Business growth is good. That’s what we’re aiming for, right? But as your business grows, especially if you experience a period of rapid growth, so will the number of administrative tasks that you need to handle on a day-to-day basis. So when the invoices stack up, it’s time to take a moment and create a game plan to scale your Accounts Payable department in the best way for your business.
Growing pains like these are a good sign but need to be sorted out quickly to prevent negative consequences for your company. In order to maintain long-term, sustainable growth, you must implement solid management and planning before things get out of hand.
If you’re at that point with your accounting department, there are options out there to help. One way is by working with an Accounts Payable outsourcing company. Outsourcing invoicing and other administrative tasks away from your Accounts Payable team can ensure they’re not overwhelmed and have time to focus on other tasks.
What Is Accounts Payable Outsourcing?
Accounts Payable outsourcing is the decision to hire a third party with the specific expertise and technology to take over the AP processes, such as receiving vendor invoices, tracking business debts, and making payments on time. Many vendors from across the globe offer Accounts Payable services, and businesses that utilize them can save time and money and take loads of stress off their employees.
Outsourcing Accounts Payable has many benefits, but it’s not always the best option. If you’re considering working with one of the many Accounts Payable outsourcing companies, you must weigh the advantages with the disadvantages to make sure it’s the most beneficial decision for your business.
Reasons Businesses Might Outsource Accounts Payable
If your Accounts Payable department is overwhelmed, you’ll likely see a higher turnover rate or mistakes in their work. If the team is too small for their current workload, these problems aren’t their fault. One option would be to hire more employees, but this can be an expensive fix. Luckily, Accounts Payable is one of the simpler departments to outsource. Some reasons that you may be considering outsourcing Accounts Payable services include:
- Rapid growth: If your company experiences rapid growth without a plan for scaling appropriately, things can get out of hand quickly. If new clients or exceptional sales have unexpectedly increased the workload on the finance department, it may be time to outsource Accounts Payable.
- Employee burnout: Employees can get overwhelmed by a sudden increase in workload. This goes hand in hand with rapid growth, as you often don’t have time to hire and train more employees, and the current staff ends up doing more work to keep up with the demand. Outsourcing can give your employees a break and let them focus their energy on higher-level tasks.
- Old school processes: If you’re stuck in the 90s and still using paper invoices, it’s time to change. Businesses requiring multiple touchpoints throughout the invoice process should look to outsource invoicing. The Accounts Payable process can be streamlined by better, standardized practices that improve organizational efficiency and the use of new technology which catches errors quickly.
- Too many errors: An excess of errors in the Accounts Payable department can stem from employee burnout and a lack of standardized processes. Mistakes can harm your business’s finances and take valuable time to fix. Working with a third party equipped with the technology and experience to minimize errors in the invoicing process can save you time and stress.
Benefits of Outsourcing Accounts Payable
If you’re facing any of the above issues, it’s time to look into Accounts Payable outsourcing companies. Outsourcing is one option for business owners who want a third party to handle the entire process rather than taking the resources and time to overhaul the department in-house. For most companies, the benefits of Accounts Payable outsourcing are more than worth the cost.
- Save on costs: There is, of course, a cost to outsourcing, but this is typically much less than it would cost to hire and train new staff to handle the excess workload. And in most cases, our clients actually see massive savings by combining our accounts payable service with the rebates we help them earn using virtual payments. Outsourcing is also usually cheaper than purchasing high-end automation software, which also comes with employee training and growing pains. Accounts Payable outsourcing companies generally charge per invoice, which may be the most cost-effective solution compared to paying employees an hourly rate.
- Implement AP automation systems: Accounts Payable outsourcing companies already have the tools, skills, and technology to improve the department. They will use an AP automation system to make your invoice processing more efficient. By using technology to automate Accounts Payable processes, you’ll benefit from a decrease in errors, improvement in data reporting, and the utilization of dynamic discounting. Plus, your team will get trained on how to use the software as well.
- Promote better vendor relationships: By streamlining the Accounts Payable process and cutting back on human error, you will improve your relationships with your vendors. Third-party companies will likely provide better security measures and faster turnaround rates, which your vendors will love.
