Accounts payable outsourcing: Pros and cons

Staff can also be located overseas and in a completely different time zone; which puts a strain on communication. AP software immediately scans the system for duplicate invoices and rejects anything that looks similar. It’s like having a separate set of digital eyes constantly scanning your entire database to avoid any issues down the road. 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. If you’re not managing AP properly, vendors will dread having to call and look for payment.

  1. Before your business decides to use a third-party accounts payable outsourcing provider, compare the potential savings and increased privacy of AP automation software today.
  2. Most businesses still use outdated and expensive systems like optical character recognition (OCR), or even paper invoicing, to manage their AP processes.
  3. Below, we explain why you need to consider the following three areas and what you can do to mitigate any potential challenges.
  4. When considering a major change to your processes, it helps to explore all your options.

Accounts payable are obligations that must be paid off within a given period to avoid default. The payable is essentially a short-term IOU from one business to another business or entity. The other party would record the transaction as an increase to its accounts receivable in the same amount. Outsourcing your accounts payable processes represents a significant time and monetary investment.

Our commitment to accuracy and completeness in managing outsourcing services has helped us grow our business by leaps and bounds. We follow the standard accounts payable process, such as maintaining the master vendor file, receiving and uploading invoices into a financial system, verifying, and approving and processing payments. As a specialized accounts payable outsourcing company, we guarantee you services that will ensure your financial statement and cash position is healthy and transparent. Efficiently managed accounts payable processes through outsourcing significantly enhance a business’s ability to control and optimize cash flow. This efficiency enables companies to capitalize on early payment discounts and avoid costly late payment penalties.

How Bestarion Facilitates Accounts Payable Outsourcing

Outsourcing accounts payable helps businesses avoid these costs while using the best document management and business intelligence tools available. Since Indian service providers have the required bandwidth, skills and resources to scale up and down the accounting procedures, they’re there to support you through thick and thin. Although these are good indications that businesses should consider outsourcing, many of these challenges can be addressed at a fraction of the cost through AP automation and payment services. More and more businesses rely on AP outsourcing firms to redesign and streamline their AP processes despite mild hiccups along the way. 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 exceptions in processing, then your business has to deal with it separately.

Also, changes in your processes may not be fully implemented by outsourcing companies handling your AP processes, resulting in more errors or rework. AP processes, if interrupted due to employee absence, can multiply and burden the business. Outsourcing providers have an adequate workforce (and backup teams) to step in and manage your AP processes. Organizations dealing with sensitive financial data may be hesitant to use a third-party vendor for their AP processes.

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. It memorizes even more than a human when it comes to features like tax compliance and global regulatory rules.

While outsourcing accounts payable offers numerous benefits, there are also valid reasons why some companies may choose to avoid this option. Transitioning the in-house AP department to a third-party provider requires careful consideration and should not be taken lightly. 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 today’s fast-paced business environment, companies are constantly seeking ways to optimize their operations and reduce costs. One strategy that has gained popularity in recent years is accounts payable outsourcing.

Third-party vendors automate the bookkeeping process using the best security systems. Also, experts may offer account analytics services to target areas that require improvement. However, payment services from MineralTree can offload this challenge entirely. MineralTree provides ongoing vendor support, fielding payment inquiries and providing prompt, professional service to suppliers. By combining these two services, AP teams can better manage the relationships with their vendors without any additional time commitment.

Most businesses have a few exceptions and business rules in their accounts payable workflow. As you’re not physically present where the tasks are performed, it can be difficult to manage any issues that pop-up. You might not even be able to quickly identify the source of problems in the AP processes. tax calculator to estimate your tax refund and tax return However, when you outsource the task to a third-party provider, error reporting can be problematic. Outsourcing accounts payable 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.

The drawbacks of outsourcing accounts payable

One risk of using an accounts payable service is the potential for data breaches or unauthorized access to sensitive financial information. To mitigate this risk, companies should carefully vet potential service providers and ensure that they have strong security measures in place. Is your Accounts Payable (AP) service efficient enough to enable you to manage working capital and cash flow better? Are you always in a position to determine potential areas of cost savings, increase organizational agility, and comply with regulatory policies?

Outsourcing Accounting & Bookkeeping Services to India

To address this concern, it is essential to conduct thorough research on the outsourcing provider’s privacy policies and security measures before initiating any engagement. Ensuring that the provider aligns with the company’s privacy requirements will help alleviate such concerns. Accounts payable is the money a company owes its vendors, while accounts receivable is the money that is owed to the company, typically by customers. When one company transacts with another on credit, one will record an entry to accounts payable on their books while the other records an entry to accounts receivable.

Choose the right service provider

When automating accounts payable, a company relies on third-party software to handle the automation while retaining all AP processes in-house, requiring staff training within the AP department. Errors in accounts audits can lead to significant costs and compliance issues for businesses. Many of these errors stem from manual data entry and a lack of control over Purchase Order requisitions, approvals, and deliveries in the accounts payable process. The accounts payable department is responsible for managing any invoices or due payments for vendors and suppliers the business works with to provide material, products, services, or other goods. Many vendors from across the globe offer Accounts Payable services, and businesses that utilize them can save time and money and take loads of stress off their employees.

Switching to another outsourced accounting services provider may be time-consuming and costly. Or, you can choose to install intelligent AP automation software that poses little risk to your security. However, businesses that want to improve their service levels, while cutting down on hiring costs, may benefit from partnering with AP outsourcing providers. 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. Accounts payable outsourcing offers a pathway for companies to enhance efficiency, reduce costs, and focus on their core business activities. By selecting the right partner, leveraging technology effectively, and managing the outsourced relationship strategically, businesses can transform their accounts payable function into a source of competitive advantage.

Flexibility – If you’ve worked in AP long, you know that things don’t always go perfectly. All companies have exceptions processing, but depending on the contract with your AP vendor, they may not. Since their business model is built on low processing costs for invoices, they may kick exceptions processing back over to you or your team. Increased resources – Outsourced AP solutions are generally going to come equipped with technology (i.e. AP Automation platforms) to handle their workflows. This means that they’ll have systems in place to handle both a PO-backed or non-PO process, discrepancy resolution, vendor management and sometimes administrative support.

The Cons of Outsourcing Accounts Payable

Especially if your business is still tied to paper processes and manual data entry. Accounts payable outsourcing can be helpful for companies lacking the resources and automation software to manage their own AP process. As the business world grows more competitive, companies are scrambling to improve services and differentiate their brand, while cutting costs.

In its essence, this process involves entrusting the management of accounts payable – a key financial operation encompassing the handling of outgoing payments to suppliers and vendors – to a third-party service provider. Outsourcing accounts payable processes can also give businesses enhanced visibility and control over financial transactions. Organizations can access advanced technology and tools designed to provide real-time insights into their accounts payable operations by working with a specialized provider.


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