Accounts Payable AP Outsourcing in 2024: Pros, Cons, and Evaluation

And even if you know you want to use an accounts payable outsourcing service, automation software can be great to employ alongside your contracted provider. Most providers will either implement their own smart technology if you don’t have one in place already. Outsourcing accounts payable is an attractive option for many small businesses, freeing your team from the manual work of managing invoice processing and vendor payments. Outsourcing your accounts payable processes may be cost-effective for a business.

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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. So if the provider faces challenges such as security breaches or even bankruptcy, then your company processes could come to an abrupt standstill. Many account payable outsourcing companies charge on a per-invoice basis. Hence, if your business shares duplicate invoices, you are going to have to pay for that too. If outsourcing providers do not have the facility to detect duplicate invoices, then the business ends up incurring more costs than necessary.

Skilled resources & latest technology

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. Administrative, tracking & reporting – Since you’ll be paying this vendor a fee to manage your AP, they’ll often provide reporting among other administrative functions. Managed AP services can offer reporting on cost per invoice and time to payment among others, and routines such as analysis, month and year-end close, reconciliation, and AP document management. Increased resources – Outsourced AP solutions are generally going to come equipped with technology (i.e. AP Automation platforms) to handle their workflows.

Skilled outsourcing providers can make a company’s AP processes more efficient; thus improving the cash flow. 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. AP Automation, in comparison, is the adoption/integration of an AP software to extract, validate and approve accounts payable invoice processes.

AP outsourcing solutions put efficient systems in place that allow you to pay vendor invoices on time (or even early) to enhance supplier relationships. A satisfied supplier may offer discounts due to early payments, thus increasing your profitability. Essentially, AP process outsourcing transfers tasks and responsibilities to another company for efficient management. AP automation uses business intelligence software to manage your in-house systems (with lower total costs on your part). An alternative to outsourcing your AP function is implementing AP automation. When you outsource accounts payable, a third-party company runs your AP department.

Is Accounts Payable Outsourcing the Best Choice for Your Business?

Accounts payable outsourcing is the process of hiring and using an outside vendor to manage and execute certain AP tasks, such as processing and paying invoices. Accounts payable outsourcing is a subset of business process outsourcing (BPO). A company hires an experienced third party to electronically capture and process its vendor invoices, accounts payable, and payments, reducing the in-house financial workload.

1. Let’s unlock the mind-boggling benefits of accounts payable services and revel in the sheer joy they bring.
2. With AP automation, your in-house accounts payable team uses a sophisticated platform to streamline your internal AP systems.
3. It’s designed to streamline back-office AP workflows and global mass payment processes.
4. While outsourcing helps a company cut costs and improve its service levels, it can often limit their independence.

Businesses that are used to doing accounts payable in-house are also used to a certain level of control. If you oversee the AP department, for example, you may enjoy the fact that you can step into a room and speak with your staff whenever prepaid lease agreements you want. Despite the myriad benefits of outsourcing your AP processes, it may not be the best choice for you. You may have hesitations about working with a third-party, or it may not be a reasonable choice in your industry.

AP software can also increase timely payment processing with automated triggers in the matching and approval process. They also provide comprehensive reporting and analytics, giving you valuable insights into your financial health. It’s like having a crystal ball that predicts your future financial success, all while you sit back and enjoy a good laugh.