A satisfied supplier may offer discounts due to early payments, thus increasing your profitability. Essentially, AP process outsourcing transfers tasks and responsibilities to another company for efficient management. AP automation uses business intelligence software to spending variance definition and meaning manage your in-house systems (with lower total costs on your part). This frees your in-house AP department to focus on higher-level tasks and attend to the core business processes that enhance your company’s performance and improve service levels. Increased resources – Outsourced AP solutions are generally going to come equipped with technology (i.e. AP Automation platforms) to handle their workflows. This means that they’ll have systems in place to handle both a PO-backed or non-PO process, discrepancy resolution, vendor management and sometimes administrative support.
Below, we explain why you need to consider the following three areas and what you can do to mitigate any potential challenges. 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.
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. For example, the average salary of an accounts payable manager based in LatAm is up to 59% less than a US-based manager. Businesses should establish clear communication channels and expectations with their outsourcing provider from the outset to address communication challenges. This may include regular progress updates, meetings, and clearly defined points of contact to ensure that any issues or concerns are promptly addressed and resolved. In these cases, there is sometimes a possibility that certain entries will be duplicated.
- If outsourcing providers do not have the facility to detect duplicate invoices, then the business ends up incurring more costs than necessary.
- Hence, if your business shares duplicate invoices, you are going to have to pay for that too.
- Outsourcing your accounts payable processes can help streamline payments and save on labor, time, and errors.
- AP Automation, in comparison, is the adoption/integration of an AP software to extract, validate and approve accounts payable invoice processes.
- However, some practices can be followed to ensure that businesses partner with the proper accounts payable outsourcing provider.
You would rather pay for an AP service rather than hire more AP staff
Once the planning phase is complete, the next step is selecting the most suitable outsourcing partner. This decision should be based on factors such as the provider’s expertise, technological capabilities, industry experience, and client testimonials. This is essential to judge how well the outsourcing provider’s privacy and data protection measures match up to yours. Depending on the industry standards and your outsourcing provider, the data may be stored on internal servers or even on the cloud. This could increase your data’s accessibility — making it prone to unauthorized access. Outsourcing accounts payable helps businesses avoid these costs while using the best document management and business intelligence tools available.
Comparing AP Outsourcing and AP Automation
Financial audits gives companies an objective read of their financial statements.
Privacy and security issues
Organizations dealing with sensitive financial data may be hesitant to use a third-party vendor for their AP processes. Accounts payable outsource companies are equipped with the necessary skills, tools, and technology to integrate with an organization’s existing AP processes. 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. Additionally, missed or late payments cost your staff time when they have to right the wrong by recovering erroneous spend, which in turn, reduces time available for other AP functions. Outsourcing this beast of a process will have you in stitches as your efficiency levels skyrocket.
Use performance monitoring tools
Managed AP services can offer reporting on cost per invoice and time to payment among others, and routines such as analysis, month and year-end close, reconciliation, and AP document management. Accounts payable outsourcing is the business practice of using a third-party vendor to administer invoice or bill related processes. The list of services varies but the vendor will generally perform functions such as invoice capture, purchase order (PO) matching, and processing, payments, archiving records, and reporting.
The dynamic duo that brings hilarious clarity to our financial decisions. Join us as we unravel the jaw-dropping comedy of evaluating the costs and value of AP services. You’ll laugh, you’ll cry, and you’ll wonder how you ever survived without this amazing insight. And there you have it, an exhilarating glimpse into the world of accounts payable outsourcing. So, embrace the journey and prepare for more astonishing revelations that will leave you in stitches.
But it involves incurring other costs such as investing in the software and allocating time for training the employees to use the software. Look for a provider with extensive experience in accounts payable outsourcing services and a deep understanding of your specific industry’s nuances and best practices. An experienced provider will have a proven track record of successfully managing AP processes for businesses similar to yours, allowing them to anticipate potential challenges and provide tailored solutions.