Of course, this rapid change in processes can cause problems in-house, especially if your employees are used to your old procedures. 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. Companies that don’t use e-invoices and other electronic automation tools are likely to lose out to more productive competitors!

• Vendor relations should be taken as a customer service approach, because vendors can (and will) pull contracts from your company if they find it difficult to work with your business.
• So, companies that use an outsourced service will rely on a third party to protect their interests.
• Most in-house teams have a financial supervisor, such as the CFO, to manage issues when employees aren’t present.

Additionally, when you own your own AP process you can turn accounts payable into a strategic partner for your business. As opposed to your staff spending hours on manual data entry, you can automate that and have them spend their time combing through vendor contracts looking for early payment discounts since you’re no longer missing deadlines. In an earlier blog post, we explained that manually processing a single invoice can cost as much as $30. By partnering with professional outsourced companies, businesses can benefit from the integration of advanced technologies, systems, and processes.

Cons of accounts payable outsourcing

Exceptional BPO partners will also develop a hybrid strategy that allows CEOs to maintain control of processes they consider essential for business success. While turning a bottom-performing organization into a top performer may appear like an obvious goal, the hefty investment that comes with it might make it an unattainable short-term objective. An excellent outsourcer can assist you in establishing a feasible performance target based on your company’s drivers and ratings. The greatest value is provided by identifying your company’s most important business drivers at the outset – and aligning your leadership team and BPO provider behind them. Accounts payable processes are rules-driven, making them ideal for third-party administration.

• To ensure a high quality of work, exceptional providers will also track a broader scope of AP key performance indicators (KPIs) like cycle time and number of invoices processed per FTE.
• After learning about all the issues that outsourcing Accounts Payable can help with and the benefits of using a third party, you’re probably ready to start researching potential providers.
• Manual data entry and the lack of control around purchase order requisitions, approval, and delivery account for many accounts payable errors.
• Identifying your biggest business drivers at the start – and aligning your leadership team and BPO provider behind them – ensures the greatest value.

These activities distract your workforce from more strategic work, wasting your human resource potential. The most effective SLAs measure an outsourcer’s performance through one or two carefully chosen metrics for every function in a contract. The pandemic further spotlighted the inadequate infrastructure and poor healthcare systems that impact service delivery in many offshore locations. Order.co helps high-performing clients in diverse industries increase the efficiency of their procurement process. You can contact us today to get more information about our exceptional AP Processing services.

Why accounts payable outsourcing is gaining popularity

The list of services varies but the vendor will generally perform functions such as invoice capture, purchase order (PO) matching, and processing, payments, archiving records, and reporting. The outsourcing partner already possesses a skilled workforce equipped with the necessary tools to streamline the AP process. As a result, the company can redirect the saved resources toward other critical areas of the business, ultimately contributing to improved cash flow and overall financial health. In this article, we will explore the pros and cons of accounts payable outsourcing solutions to help businesses make informed decisions regarding this critical aspect of their financial operations. To ensure a high quality of work, exceptional providers will also track a broader scope of AP key performance indicators (KPIs) like cycle time and number of invoices processed per FTE. While failing to meet KPIs isn’t a breach of contract, these measurements are navigational tools that provide insight into operations, uncover bottlenecks, and keep outsourcers on track to meeting SLA objectives.

Accounting Systems

But without the right efficiencies and reporting tools, the risk of payments fraud and vendor non-compliance escalates as businesses grow. In fact, according to the 2018 Payments Fraud and Control Survey by the Association for Financial Professionals (AFP), 78% of all organizations surveyed were hit by payments fraud in 2017. Among those that were hit by fraud, 92% said the attacks collectively cost at least 0.5% of their organization’s annual revenue. No matter your current accounting system, the best accounts payable outsourcing firms have the tools to integrate with it. 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.

Access to better tools

Besides an innovation agenda, your outsourcer should also demonstrate deep finance subject matter expertise and a robust approach to process documentation. The best partners can readily identify challenges in the full AP lifecycle and are experts at implementing process improvements and best-in-class tools to resolve them. They are also able to take the end-to-end AP process and not just the most basic activities of invoice coding and processing. For example, at Auxis, our AP outsourcing teams are able to perform many other AP functions including vendor master maintenance, vendor communication and inquiries, payment proposal preparation, reconciliations and more. If your current accounts payable process has considerable cash leaks or issues, moving to outsourced AP may improve budget optimization even after the cost of service fees.

Are Accounts Payable Outsourcing Right for Your Business?

If this is the case, a small error can quickly turn into a huge hassle that goes unresolved for days or weeks. It would be wise to identify if the outsourced solution is leveraging complete AP Automation or manually keying in data for any step in the process. Loss of control – It goes without saying that anytime something is happening outside your building, you’ll have less control, and outsourced AP vendors are no exception. Additionally, it’s unlikely that they’ll be able to conform to your AP workflows exactly, so you’ll be doing things their way. Also, don’t be disconcerted when outsourcing AP and they have eyes into your financials; a loss of privacy is one drawback and vulnerability when it comes to accounts payable internal controls. Outsourcing accounts payable offers a multitude of benefits that can significantly impact a company’s financial efficiency and overall well-being.

Potential Drawbacks of Using an Accounts Payable Service

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 balance sheet provider requires careful consideration and should not be taken lightly. Monica leads Finance Transformation Projects, including changes to processes, data, systems, roles, and responsibilities.

The outsourcing provider takes over tasks such as invoice processing, data entry, invoice validation, payment processing, vendor management, and reporting related to accounts payable. Outsourcing accounts payable processes can lead to significant improvements in efficiency for businesses. By leveraging the expertise and technology of a third-party provider, organizations can streamline their AP workflows and reduce the time spent on manual tasks such as data entry and invoice processing. Genpact provides a comprehensive range of AP outsourcing services, including invoice receipt and processing, vendor management, and payment processing. They strive to offer cost savings, improved efficiency, and increased visibility and control for their clients. However, accounts payable automation may not be suitable for all businesses, as it may not offer the same level of human oversight and adaptability as outsourcing accounts payable processes.

Finance & Accounting unemployment levels have also reached record lows in the U.S. – increasing wages and driving high turnover that impacts consistency and errors. Before implementing a move to outsourcing or automation, get your data in order to ensure you begin your new program with a clean slate. Take time to check and cleanse data for errors, duplicates, or issues that could hinder transparency in your AP processes. These include delegation of responsibilities, implementation of new software, and changes in the submission systems. Since you are not physically present to supervise tasks, mistakes may not receive due attention. You may not even notice serious errors — such as duplication of invoice processing and exception processing — until it’s too late.

Larger outsourcers are less willing to customize solutions because they have operations set up for high volumes. Benchmarking your Accounts Payable department against its peers can assist you in finding the most profitable outsourcing possibilities. Using industry standards to evaluate your team’s performance provides a clear picture of your operations’ current health and quality, allowing for a strategic approach to optimizing your end-to-end process. Accounts payable automation software, which may be used in-house, is a SaaS add-on to your ERP or accounting system that automates back-office payables processes and international mass payments procedures. ​​The best benefit of in-house accounts payable departments is that they allow organizations to manage procedures and systems. In-house personnel is more approachable, so concerns and queries may be addressed immediately to the relevant parties.