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

Also, some organizations may prefer to retain direct (manual) control over their accounts payable operations. Improved efficiency in accounts payable processes can also lead to better cash flow management and a more strategic use of financial resources. On the other hand, accounts payable outsourcing involves delegating the AP function to a third-party service provider. This external partner takes on tasks such as invoice processing, payment execution, and vendor management, allowing the business to focus on core activities. Outsourcing accounts payable services offer numerous benefits that can transform the way businesses operate and manage their financial obligations. By partnering with a reputable outsourcing provider, companies can unlock cost savings, enhanced accuracy and efficiency, and access to expert knowledge and advanced technologies.

Why outsource your accounts payable?

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. The average cost to process an invoice is as high as $15, and outsourcing or automation may offer up to a sixfold reduction in processing costs. Third-party AP service providers offer professional teams and the latest software to do the job.

• If there are limited resources within your AP department, it becomes crucial to plan on how to scale the function to deal with greater volumes of invoices and data entry.
• Accounts payable (AP) outsourcing is entrusting your organization’s accounts payable processes to a third-party company specializing in managing accounts payable.
• AP outsourcing can be a significant boost to businesses looking to improve efficiency.
• In the following, we will discuss the pros and cons of outsourcing accounts payable services compared to having an in-house accounts payable team, AP automation, and the shared services center.
• By leveraging the skilled workforce available in the LatAm region, businesses can access top-quality accounts payable professionals at a fraction of the cost of hiring in-house staff.

What Is the End-to-End Accounts Payable Process?

But before you jump at the opportunity to outsource AP, you should weigh the pros and cons. If you’d rather keep the process in-house, financial technology is one alternative https://www.bookstime.com/ that can help simplify your AP process. These apps can often automate the invoicing process from end to end, improving efficiency for everyone involved.

Potential Drawbacks of Using an Accounts Payable Service

Case studies and real-world examples can provide valuable insights into the tangible benefits and improvements achieved by businesses that have successfully outsourced their accounts payable functions. These success stories can serve as inspiration and guidance for organizations considering embarking on their own AP outsourcing journey. The accounts payable outsourcing process typically begins with an initial assessment and planning phase.

• Accounts payable outsourcing and accounts payable SSC are usually seen as similar options offering almost identical models to businesses, but there are also some notable differences to clarify here.
• An AP team can easily track critical accounts payable metrics for accurate forecasting and opportunities for improvement.
• In AP outsourcing, activities such as managing short-term debts and creditors are conducted by qualified third-party AP teams.
• 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.
• For any business this is a plus, but for budget-conscious growth startups, this can be a game-changer, allowing you to focus funds and resources elsewhere.
• These people will take over all of the analysis and reporting on your finances.
• Small to medium-sized businesses with straightforward AP processes might find AP automation software more suitable, while larger organizations with complex AP requirements might benefit more from outsourcing.

The Real Cost of Outsourced Bookkeeping: A Detailed Breakdown

Outsourcing firms specialize in AP management, ensuring not only efficiency but also strict compliance with evolving regulatory standards. These providers stay at the forefront of industry best practices, offering insights and strategies that might be beyond the scope of an in-house team. This level of expertise ensures that AP processes are handled with the utmost professionalism and up-to-date knowledge, safeguarding businesses against compliance risks and inefficiencies. Hence, if your business shares duplicate invoices, you are going to have to pay for that too.

When and Why You Should Outsource Accounts Payable

By selecting a reliable provider and implementing additional security measures, businesses can reduce the likelihood of data breaches and financial losses. One of the biggest reasons to outsource AP is that it allows companies to scale up their operations without hiring additional staff. Outsourcing the AP process and delegating tasks saves time and money that would otherwise have been spent on hiring new employees. Accounts Payable (AP) is a financial term that describes short-term debt and obligations to a company’s vendors or suppliers for the goods and services bought on credit. The sum of all accounts payable is represented on a balance sheet as a current liability.

Consider Hiring Outsourced Accounts Payable Talent From Latin America With Near

Automation offers many benefits of outsourcing accounts payable without the liabilities of engaging a third-party team. Automated systems can process invoices faster, with some solutions capable of handling accounts payable outsourcing invoices in as little as 2-3 days compared to the average of 8.6 days for manual processing. This speed not only improves efficiency but also allows businesses to take advantage of early payment discounts.

• If the third-party AP provider you hire is making late payments, the behavior reflects poorly on your brand—and no one else.
• This expertise can be particularly valuable for businesses operating in multiple jurisdictions or dealing with complex regulatory landscapes.
• Companies working with outsourced AP service providers can face challenges with validating issues or errors in an outsourced firm.
• The size and resources of your company play a significant role in determining whether outsourcing accounts payable is the right choice.
• If your company is scaling up and requires more flexible, scalable AP solutions, outsourcing can provide the necessary adaptability without the overhead of expanding an in-house team.
• Mid-sized businesses don’t often have the luxury of employing a robust team of security experts, nor do they have the resources to run extensive audits and eliminate risks.

Check for Comprehensive Service Offerings

A growing e-commerce company with 50 employees implemented an AP automation solution to handle their increasing invoice volume. Within six months, they reduced their invoice processing time from 14 days to 3 days and cut processing costs by 60%. The finance team reported spending 75% less time on manual data entry, allowing them to focus on more strategic tasks.

AP Automation involves implementing software solutions that streamline and digitize the accounts payable process. 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. If you’re still reliant upon cumbersome processes and old technology, outsourcing could help you see results faster and more clearly. Outsourced accounts payable providers have all the resources they need to optimize your process, including automation and reporting tools.