Pros and Cons of Accounts Payable Outsourcing: Advantages, Disadvantages, and Alternatives

It can grant companies the invaluable ability to invest their time, vitality and expertise in endeavors that hold the potential to yield the most significant impact on their ever-expanding enterprises. This essential function guarantees the precision, compliance and operational efficiency of financial processes. As a result, if anyone looks at the balance in accounts payable, they will see the total amount the business owes all of its vendors and short-term lenders. For example, if the business above also received an invoice for lawn care services in the amount of $50, the total of both entries in accounts payable would equal $550 prior to the company paying off those obligations. As a result, they can ensure compliance with all applicable laws while streamlining invoice processing procedures.

The $500 debit to office supply expense flows through to the income statement at this point, so the company has recorded the purchase transaction even though cash has not been paid out. This is in line with accrual accounting, where expenses are recognized when incurred rather than when cash changes hands. The company then pays the bill, and the accountant enters a $500 credit to the cash account and a debit for $500 to accounts payable. Proper double-entry bookkeeping requires that there must always be an offsetting debit and credit for all entries made into the general ledger.

Quality issues can appear in the services.

Outsourcing payment processing tasks to a reliable provider also reduces the risk of payment fraud and errors, as they employ advanced technologies and processes to identify, eliminate, and minimize such risks. This can ultimately save your organization time and money while maintaining a high level of accuracy and compliance. Poor vendor management can lead to issues such as overpayments on invoices, missed early payment discounts, and even loss of contracts with key suppliers. Outsourcing vendor management tasks can ensure that vendor relationships are well-maintained. Companies might outsource their accounts payable functions, including the entire accounts payable department, for various reasons, such as cost savings, improved efficiency, and easier compliance with financial regulations.

  • Outsourcing your accounts payable function resolves these challenges and more, with Deloitte reporting that 65% of successful organizations include outsourcers in their delivery model.
  • The payable is essentially a short-term IOU from one business to another business or entity.
  • Book a 30-min live demo to see how Nanonets can help your team implement end-to-end AP automation.

A security breach can damage a company’s reputation, cost money, and put you in legal trouble. 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.

Accounts Payable outsourcing is the decision to hire a third party with the specific expertise and technology to take over the AP processes, such as receiving vendor invoices, tracking business debts, and making payments on time. Many vendors from across the globe offer Accounts Payable services, and businesses that utilize them can save time and money and take loads of stress off their employees. Outsourcing accounts payable processes can also give businesses enhanced visibility and control over financial transactions. Organizations can access advanced technology and tools designed to provide real-time insights into their accounts payable operations by working with a specialized provider. It has become abundantly clear that within financial, tax and accounting firms, there exists a reservoir of exceptionally talented individuals capable of delivering high-margin tax and accounting advisory services. However, these very individuals often find themselves entangled in the time-consuming web of repetitive tasks and low-margin compliance work.

Your accounts payable process may be put at risk, and switching to another system can be expensive and time-consuming. As a result, accounting firms in India are equipped with the latest accounting software, internet services, and security solutions. This enables them to cater to all of your accounting needs quickly and accurately, making it a great destination for accounts outsourcing.

Receive Invoices

It’s never too late to regain control of your time and let the accountants handle the financials. Learn more about all the reasons business owners are outsourcing back-office accounting functions. Accounts payable (AP), or “payables,” refer to a company’s short-term obligations owed to its creditors or suppliers, which have not yet been paid. Your Account Payable team members are trained in most of the commonly used Account Payable systems. They are all college educated with accounting degrees and you benefit from their experience in Accounts Payable. Offer suggestions around researching the privacy policies and security measures prior to engaging with the outsource partner.

Accounts outsourcing to India: 7 key benefits & top agencies

Many outsourcing firms far and wide are available to offer a multitude of services. Additionally, the possibility of human error, common in manual data entry, is eliminated when accounts payable is automated. To guarantee the accuracy, data can be validated and cross-checked against existing databases online payroll services for small businesses and ERP systems with automation. Because this removes the need for manual data correction and re-entry, it saves time, increases efficiency, and results in cost savings. In general, businesses seeking to enhance their financial operations may find that outsourcing accounts payable is appropriate.

