Pros & Cons of Accounts Payable Outsourcing vs AP Automation

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. 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. Growing businesses have to maintain relationships with many suppliers and vendors, and this usually ends up making the Accounts Payable process complicated. Vendors with different invoicing standards/procedures tend to make accounts payable processes quite cumbersome.

Reducing Paper Invoices and Manual Data Entry

As with any organizational change, teething issues may arise when a company decides to outsource its AP process. Transitioning from an in-house AP department to an external provider can potentially lead to duplicated entries and other early challenges. To preempt these issues, it is advisable to conduct an internal meeting with staff before implementing any changes. This meeting should focus on discussing the chosen outsourcing partner, its impact on workflow, and proactive measures that employees can take to ensure a smooth and seamless transition.

Lower errors and better fraud mitigation

This strategic reallocation of efforts not only enhances overall business efficiency but also fosters a more dynamic and competitive organizational environment. Being able to hand over crucial AP responsibilities may be good but it comes at a cost. The fact is you become heavily dependent on the outsourcing provider for accounts payable services that involve vital transactions. https://www.bookstime.com/ So if the provider faces challenges such as security breaches or even bankruptcy, then your company processes could come to an abrupt standstill. AP Outsourcing involves handing over accounts payable processes to a third-party business provider. This means that you use the accounts payable services of an external entity to perform your business transactions.

Choose the right service provider

Companies that are worried about headcount expansion are often struggling with an equivalent increase in paperwork. You’d be so busy shipping papers back and forth, making sure nothing slipped through the cracks of those manual systems, that you’d be no better off than you were before. If you’re concerned about the dwindling efficiency of a ballooning AP department, automation can help with that too.

If you do decide to pay a third party to handle your accounting, be aware of the potential for scope creep. You’ll want to set clear expectations from the start about the scope of work, not to mention how to handle any tasks outside of that scope, especially if you’re paying hourly. An early and open discussion about this can keep you from being hit with unexpected costs down the line. An Accounts Payable department that is managing the AP process on its own (in-house) is most likely overwhelmed, especially if you’re a small business with piles of invoices coming in each day.

• While you have to hire employees and spend time training them, you also need to purchase the tools required to do the job!
• Moreover, the precision of automated systems reduces the error rates from around 1-3% in manual handling to near-zero, ensuring financial accuracy and compliance.
• Furthermore, outsourcing accounts payable services grants businesses access to a wealth of expertise and advanced technologies that may be difficult or expensive to acquire internally.
• Outsourcing vendor management tasks can ensure that vendor relationships are well-maintained.
• Potentially reduced costs – It’s possible that outsourcing your AP duties will be more cost-effective than hiring and training your own team.

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. Plus, accounts payable outsourcing 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.

• Your chosen service provider will handle many aspects of your financial operations, and this may lead to concerns about transparency and decision-making.
• Perform a thorough cost-benefit analysis to determine whether outsourcing accounts payable makes financial sense for your organization.
• In-house AP processes require hiring people, investing in training materials, and equipment/software which can be quite expensive for a business.
• 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.
• Plus, an accounts payable service or organization can serve each customer in a fraction of the time because they’re specialists.
• If a third-party company experiences mismanagement or bankruptcy, it may disrupt your accounting services and affect vendor relationships.
• 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.

Loss of Control