely execution. By partnering with Genpact, organizations can focus on their core business activities while an experienced team effectively manages their AP processes.

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  2. In addition, you’ll enjoy the same availability of your data, the same control over compliance workflows, the same detailed invoice and payment tracking, with the same standardization of your AP process.
  3. The pricing could be more cost-efficient and profitable than the overhead expenses necessary to hire and train new personnel when your business relies on manual processes.
  4. Plus, you can manage payments with batch approvals, allowing you to authorize the payment of vendors efficiently.

This is particularly important for financial services and businesses operating in highly regulated sectors. 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. To streamline your AP processes, your data submission systems will need to be updated. Ensure your employees are up to date with these to avoid errors or duplication.

Factors to Consider Before Outsourcing Your Accounts Payable

By establishing clear expectations and maintaining a strong working relationship with the outsourcing provider, businesses can maintain appropriate control over their accounts payable processes. Invoice receipt and processing is a crucial aspect of accounts payable outsourcing services. Providers offer services such as receiving hard copy and electronic invoices, matching invoices with purchase orders, processing debit memos, and image and data capture.

There’s unlikely to be a lot of deep insights that may help your business run better, smoother, and more efficiently from a financial perspective the same way a rockstar AP department would. It’s also worthwhile to take note of their office/staff locations as outsourced AP services can be hosted overseas, which can be a communication barrier. Companies outsource their accounts payable operations in part to gain access to better tools and processes. Of course, this rapid change in processes can cause problems in-house, especially if your employees are used to your old procedures. Mid-sized businesses don’t often have the luxury of employing a robust team of security experts, nor do they have the resources to run extensive audits and eliminate risks. To get the security tools and skills they need, many small to medium-sized businesses rely on the outsourcing services of larger and more sophisticated AP experts.

If this is the case, a small error turns into a huge hassle that goes unresolved for days or weeks. Identify if the outsourced solution is leveraging complete AP automation or manually keying in data. Accounts payable software ensures the control remains in-house, while still eliminating a variety of manual processes. AP automation software is also designed with features that allow for scheduled payments. If you have recurring purchases or need payments to go out on a certain date, the system can be set up to accommodate you. AP software is typically priced by either a subscription as SaaS or a fixed price for a license fee.

While often subject to rigorous security protocols, third-party providers are always prone to data breaches and other security risks. This lack of transparency can be a concern for companies that want to maintain tight control over their financial operations and regulatory compliance. Accounts payable is the money that a company owes to its vendors or suppliers for products or services that it has received but hasn’t paid for yet. This process is a critical aspect of the accounts payable process for proper accounting.

Accounts payable outsourcing vs. AP automation

This comprehensive guide will explore the benefits of outsourcing accounts payable, address potential concerns, and provide tips for ensuring a successful partnership. Aside from these the ideal candidate should also be well-versed in accounting softwares. Finance and Accounting Outsourcing is designed to supplement the business with accounting services.

outsourcing accounts payable

They incorporate technologies that identify errors before they become liabilities. In the worst scenarios, a poorly performing accounts payable process can even be a liability to your company. An alternative to outsourcing to a company specializing in accounts payable is outsourcing to an individual or team of AP professionals. Time Doctor is a powerful performance tracking software used by PWC and KPMG to track their outsourced teams’ work activity.

Accounts payable (AP) outsourcing is entrusting your organization’s accounts payable processes to a third-party company specializing in managing accounts payable. This can range from invoice receipt and processing to vendor management and payment processing. Corcentric’s wide range of product solutions such as accounts payable outsourcing, invoice processing, as well as accounts receivable, makes us an essential part of the success of any company. With a relentless focus on the customer, Corcentric works with businesses to improve cash flow and achieve the operational efficiency they’ve been searching for. The world is a big place and sending payments to vendors has become increasingly complicated.

Cons of AP outsourcing and how to address them

AP Automation, on the other hand, refers to the use of software to automate AP tasks within the organization. This technology streamlines processes like invoice capture, approval workflows, and payment processing. While it reduces manual work and improves efficiency, it requires investment in software and may still necessitate internal management and oversight. As we mentioned earlier, verifying potential AP outsourcing providers’ security and compliance measures is crucial to ensure that your organization’s sensitive financial information is protected. Evaluate the provider’s internal controls, anti-fraud measures, and adherence to accounting principles and regulations to gauge their commitment to data security and compliance.

The comprehensive guide to accounts payable outsourcing

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 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. In many cases, outsourcing is the easiest way to eliminate paper invoices, checks, and receipts. Paper processing has long been one of the most significant sources of problems for accounts payable professionals, especially in terms of fraud. As the business world expands and supply chains stretch farther and farther across the globe, payments to vendors and other service contractors are becoming even more complicated.

Instead of changing the system, they require more and more people to manage it—to perform data entry, to track down each approval, to catch human errors. Plus, an accounts payable service or organization can serve each customer in a fraction of the time because they’re specialists. They have a lot of AP experience, and they dedicate every resource to that one job.

To acquire the resources necessary to streamline their internal processes, small and medium-sized businesses often turn to accounts payable outsourcing companies to fill the gap. By thoroughly assessing a provider’s capabilities, you can select the best-fit partner for your organization and ensure that your accounts payable processes are effectively managed. By outsourcing to third-party account payable services, the best financial document management companies handle your AP functions. It also frees up your in-house AP departments to focus on higher-level tasks and core business processes.

These concerns can make it very appealing to outsource some (or all) of the accounts payable function, which ironically, becomes another invoice. While mistakes are inevitable with any manual process, duplicate payments cost businesses money; a lot of money in fact. It’s not at all uncommon for AP departments to become completely overwhelmed by their workload. This is especially prevalent when businesses experience periods of rapid growth, which is often accompanied by an increase in invoice volume. While this is great for sales, it also puts additional pressure on your AP staff. This is especially the case for paper-based processes and those manually entering data, chasing down approvals, and heavy PO-based processes.

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Selecting the right accounts payable service provider is critical to ensure a successful partnership. Below are our top tips for three areas to consider when choosing the best AP outsourcing provider. Communication challenges can arise when working with an outsourced accounts payable provider, particularly if there are language barriers, time zone differences, or lack of clarity in communication.


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