The Pros and Cons of Outsourcing Your Accounts Payable
Each day, the business world gets more competitive. In such an environment, your company needs a way to improve your services and stand out from the competition while also cutting costs. Outsourcing accounts payable is a viable solution for companies wanting to do just that.
Trying to manage your own AP processes is often daunting and it seems like moving the processing outside of your office would solve your staffing problems. And that is one benefit of oursourcing. However, you can’t consider outsourcing as a mere shift in labor. Outsourced accounts payable should be a service with tangible benefits. With the right supplier, accounts payable outsourcing will be an ongoing investment in your business.
But even with the promise that outsourcing can be beneficial, many companies are a bit uncomfortable with the idea of trusting one of their most important financial processes to an outside firm. And it is also possible that outsourcing won’t exactly fit your company’s needs. Adequately considering the advantages and disadvantages of outsourcing will put you in a great position to make the best call for the future.
The Pros of Outsourcing Accounts Payable
Outsourcing isn’t just about shifting responsibility. Ideally, making the decision to work with a business process outsourcing (BPO) provider will add value to your business and improve your AP process. The benefit of outsourcing include:
Hiring your own in-house accounts payable staff, as well as all the equipment and programs that are necessary for the process, can be very costly. Outsourcing, on the other hand, means you can have experienced, equipped professionals do the same job at a lower cost. Plus, the outsourcing firm is responsible for keeping up with the increased workload as your company grows.
Accounts payable service providers have access to automated processes and a wealth of experiences. Plus, your invoice copies and statements will be processed quickly because that’s the business’ core service to you. This means outsourcing can get your work done more quickly and accurately than a small in-house staff could.
With an in-house AP staff, a supervisor would be responsible for managing scheduling and handling issues if employees are out. An outsourcing firm cross-trains multiple employees on accounts and maintains common standards. That means you never have you worry about being left uncovered.
Even though outsourcers do the work off-site, modern technology lets you track each step of the AP process instantly. You’ll have constant real-time access to your accounts payable information. With this sort of access, you’ll never be left in the dark about your AP processing.
Minimization of Error:
Human error can lead to costly consequences. In fact, if you’re using spreadsheets to track accounts payable, it’s pretty much a given that there are already errors in your process. However, the automated processes and experienced professionals of a service provider can minimize common mistakes.
Outsourcing accounts payable helps ensure you’re no longer losing or overlooking invoices. Your provider should have a reliable system in place with control procedures to keep track of your papers. Working with a BPO provider should also greatly reduce headaches around research and locating documents as needed.
A good business partner can take on your AP operations and provide analytics on possible avenues for improvement. They also have a greater bandwidth to add more volume so they can absorb seasonal increases and year-end crunches more effectively. And if you work with a technology provider as well as an outsourcer, you will be in prime position to learn about the latest in technology and have personalized improvement opportunities available.
The Cons of Outsourcing Accounts Payable
As with so many things, the advantages of business process outsourcing comes with a few downsides as well. Some of these are inherent to outsourcing while others will depend on the quality of the BPO provider you choose.
Loss of Control:
When you have employees on the floor conducting invoice processing, the control is much more direct. But when you outsource your accounts process to a third-party, you do give up a degree of control and visibility. You no longer directly control exactly how they handle your AP.
Error Reporting Issues:
Many outsourcing providers conduct their own audits but sometimes the process feels like a black box. If something goes wrong you aren’t sure how to validate the issues and may find your management unable to fully identify the source of the problems you’re still seeing in your department.
If you outsource your accounts payable, you will depend completely on that company to do vital work. If something happens to them (bankruptcy, security breach, etc.) it would put your AP at risk. That’s one reason why it’s so important to choose a reliable partner to work with.
All companies have exceptions in their accounts payable workflow but outsourcers can be very selective about what they will process. Because they rely on having a low cost per invoice, they may insist that you process exceptions yourself. An inflexible outsourcer can make it seem like you’re only getting half of the solution you paid for.
If your outsourcing provider charges by the invoice, then you need to take extra caution to avoid duplicate submissions. And because many outsourcing providers don’t have the tools to tell you how duplicated submissions occurred, it can make you feel powerless to solve the problem. You’ll need to get your vendors and/or AP employees all on board with the change in submission systems to avoid problems.
While the dangers that could come with outsourcing your accounts payable are serious, the right provider can make sure you benefit from all the pros without having to worry about the cons. Next Process is dedicated to minimizing risks and maximizing results for all our customers. If you’re looking for a safe, affordable option for accounts payable outsourcing get in touch with us. We’ll be happy to answer your questions and help you set up an outsourcing solution that’s perfect for your company.