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.
Collect all relevant data for migration and cleanse it well
But evaluating your options with a complete understanding of what’s available leads to better business outcomes. Time Doctor is a powerful performance tracking software used by PWC and KPMG to track their outsourced teams’ work activity. However, when you outsource the task to a third-party provider, error reporting can be problematic. Most in-house teams have a financial supervisor, such as the CFO, to manage issues when employees aren’t present. For example, back-office employees don’t have to spend hours on manual data entry, recording disbursements and bookkeeping. While you have to hire employees and spend time training them, you also need to purchase the tools required to do the job!
How AP Outsourcing Works
Accounts payable outsourcing can increase the efficiency of your AP processes by streamlining vendor invoices and payments. Since everything is organized, you can also make early settlements of vendor bills to get better discounts. Now that we’ve had our fair share of laughter, it’s time to get serious again (just for a moment, promise).
- By partnering with Genpact, organizations can focus on their core business activities while an experienced team effectively manages their AP processes.
- Outsourcing is often favored by businesses looking for a hands-off approach and access to external expertise, while automation is preferred by those wishing to maintain control in-house with improved efficiency.
- They also provide comprehensive reporting and analytics, giving you valuable insights into your financial health.
View a free demo of Time Doctor
This way, companies gain huge cost reductions from saved time and improved productivity. For example, the average salary for an in-house AP clerk in the United States averages around $45,366 annually, not including benefits and taxes. Outsourcing lowers these costs by providing access to a team of experts at a fraction of the price. When you outsource, you don’t have as much visibility over the process, nor do you have as much double declining balance depreciation control over how the process works. In the worst scenarios, a poorly performing accounts payable process can even be a liability to your company.
An alternative to outsourcing your AP function is implementing AP automation. When you outsource accounts payable, a third-party company runs your AP department. With AP automation, your in-house accounts payable team uses a sophisticated platform to streamline your internal AP systems. Every business has unique needs, and your AP service provider should be able to tailor their services accordingly. Whether it’s handling different types of invoices, integrating with your existing financial systems, or scaling services in line with your business growth, the provider should be flexible and adaptive. Outsourcing firms specialize in AP management, ensuring not only efficiency but also strict compliance with evolving regulatory standards.
By shifting the responsibility of accounts payable operations to specialized providers, companies can dedicate more time and resources to these core activities, driving growth and innovation. As vendor relationships grow ever more complicated, more and more businesses will need to rely on outsourced providers to re-architect their accounts payable operations. Some companies handle sensitive financial data, which makes it difficult or impossible for them to hand it over to third parties.
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. ILM is a Virginia-based provider of accounts payable services to commercial clients, government entities, and nonprofits. They utilize artificial intelligence and machine-learning algorithms in their smart-scanning and exception-handling technology, ensuring efficient and accurate invoice receipt and processing. 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.
Unlike AP outsourcing, which involves handing over all AP responsibilities to a third-party provider, AP automation keeps the management of the accounts payable processes within the organization. With automation, companies maintain control over their AP operations while benefiting from faster processing times and reduced manual errors. As we mentioned earlier, verifying potential AP outsourcing providers’ security and compliance measures is crucial to ensure that your organization’s sensitive financial information is protected.