AP Outsourcing involves handing over accounts payable processes to a third-party business provider. This means that you use the accounts payable services of an external entity to perform your business transactions. AP Automation, in comparison, is the adoption/integration of an AP software to extract, validate and approve accounts payable invoice processes. For many firms, the AP personnel tasks are not always as integrated into the business as another function such as operations, so it can be an attractive offering to outsource some of the paperwork.
Check for Comprehensive Service Offerings
Evaluate the provider’s internal controls, anti-fraud measures, and adherence to accounting principles and regulations to gauge their commitment to data security what is a fidelity bond and compliance. They should offer advanced solutions like automation, electronic invoicing, and cloud-based systems. These technologies streamline the AP process and provide greater visibility and control. Inquire about their data security measures and compliance with regulations.
Additionally, when you own your own AP process you can turn accounts payable into a strategic partner for your business. Errors – While an outsourced vendor should have better controls and, theoretically, make fewer errors than an overwhelmed AP department, errors will still happen. And when it’s time for you to go back and audit the trail of documents, you may have limited access to be able to find where something went wrong. If this is the case, a small error can quickly turn into a huge hassle that goes unresolved for days or weeks. It would be wise to identify if the outsourced solution is leveraging complete AP Automation or manually keying in data for any step in the process.
The fact is you become heavily dependent on the outsourcing provider for accounts payable services that involve vital transactions. So if the provider faces challenges such as security breaches or even bankruptcy, then your company processes could come to an abrupt standstill. Hence, if your business shares duplicate invoices, you are going to have to pay for that too.
In the worst scenarios, a poorly performing accounts payable process can even be a liability to your company. By partnering with us, you can tap into the vast pool of talented professionals in Latin America, drive growth, and increase the financial health of your company. An alternative to outsourcing to a company specializing in accounts payable is outsourcing to an individual or team of AP professionals. 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.
Outsourcing your accounts payable processes can help streamline payments and save on labor, time, and errors. Adopting an AP automation software can get you better control of invoice data capture, security, and help in better data analysis to increase business efficiency. But it involves incurring other costs such as investing in the software and allocating time for training the employees to use the software. However, accounts payable automation may not be suitable for all businesses, as it may not offer the same level of human oversight and adaptability as outsourcing accounts payable processes. Additionally, implementing accounts payable automation software may require a significant initial investment (or recurring SaaS fees) in software and training of in-house employees. Also, some organizations may prefer to retain direct (manual) control over their accounts payable operations.
Your invoice processing costs are too high
Leveraging accounts payable outsourcing services offers a strategic opportunity to streamline financial what is a hurdle rate processes, boost accuracy, and ensure compliance. However, outsourcing can come with challenges, such as potential communication gaps or reduced control over processes. Outsourcing accounts payable processes can result in a loss of direct control over managing financial transactions and vendor relationships. Although this can free up valuable time and resources for businesses to focus on other core activities, it may also lead to a lack of oversight and increased dependency on the outsourcing provider. Outsourcing accounts payable processes can also give businesses enhanced visibility and control over financial transactions.
- If your team can create value elsewhere in the business by moving to an outsourced AP model, outsourcing might make sense.
- So while implementing an accounts payable automation system in-house can help reduce invoice processing costs and improve efficiency, you will still have to have in-house employees dedicated to AP functions.
- To address potential communication issues, ensure that the provider offers multiple ways to communicate, such as phone, email, and chat support.
- Even with the best data protection measures in place, there is always some degree of risk in handing over critical financial data.
- When you delegate AP tasks to an external provider, you’re no longer overseeing the daily operations directly.
Accounting Systems
When you hire new employees, you don’t just hire anyone — you consider their skillsets to determine if they’d be a good fit for your company. Similarly, you glossary of business terms need to make sure that you pick the best outsourcing provider. While outsourcing helps a company cut costs and improve its service levels, it can often limit their independence. In many cases, outsourcing is the easiest way to eliminate paper invoices, checks, and receipts.
This is especially prevalent when businesses experience periods of rapid growth, which is often accompanied by an increase in invoice volume. While this is great for sales, it also puts additional pressure on your AP staff. This is especially the case for paper-based processes and those manually entering data, chasing down approvals, and heavy PO-based processes. Every additional invoice adds further load and over time, dampens AP productivity. AP automation is possible when subscribing to a SaaS solution, adopting a dedicated accounting software, or adopting an ERP system on-premises. With a global presence and a reputation for excellence, Genpact has become a go-to choice for companies looking to streamline their accounts payable operations.
