A majority of the businesses are now handing over their accounts payable processes to qualified outsourcing firms, why? With outsourcing accounts payable function, they can: Manage their cash flow effectively, Identify areas that are costing more than usual, and increase overall efficacy of the firm.
What is the Accounts Payable (AP)?
Accounts payable (AP) refers to an account that exists in the general ledger. It reflects a company’s obligation to settle the existing debt to its vendors and suppliers. In the accounting context, Account payable refers to the company division that is accountable for paying debt owed by the company to vendors and other creditors.
Most Significant Benefits of Outsourcing Accounts Payable function
Here are the main advantages of outsourcing your accounts payable function:
Saves Funds & Time
Hiring staff for managing an account payable process could be a costly affair for a company; why? While you have to appoint staff and spend resources to train them, you also need to arrange the tools required to do the job. These costs can increase up in no time, particularly if you have a large team.
How does outsourcing mitigate such expenses?
You don’t have to appoint to train outsourced staff for the job, as they already have the potential and required qualifications to get the job done. You only have to make payment for their services in the agreed timeline.
Outsourcing can digitize many accounting operations for you. This way, firms rejoice in huge cost reductions and improved productivity. For instance, the in-house staff doesn’t have to kill hours on manual data entry, posting bookkeeping & disbursements.
You can outsource these tasks to a third-party outfitted with qualified staff and have the latest tool for the job. Want to secure funds against irrelevant expenses? Many outsourcing firms render early payment discounts to their clients if they pay invoices before the due date.
Read our article:Potential Benefits and Downsides of Outsourcing Accounts Payable
Greatly Subdue Inefficiency
Every Account payable activities are highly susceptible to errors- mainly if you use old-school programs like paper invoices. But thanks to automation and modern technology, accounts payable outsourcing is less likely to encounter costly human errors.
Additionally, since the third-party staff only works on your accounts payable, they can ensure better outcomes in a reduced amount of time. By outsourcing accounts payable function, you unload some stress from your in-house staff for core business activities such as improving budgets and managing vendor relationships. This enhances the efficacy of the team across the board.
Access to Modern Programs & Latest Tools
Acquiring the latest modern accounts payable solutions could be costly affairs for the company. Additionally, the expenditures & resources utilized for appointing the staff to use these tools further add up.
Outsourcing account payable enables companies to avert these expenses while the best business[1] intelligence tools are available. Most outsourcing firms possess qualified staffs that use modern tools for carrying out a job. You won’t have to stress paying for each program or tool or training your staff on it. Just hire a specialized third-party firm to benefit from AP tools at reduced costs.
Consistent Coverage
Most in-house staffs have a financial expert, such as the CFO, to oversee problems when staffs aren’t present.
However, a single supervisor may find it hard to complete such a task, right?
Outsourcing accounts payable takes the stress off of your team supervisor. Even if some professionals are not available, the stress of managing does not land on the sole supervisor.
How?
As most outsourcing companies have several professionals for the same task, you do not have to take stress about your provider being understaffed.
Commonly Outsourced Account Payable Functions
When a company considered APO, it is vital to understand what AP services elements are open to outsourcing. If the manual data entry of invoices ends up in a huge backlog, they can hand over the receipt-to-ERP process (Enterprise Resource Planning). If rising cost and low productivity are concerned, they can outsource processing to leverage automation at a minimal cost.
The AP process is comprised of three phases, and companies can outsource operations by phase.
Receipt to ERP (Front-end process)
This phase is labor-intensive, seeking manual entries from data across fax, paper, & e-mail transactions. Companies usually outsource this phase to gain automation to simplified error-prone manual data entry. The most significant benefit of handing over this phase to an outsourcing firm is centralization & digitized data conversion of both paper & digital invoices.
Approval, discrepancy auditingand, AP Administration
Generally, when an outsourcing firm proves to be spot on for the first phase, companies slowly divert more in-house operations toward them- including handling of non-Purchase Order approval, Purchase order matching, expense & travel, invoice processing, discrepancy auditing, & even management support requirements.
Accounts payable function include inquiries handling coming from vendors, assisting with regulatory compliance, tax support, and account reconciliation.
Invoice Automation
Companies opt for the outsourced system because they settled in speedily compared to an internally developed in-house system, which consumes years to build and install. APO automation doesn’t necessarily seek intensive testing and training since it has a proven track record for successfully serving many clients. APO technology is expeditious in all aspects, and it’s virtually painless, leaving no stress on the company as far as maintenance, training, or upgrade costs are concerned.
Conclusion
Whether you own a new business or a bigger entity operating worldwide, outsourcing can help you minimize expenses and optimize your accounts payable process. However, don’t rush while selecting the right outsourcing partners for all your accounts payable function. Make sure to deeply examine your options and choose the one that perfectly syncs with your requirements and offers better value.
Read our article:An overview – Outsourcing of Accounts Payable Services
