Accounts Payable Outsourcing

10 min

Account Payable Outsourcing: Pros & Cons For Accounting Firms

Account Payables are an important part of your business. Outsourcing this department to a third party might be the best decision for your firm. To successfully look into this option and evaluate its benefits as well as disadvantages, one needs to understand the whole picture.

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What is Accounts Payable Outsourcing? How Does It Work?

Faced with an ever-increasing workload, more and more accounting firms are opting for an outsourcing solution for accounts payable and receivable. Outsourcing accounts payable and receivable means a company outsources its accounts payable function to a third-party service provider. The goal is speed up the process, improve efficiency and save money.

This service can be provided by an accounts payable software or an independent outsourced vendor. The company will then take care of the entire accounts payable process:

  1. Receiving and reviewing invoices
  2. Checking whether the goods or services have been received
  3. Approving the invoice for payment
  4. Paying the invoice

That includes sending reminders when payments are due, following up with vendors if necessary and making sure everything runs smoothly at all times. In addition, some accounts payable outsourcing companies also offer services such as payment reconciliations or payroll management.

Reasons why companies are outsourcing their AP process

Account payable outsourcing is often used by small businesses that need help managing their accounts payable process but don't have the resources to hire someone full time. It can also be useful for larger companies that have already implemented an internal AP department but need additional help with certain phases of their AP process.

When it comes to accounting and bookkeping practices, this decision responds to a cultural shift in accountancy. With the evolving needs of clients and the introduction of Making Tax Digital for Income Tax Self Assessment (MTD ITSA), UK accounting firms and practices have never been busier. According to Sage Practice of Now 2020 report, 82% of accounting firms report that clients expect more advisory and consulting services and resources from accountants today than they did five years ago. Moreover, the annual ICAS Practice Survey 2022 only 53% of firms have already adopted software for MTD ITSA.

For all these reasons, account payable outsourcing is worth considering for many accounting firms. To save time by getting rid of manual tedious tasks like making and reconciling payments and focus on their core competencies: providing high-quality services to their clients.

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Pros of Account Payable Outsourcing

If you run an accounting firm, you know the importance of having a streamlined accounting process. If you're like most businesses, your accounting team is spread thin. As a result, manual data entry has become the norm — and it's time-consuming.

You can pass the baton to the pros and focus on what you do best

Outsourcing your accounts payable function allows you to free up internal resources for more important tasks, such as client service or revenue generation. As a result, decreased staff training and labor. You'll receive consistent invoice processing services from expert professionals who have years of experience in this field.

The quality of work is high, and is delivered on time

Top accounts payable outsourcing companies provide their clients with highly-skilled professionals and technology.

By hiring a third-party service provider that specializes in this area, you can be sure that your payments are being processed accurately and on time. The best account payable outsourcing companies use strict standards for data entry and validation, so you don't have to worry about mistakes or omissions in your AP processes.

Accounts Payable Outsourcing Reduces Costs

Firms that outsource their invoicing or invoice processing often do so for financial reasons. Hiring an AP clerk or assistant to handle your company's AP process can be expensive — especially if they need training before they're ready to work on their own. Using an outsourced accounting firm means there's no need for additional staff members; instead, all you need is access to high-quality software systems which can automate many of the tasks involved in managing AP transactions.

Outsourcing companies have more flexibility because they are not bound by location or culture

They can hire employees from around the world, allowing them to find people with skills and experience in areas that are not readily available in your area. You don't need multiple departments handling different aspects of your accounting needs — just one company that can handle everything from payroll to accounts payable outsourcing services and everything in between!

Cons of Account Payable Outsourcing

Many accounting firms outsource their Payable department, and there are benefits to doing so. However, caution must be employed when deciding to outsource this department, as outside firms may not have the level of personalization that is needed for unique auditing practices.

There are many people who are opposed to outsourcing, believing that it has the potential to cost an economy jobs and hurt the community in general.

Also, your clients will be sharing their most sensitive financial data with a third party. There is no doubt that outsourcing the AP department may save money and boost profit margins. However, the lack of adequate oversight will increase opportunities for fraud and errors in decision making.

Therefore, if you choose to outsource your accounts payable, you should choose a cloud-based solution that will provide you with a secure environment using security measures such as secure gateways and two-factor authentication. Some solutions even include a score-based alerting system and an heterogeneous fraud team a great B2B payment experience, secured and smooth!

Only You as an Accounting Firm Owner Know For Sure if AP Outsourcing is the Best Choice for Your Business

In the end, outsourcing your AP department may not be right for every accounting firm. But if you have the means and resources, it is something to seriously consider.

Outsourcing has both pros and cons for accounting firms. For example, if you want to save money, then you'll want to look at the costs of outsourcing versus hiring in-house staff. However, if your goal is to improve customer service and increase profits, then the pros of outsourcing may outweigh the cons.

You know that outsourcing AP provides a better-trained staff, more efficient processes and better customer service than what you can provide in-house. But only you as an accounting firm owner know for sure if AP outsourcing is the best choice for your business.

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