What You Should Know About Accounts Payable Outsourcing
For many businesses, managing accounts payable (AP) can be time-consuming and labor-intensive. Not to mention, if you don't have the staff with the right skills to handle the process, you could run into errors and delays that will impact your operational efficiency.
Thankfully, you can avoid a lot of headaches associated with handling accounts payable by taking advantage of accounts payable outsourcing. Here's what you need to know:
What is Accounts Payable?
Accounts payable represents the amount a company owes its creditors or suppliers. It's a short-term debt that appears as "current liabilities" in the organization's balance sheet and must be paid off within a specific period of time to avoid default.
The company's accountant or bookkeeper is responsible for recording accounts payable by crediting the AP account when a bill or invoice is received. When the bill is paid, the AP account will be debited.
Outsourcing Accounts Payable
By hiring a third-party vendor to assist with your accounts payable, you'll be able to manage working capital and cash flow more effectively. You can better maintain strong vendor relationships, uncover opportunities for cost saving, avoid duplicate payments, and become more agile in adapting to market demand or evolving compliance requirements.
To outsource your accounts payable, you can hire a service provider to handle a specific aspect or transactional process (such as invoice processing, purchase order processing, aging report preparation, debits memo processing, monthly sales tax processing or monthly ledger processing). Alternatively, you may opt to sign up for an end-to-end accounts payable service.
There are many benefits to outsourcing your accounts payables, including:
- Cost saving: Maintaining an in-house AP team and purchasing the equipment or programs to handle the process can be costly. Outsourcing AP can help lower your monthly overhead while allowing you to gain access to the latest tools and programs.
- Access to experienced professionals: Outsourcing the accounts payable process gives you access to the expertise of seasoned professionals that are properly equipped to do the job most efficiently. Additionally, you don't have to worry about training your staff or juggling resource allocation.
- Scalability: An accounts payable outsourcing company has the capacity to take on additional workload at short notice so you can scale up quickly without the associated upfront cost. It also has the bandwidth to handle seasonal spikes or year-end crunches to ensure that everything is handled properly.
- Efficiency and accuracy: Outsourced service providers have the resources to implement automation and hire experienced professionals to ensure that all your invoices and statements are processed accurately and in a timely manner.
- Constant coverage: A vendor has teams of employees that are trained to maintain a common set of standards so you can have access to a consistent level of service at all times.
- Automated tracking: With the automation process, you can keep track of each step of your AP process in real-time so you can make decisions and take actions based on the most accurate and up-to-date information.
- Resources and analytics: A reputable vendor will provide analytics and recommendations to help improve your business processes.
Use the Right Technologies To Optimize Accounts Payable Outsourcing
While there are many advantages to outsourcing accounts payable, there are also some potential pitfalls, such as:
- You may be giving up a certain level of control over or visibility into your internal process.
- There may be error reporting issues if the vendor doesn't communicate its troubleshooting process properly.
- Some vendors don't track duplicate submissions so you'd need to establish a systematic workflow to reduce errors.
To avoid these issues, you should establish a clear and transparent communication process both internally and with your vendor. Information should be shared in real-time to increase visibility while minimizing misunderstanding and errors.
By using cloud communication tools such as UCaaS and VoIP, you can improve information sharing between your team and the accounts payable service provider through features such as voice and video calls, instant messaging, and file sharing. All the communication threads and data can be accessed via a centralized location so everyone can get the latest information in real-time.
Your business has enough on its plate. Outsource what makes sense for your business, choose a world-class SaaS technology solution and focus on what's important: your clients. Call 1-866-879-8647 or fill out an online form to request a no-obligation quote from an 8x8 product specialist.