Accounts payable is a liability due which needs to be paid within the specified period to avoid default. Accounts Payable Process is mostly outsourced as it increases the pain and chances for errors from receipt to invoice processing. It enables a company to focus on core business and work efficiently.
While for some companies, it might not be practical to outsource whole Accounts Payable Department but keeping some functions in-house to enhance the efficiency of their entire Accounts Payable Process.
Accounts Payable Outsourcing offers following benefits to a business:
Reduce Upfront Costs- Having your own in-house accounts payable technology, infrastructure and staff can prove to be very costly for a company. On the other hand, outsourcing these services can help to reduce the upfront costs by enabling a company to convert fixed costs into variable costs.
Timely Payment- For small and medium sized businesses, proper cash inflow and outflow is very important as they have limited cash sources. Not having a sound AP process hampers the working of a company by incurring huge losses. While, having accounts payable services outsourced helps a company to pay bills and invoices on time and also get the early paying bills discount maintaining a healthy supplier relationship.
Increase Efficiencies- The rationale for outsourcing is that it is usually better for an expert service provider to perform nonstrategic activities. Outsourcing model enables an organization to offload transactional functions to third party service provider’s expertise and gain the importance to focus more on higher value and analytical tasks.
Better Resources- With the changes in technological advances; every technology investment carries the risk of being obsolete and being more expensive than planned. Outsourcing service provider having accounts payable as its core function has the latest and updated technology software. Therefore, it assumes and manages all the technology risk.
Control on Excess Payment- By doing P2P process verification, entire flow of Accounts payable transactions is checked and better assurance is achieved in terms of correct payment to vendors. Vendor invoices are correctly checked in terms of approved rates and quality.
Learn more about finance and accounting outsourcing services at Aristotle Consultancy