Staffing is one of the biggest challenges for companies nowadays. The tight labor market and other factors, businesses often don’t have enough staff to process all of their accounts payable (AP) paperwork.
Outsourcing AP is a wise business decision that saves money, reduces manual error rates, and frees up staff to work on other mission-critical tasks. The outsourcing vendor takes on the responsibility of ensuring there is enough trained staff to handle the peaks and valleys in the volumes of invoices received.
Read on to learn more about how much accounts payable outsourcing costs and the various factors that can affect it.
How AP Outsourcing Works
There are several essential steps involved in outsourcing your accounts payable to a trusted third-party vendor, such as ILM:
- Collecting – Collect invoices via mail, email, fax, or secure upload
- Scanning – Digitization or reformat into a readily accessible PDF format
- Sorting / Classification – Identifying the invoice by the vendor
- Vendor Verification – – Is this a valid and verified vendor in the system?
- Purchase Order (PO) Matching – is there a valid PO that matches the invoice?
- Data Extraction – Using a combination of AI with human validation to extract critical data elements such as amounts, dates, and line item information (quantity, part’s numbers, SKUs, amounts, etc.)
- General Ledger (GL) Coding – oding of line items to the correct GL category.
- Integration – The metadata and PDFs of invoices and supporting documentation get uploaded to your ERP or accounting system.
- Online Repository – Copy of images can also be stored online for simple search and retrieval.
Benefits of Outsourcing Accounts Payable
When you perform the above AP functions in-house, you often process and make decisions on invoices one at a time. Because ILM has many different clients, each with unique requirements, we streamline the process by minimizing the decision making process during the capture phase. We accomplish this by using our state-of-the-art software, computers, scanners, and finely tuned procedures.
By sorting out and batching the exceptions of each invoice, a knowledge worker is able to quickly resolve invoice issues rapidly.
You still retain the ability to analyze the information that’s been entirely digitized by this point in time. This tremendously increases your productivity and allows your office to avoid the time-intensive task of collection, data digitization and capture.
There are several other notable benefits of utilizing an outsourced AP service:
- Faster exception handling
- Learning AI—Grid mapping and intelligent matching allow the AI to learn while reducing time and eliminating mistakes
- 9x faster invoice approval rate
- Reduce invoice processing cost by up to 83%
- Eliminate manual tasks and data entry
- 100% virtual access—work remotely from anywhere
In-House Costs of AP
In 2019, the Arden Research Project performed a survey and put out a state of the market report that found the following costs of processing AP in-house:
|Cost to process a single invoice (all-inclusive cost)||$11.57|
|Time to process a single invoice||8.6 days|
|Invoice exception rate||23.2%|
|Suppliers that submit invoices electronically||24.7%|
|Invoices processed “straight-through”||26.6%|
|Invoices linked to a purchase order (PO)||60.5%|
AP Outsourcing vs. Software
Incorporating software should increase the productivity of AP processing; however, it still requires many expensive and time-consuming resources to implement, manage, and update.
While it’s true that one of your staff members will need to manage the AP outsourcing relationship, it will require far less input and impact than managing an internal team.
Internal software requires resources from your IT department, specialized training, software maintenance costs, upgrades, security and compatibility issues with existing infrastructure.
Factors That Can Affect the Cost of Outsourcing AP
Several factors that can affect the total cost of outsourcing your AP:
- Quantity per month
- Invoice complexity
- Integration to your current process
- What information is required from each invoice
- Are PO matching and GL Coding required
- Turnaround time
There is, however, a way to keep costs down. For example, you might only require partial extraction of invoice information, such as vendor name, invoice number, date, etc. You’ll still handle the PO matching and GL coding on your end. This is but one of many examples of how outsourcing a part of the process can reduce the accounts payable service cost.
It’s difficult to provide an actual cost without knowing the answers to the above six questions and your unique requirements. For example, we had one client reduce their cost per invoice by 59%—going from $9.38 to $3.87 per invoice. We also reduced their turnaround time from 8 to 2 days. This client had achieved an ROI within one year and continues to take advantage of outsourcing savings.
AP Outsourcing Services from ILM
When you let ILM handle your accounts payable needs, you no longer have to worry about staffing , training, providing computers, and supervision. We take all of that off your plate and put it onto ours.
With over 45 years of experience, we’ve worked with companies and government institutions of all sizes. We’re ISO:9001:2015 certified for our quality management system, perform an annual SOC 1 Type 2 Audit, and have been cleared by the Department of Homeland Security.
Let ILM provide you with a turn-key AP Outsourcing solution that will save time, money, and give you peace of mind. Click below to learn more about our AP services.