- Reallocate AP team members: With the tedious, time-consuming invoice process handled by a third party, your Accounts Payable department members can focus their time and energy on other tasks like updating the budget or concentrating on analysis.
- Achieve “touchless” accounts payable: Between outsourcing Accounts Payable and the automation software they use, you’ll be able to be nearly hands-off for the entire invoicing procedure. All you will have to do is approve payment, and the Accounts Payable outsourcing companies will handle the rest.
Downsides of Outsourcing Accounts Payable
After learning about all the issues that outsourcing Accounts Payable can help with and the benefits of using a third party, you’re probably ready to start researching potential providers. However, as with anything, there are some potential downsides as well. So you must consider the cons of invoice outsourcing before you jump the gun.
- Diminished privacy: To take advantage of a third-party Accounts Payable team, you’ll have to share your business’s financial information with them. Certain businesses may not be in a position to share sensitive financial data outside the company.
- Lack of control: Outsourcing will also require you to relinquish some control of how things are done. You may have to adjust to their systems, which may or may not seamlessly integrate with your current systems. Errors or emergencies might not be handled on your preferred timeline, considering you won’t be the firm’s only client.
- Learning a new system: The Accounts Payable department will likely have to learn how to use a new system. Sudden procedure changes can lead to errors, duplicate entries, and miscommunications between third-party and in-house teams.
- Dependence on a third party: It can be hard to trust an outside entity with such an important part of your business. You’ll have to trust them to be available for communication, fix errors promptly, and handle sensitive information appropriately. If the outsourcing company goes out of business, you might lose access to critical financial data.
Accounts Payable Outsourcing Services: What You Need to Know
If you’re still with us and leaning towards working with one of the many Accounts Payable companies out there, there are some things you need to know when looking into potential vendors.
- Do your research: It may sound like cliche advice, but solid research into a potential outsourcing company is crucial. You’re placing a lot of trust in this third-party, so don’t take it lightly. Don’t go with the lowest price. Look into their previous experience to ensure you’ll receive quality services.
- Investigate privacy and security systems: To help with concerns about sharing financial information, make sure you discuss the company’s privacy and security regulations. Be sure to read the fine print to guarantee they can adequately secure your sensitive data and uphold any industry standards required.
- Think carefully about outsourcing overseas: Many business owners are attracted to low prices from other countries, and there are likely quality services being offered from some firms. But, it’s imperative to do your homework and consider communication difficulties and time zone differences.
- Educate your team: Shifting to outsourced invoicing can be a rather abrupt change for your employees. Make sure to educate staff and continuously communicate throughout the transition stage to avoid errors and duplications.
Accounts Payable Outsourcing vs. Automation
Accounts Payable outsourcing and automation sometimes get used interchangeably, but there is a difference between the two. Both can help take a load off of your Accounts Payable department, reduce errors, streamline processes, and save your company money in the long run.
When you’re outsourcing Accounts Payable, you’re hiring an outside team to fully take over and run your AP department. An Accounts Payable outsourcing company will utilize automation software to maximize efficiency and accuracy. Alternatively, automation technology can be implemented in-house and be operated by your Accounts Payable team.
How P3 Can Automate Your Accounts Payable
If you want the benefits of outsourcing Accounts Payable but still maintain control of the processes, P3’s Vendor Payment Automation Solutions tool is the perfect middle ground for your business. Our AP automation tools can easily integrate with the systems you already use, so there won’t be any major overhaul to procedures.
With our simple interface, you can fully automate Accounts Payable while having easy access to data and analysis at the click of a button. Plus, you can manage payments with batch approvals, allowing you to authorize the payment of vendors efficiently. We’ll even maximize your rebates by paying your vendors with virtual cards.
Why Outsource When Automation Is This Easy?
If your Accounts Payable department is overwhelmed, something’s got to give. Accounts Payable outsourcing services can provide the relief your accounting department needs. The benefits are clear — lower costs, updated processes, and fewer errors, just to name a few. Outsourcing can solve some of the issues that come with the rapid growth of your business.
But there are downsides as well. For example, you lose full control of your business, you have to rely on a third party, and you have to share sensitive information.
If these factors of outsourcing scare you, then the automaton of Accounts Payable with P3 Cost Analysts is the solution for you. Set up a free consultation with one of our Payment Solutions experts today.