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Pros & Cons of Accounts Payable Outsourcing vs AP Automation

accounts payable outsourcing

In this post, we’ll define and add detail to the practice of, but also examine the alternatives to accurately and efficiently manage a backlog of unpaid invoices, including AP Automation. If you’re outsourcing accounts payable data, you need to share your confidential financial data with the third-party provider. Outsourcing accounts payable helps businesses avoid these costs while using the best document management and business intelligence tools available. If you want the benefits of outsourcing Accounts Payable but still maintain control of the processes, P3’s Vendor Payment Automation Solutions tool is the perfect middle ground for your business. Our AP automation tools can easily integrate with the systems you already use, so there won’t be any major overhaul to procedures. When you’re outsourcing Accounts Payable, you’re hiring an outside team to fully take over and run your AP department.

accounts payable outsourcing

Management can use AP to manipulate the company’s cash flow to a certain extent. For example, if management wants to increase cash reserves for a certain period, they can extend the time the business takes to pay all outstanding accounts in AP. By following these tips and conducting thorough due diligence, your company can make a well-informed decision when choosing an AP outsourcing firm. This will help ensure a smooth transition and maximize the benefits of outsourcing for your accounts payable department.

Following the rationale that time is money, businesses use outsourcing to make the most of internal employee time. Managing accounts payable (AP) stands out as a critical yet often complex function. It’s a realm where accuracy, efficiency, and timely processing are paramount, directly impacting a company’s financial health and vendor relationships. Before outsourcing AP, review your provider’s privacy policy and data security measures to ensure they meet your standards. If you handle sensitive financial data, rights reserved information, or other proprietary data, be sure your outsourced provider can live up to your privacy needs. If you don’t have access to technologies that give you AP automation, workflows, and other time-saving tools, your outsourced provider can step in to deliver them at a fraction of the cost.

Accounts Payable Outsourcing Services

The system can also be set up to route specific issues to certain parties, which helps to resolve problems even faster. 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. Separate AP departments may not have knowledge of sudden system changes, such as vendor transaction updates, which can result in future errors or duplications. And when it’s time for you to go back and audit the trail of documents, you may have limited access to find where something went wrong. Accounts payable software ensures the control remains in-house, while still eliminating a variety of manual processes.

By hiring the best outsourcing accounting provider, accountants and accounting firms can acquire benefits by saving their time and money. 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.

  1. They are in charge of documenting invoices, reviewing the details of bills and invoices, making payments, keeping records on file, and reporting.
  2. Outsourcing accounts payable isn’t just about handing over a company’s AP tasks and calling it a day.
  3. According to Sage Practice of Now 2020 report, 82% of accounting firms report that clients expect more advisory and consulting services and resources from accountants today than they did five years ago.
  4. This can include invoice processing, payment execution, tax and regulatory compliance, and even strategic financial planning and analysis.

Accounts payable outsourcing providers often set pricing per invoice at the cost of $1.50 to $2.00 per invoice, not by the hour. Technology can take it a step further with accounts payable software that automatically screens for duplicates the second the invoices are scanned, and before data capture. Accounts payable automation software is a SaaS add-on to your ERP or accounting system. It’s designed to streamline back-office AP workflows and global mass payment processes. Security and privacy issues, company stability, communications, and vendor relationship issues may lead some organizations to opt for an in-house automation software solution instead.

This not only streamlines the cumbersome and often resource-intensive task of managing payables but also infuses a level of proficiency and precision that might be challenging to achieve in-house. There’s nothing worse than conducting an accounts payable audit and discovering errors. Depending on the rules that govern your industry, errors could even lead to compliance issues. 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.

Elevate your hiring process with Job Description Generator – a tool to create customized, compelling job descriptions, attracting the right candidates effortlessly. If these factors of outsourcing scare you, then the automaton of Accounts Payable with P3 Cost Analysts is the solution for you. Set up a free consultation with one of our Payment Solutions experts today. For example, you lose full control of your business, you have to rely on a third party, and you have to share sensitive information. Set up touchless AP workflows and streamline the Accounts Payable process in seconds.

That is, if the pricing for outsourced bookkeeping and accounting services is cost-effective. Duplicates could result in double payments, increasing expenses, and decreasing profitability and cash, adversely impacting cash flow management. This is like having extra sets of eyes on all of your vendor invoices before payments go out.

What Is Talent Sourcing? Benefits, Challenges and Strategies for Effective Sourcing

They get access to advanced and robust accounting software and automated process that helps accounting firms. You will get a team of professionals who have extensive years of experience in the industry to use the robust software to suit your requirements and help you achieve your goals. From executing a cost-effective solution to flexibility, outsourcing accounting services are now a fundamental part of an accounting firm or accountant, be it medium-sized, large or small firms.

That data is then stored on their internal servers or in a data center via the cloud. Depending on your industry, you may need to meet rigorous privacy standards to avoid fines and other penalties. But adopting new technology presents an entirely new challenge in and of itself, especially for small and mid-sized businesses. Managing your relationships with vendors and suppliers is challenging enough. It also ensures records are kept of all financial aspects of purchases made by the company.

Dependency – While it’s great to be able to hand off a responsibility you don’t like or can’t fulfill, it also makes you rely on that vendor. If they experience any issues that interrupt service for you, there’s little you can do to make sure your own vendors are still getting paid on time. Make sure you hire the best outsourcing provider to match your accounts payable needs and keep your data safe. AP outsourcing usually involves several changes to your accounts payable processes. As most outsourcing providers charge per invoice, duplication errors can be quite costly. And as these providers could be thousands of miles away, keeping track of these duplicates can be difficult.

accounts payable outsourcing

This flexibility negates the need for internal staffing adjustments, which can be both time-consuming and costly. Accounts payable outsourcing is the strategic delegation of a company’s AP functions to external specialists, optimizing efficiency and accuracy. 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. 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 advantages and disadvantages of outsourcing accounts payable

There has to be a system for organising all the data, keeping track of important dates and avoiding the loss of invoices or delay in payments. Automating accounts payable leads to streamlined, accurate processing and enhanced control with real-time monitoring. Automated accounts payable solutions like MineralTree also integrate seamlessly with major accounting systems and ERPs, ensuring that you can access your data anytime, anywhere. If you are trying to decide whether to outsource or automate your accounts payable processes, you have to ask yourself what your business wants to accomplish. If the primary goal is to take the workload completely off of your hands and lose oversight of your payables, then outsourcing may be the way to go.

Enhanced visibility and control

When a business outsources accounts payable processes, it is providing access to sensitive financial information. Manual accounts payable processes have caused businesses challenges since long before remote working became the norm, prompting many organizations to embrace and invest in AP automation. As with many things, the advantages of outsourcing accounts payable come with a few downsides as well.

Accounts Receivable Outsourcing: Top Benefits for Your Business

The provider’s ability to operate from different locations is a huge added value to cater for the needs of your operations and the varying demand in different sites and time zones. A company’s total accounts payable balance at a specific point in time will appear on its balance sheet under the current liabilities section. 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.

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