Saves money and time

Outsourcing the AP function is becoming more and more common as companies realize they can improve operations without making an in-house investment in technology. We’re all guilty of it, having that ‘I’ll just do it myself’ mentality, and sometimes it works to our advantage, and sometimes it doesn’t. When it comes to your company’s accounts payable process, outsourcing it through an accounting service that provides AP automation could mean the difference between a thriving and struggling business. Of course, outsourcing accounts payable may not be for everyone, but it’s certainly worth exploring.

These cost savings contribute to improved cash flow and the overall financial health of the business. As previously mentioned, it involves hiring a third-party provider to manage all AP operations. 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. It also provides a business with a repertoire of  technology and tools, which usually includes AP automation, offerings that create a competitive edge. Accounts payable outsourcing is when you hire a third-party to manage your company’s AP process.

Accounts payable outsourcing: Pros and cons

While mistakes are inevitable with any manual process, duplicate payments cost businesses money; a lot of money in fact. Selecting the right accounts payable service provider is critical to ensure a successful partnership. Below are our top tips for three areas to consider when choosing the best AP outsourcing provider. Businesses working with Accenture can benefit from cost-effective solutions and a high level of expertise in managing their accounts payable processes. With over 18 years of experience in the industry, ILM ensures high-quality AP outsourcing services, with expertise in all major payments and ERP systems. In addition to invoice receipt and data capture, ILM also offers services such as PO matching, invoice processing and routing, disbursement, accrual, general ledger, and archiving functions.

Look for an outsourcer who wants to develop a long-term partnership with your organization. Priorities should include a commitment to continuous improvement, tangible business outcomes, and a proactive approach to resolving issues enabled by real-time analytics. Having a clear vision of what you hope to achieve helps define criteria for choosing your AP partner. Basic expectations are obvious, demanding proven processes that ensure invoices are paid accurately and on time. In contrast, onshore solutions (US-based) bring the highest costs and typically high turnover from workers who generally often see transactional tasks as beneath them. But many U.S. companies initially lured to offshore locations like India and the Philippines by bottom-of-the-barrel pricing are also rethinking their strategy.

Our effective accounts payable solutions allow you to allocate resources more strategically and concentrate on essential business operations. Accounts payable outsourcing can offer significant benefits to businesses, including cost savings, improved efficiency, and enhanced visibility and control over financial transactions. Over the years, we have built a comprehensive list of accounts payable processing services across industry verticals. Our commitment to accuracy and completeness in managing outsourcing services has helped us grow our business by leaps and bounds. We follow the standard accounts payable process, such as maintaining the master vendor file, receiving and uploading invoices into a financial system, verifying, and approving and processing payments. As a specialized accounts payable outsourcing company, we guarantee you services that will ensure your financial statement and cash position is healthy and transparent.

Accounts payable outsourcing: Let’s dive into the details.

We have served clients in numerous industries, such as manufacturing, healthcare, retail, and finance, among others. This industry expertise enables us to contribute valuable industry knowledge and best practices to your accounts payable operations. Our team works closely with you to comprehend your objectives, workflows, and preferences, ensuring our services flawlessly align with your business processes and goals. We employ stringent security measures, such as secure data transfer protocols, encryption, and restricted access to sensitive financial data. Your data is treated with the utmost discretion and is safeguarded against unauthorized access and disruptions. Botkeeper partners with companies of all sizes and works with over 200 accounting firms to automate bookkeeping tasks for over 5,000 of their business clients.

We support issues such as auditor independence, corporate governance, internal control assessment, and enhanced financial disclosure based on your SOX Compliance Protocols. As your business grows and your need for Account Payable services grows we can add qualified and trained Account Payable resources to your team. Short term volume peaks can be handled by use of available qualified team members who are on the bench.

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