Outsourcing Accounts Payable: The Pros and Cons

Now, depending on how efficient that service is and how many hours you need from them, they still might be more cost effective than automating your own AP processes and maintaining a lean AP team. If you’re struggling to manage a complicated, manual AP process, it can be tempting to outsource your AP process. You might consider hiring an accounting service or a fractional finance team just to get that towering stack of paper off your desk and get those hours back every month. Any company dealing with accounts payable best practices in-house is bound to have greater control over its processes. Emergencies can be prioritized and handled straight away with direct approvals.

1. You might consider hiring an accounting service or a fractional finance team just to get that towering stack of paper off your desk and get those hours back every month.
2. Working with an external team may lead to communication challenges, especially if they are located in different time zones or have cultural differences.
3. AP processes, if interrupted due to employee absence, can multiply and burden the business.
4. The technology that comes with an accounts payable outsourcing provider presents the opportunity to eliminate paper and reduce manual tasks like data entry.
5. 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.

The fact is you become heavily dependent on the outsourcing provider for accounts payable services that involve vital transactions. So if the provider faces challenges such as security breaches or even bankruptcy, then your company processes could come to an abrupt standstill. Hence, if your business shares duplicate invoices, you are going to have to pay for that too.

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. In an earlier blog post, we explained that manually processing a single invoice can cost as much as $30. According to Ardent Partners’ Accounts Payable Metrics that Matter in 2020, the top challenges holding AP back are exceptions, lengthy invoice approval times, and too much paper. Another capital gains tax rates 2021 and how to minimize them big challenge is the amount of time staff spends on handling supplier inquiries.

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Paying your first bill takes anywhere from a few minutes to a few days, depending on the size of your AP department and processes. small business tax preparation checklist Many business leaders expect a huge headache in switching from a traditional AP system to a more practical automated one. Many companies outsource their AP for a variety of reasons that make perfect sense for their strategic situation. The implementation alone would be a nightmare, not to mention extremely costly.

Accounts Payable Outsourcing: The Complete Guide

Every business has unique needs, and your AP service provider should be able to tailor their services accordingly. Whether it’s handling different types of invoices, integrating with your existing financial systems, or scaling services in line with your business growth, the provider should be flexible and adaptive. Outsourcing allows you to focus on core operations while freeing up resources for other business functions. If your team can create value elsewhere in the business by moving to an outsourced AP model, outsourcing might make sense.

When outsourcing, you’ll be working with an external team or provider, which can sometimes result in communication challenges. The primary goal of AP outsourcing is to streamline and optimize the AP workflow, leading to cost savings, improved accuracy, and enhanced operational efficiency. 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.

Four benefits of outsourcing accounts payable

AP Automation, on the other hand, refers to the use of software to automate AP tasks invoice template 2021 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. This can include invoice processing, payment execution, tax and regulatory compliance, and even strategic financial planning and analysis. Having a full suite of services ensures that all your AP needs are covered under one roof, simplifying management and communication.

Comparing Accounts Payable Outsourcing vs. Accounts Payable Automation

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. In short, they finally change their system by letting someone else handle it.