In-house management of accounts payable presents a formidable challenge: staffing. Finding and retaining skilled employees dedicated to AP tasks is a persistent struggle for companies of all sizes. The demand for expertise in this field often leads to skilled AP staff being redirected to higher-priority tasks, impacting the efficiency and accuracy of the entire AP process.
This staffing quandary can lead to missed payments, late fees, errors in invoice data, and slow turnaround times.
Outsourcing accounts payable offers a high-level solution to these problems. It allows businesses to transfer these time-consuming responsibilities to a trusted third party. This frees up internal resources, improves security, and greatly reduces the human error factor.
Read on to learn when to outsource accounts payable and discover the benefits it can bring your company.
Understanding the Challenges of In-House Accounts Payable
In-house accounts payable management often faces significant hurdles. The primary challenge lies in staffing because finding and retaining skilled employees dedicated to AP tasks is difficult. The fluctuation in volume is difficult, requiring more staff at the beginning of the month than in the middle for example. Having ready, trained staff to handle the large influx can often be chaotic.
Companies frequently have to divert their skilled AP staff to other higher-priority tasks, affecting the AP process’s efficiency and accuracy.
What Is AP Outsourcing?
Accounts payable outsourcing involves enlisting a third party to oversee your company’s AP process. These Business Process Outsourcing (BPO) providers are equipped with the essential tools, software, and technology to effectively manage and carry out your accounts payable tasks. Most importantly, they have a large well-trained staff that can flow up and down with your volume requirements. Off your list of worries is absenteeism or training of internal employees.
But AP outsourcing doesn’t—and shouldn’t—stop there. Top-notch providers will take over these tasks and optimize them by introducing new capabilities and developing more efficient business processes to enable growth.
Signs and Reasons to Outsource AP Processing
There are clear indicators that outsourcing accounts payable may benefit a company. Key signs include consistent missed payments and discounts, late fees, frequent errors or typos in capturing invoice data, and notably slow turnaround times for processing invoices. These issues not only impact the financial health and reputation of a company but also its operational efficiency.
Analyzing the Cost-Benefit of Outsourcing AP
Before outsourcing, companies should analyze their internal costs, focusing on the turnaround time and labor costs of processing invoices. This analysis will clearly show whether outsourcing can offer cost savings and efficiency gains. Knowing what it currently costs is important to evaluate if outsourcing is right for you and provides a return on investment (ROI). Knowing the number of invoices processed in a month compared to the salary or wages of the AP staff will provide the metrics of comparison.
How Outsourcing Can Improve Your Accounts Payable Process
Outsourcing accounts payable brings numerous process improvements. Service-level agreements (SLA) ensure the timely processing of invoices and minimum accuracy rates. Outsourcing offers a fixed cost per invoice, providing predictability and removing the variability associated with internal processing speeds.
Additionally, outsourced providers, like ILM, deliver:
- Accounts Payable Automation: Automation of the entire accounts payable process which allows you to receive invoices effortlessly, significantly increase efficiency, and drastically reduce errors.
- Advanced Software Capabilities: Outsourced providers have advanced software tools that might be too expensive for individual companies to implement. The software allows for the more effective handling of volume fluctuations and eliminates staffing and management headaches.
- Digital Mailroom: Utilize ILM’s expertise in a digital mailroom for efficient handling of incoming documents from mail, email, and faxes.
- Artificial Intelligence-Based AP Processing: Leverage artificial intelligence for AP processing, improving accuracy and reducing the time and frustrations associated with accounts payable.
- Outbound Payment Processing: Once invoices have been approved, a trusted outsource provider can facilitate the payment of the vendor using paper checks, ACH, or e-check payments.
To stay ahead in the dynamic landscape of accounts payable outsourcing, it’s crucial to be aware of current industry trends. One notable trend is the increasing integration of artificial intelligence (AI) and machine learning (ML) in AP processes.
Businesses outsourcing their accounts payable can benefit from these technologies which enhance accuracy, streamline workflows, and contribute to overall efficiency gains.
Pros and Cons of AP Outsourcing
AP outsourcing advantages include cost savings, speed, accuracy, and freeing up internal staff for other projects. Outsourcing also reduces IT and overhead costs.
Additional benefits of accounts payable outsourcing include:
- Purchase Order Matching
- Reduced Cost Per Invoice
- General Ledger (GL) Coding
- Reduced Turnaround Time
- Reduced Staffing Levels
- Expedited and Reduced Exception Handling
- Increased security
However, companies may face a potential downside when establishing fixed guidelines for invoice handling. While ensuring quality, this process may slow down the implementation of changes. Your internal processes have to be well documented and the workflow established to pass off to an outsource partner.
In general, outsourcing is less expensive and faster per invoice, thereby saving costs. Additionally, it enables companies to take advantage of quick pay discounts and avoid late fees. Larger companies, in particular, will see more significant benefits due to their scale.
Accounts Payable Processing Experts
At ILM, we understand the challenges of managing accounts payable in-house. Staffing issues, errors, and slow turnaround times can hinder your company’s efficiency. That’s why we offer a comprehensive solution through our accounts payable outsourcing services.
By outsourcing your AP processing to ILM, you can streamline your operations, reduce costs, and improve accuracy. Explore our accounts payable outsourcing page below to learn more about how ILM can transform your AP process.