Accounts Payable Outsourcing for Small Businesses: Common Mistakes & How to Avoid Them

A company’s accounts payable department is responsible for making timely payments to suppliers, building strong business relationships, maximizing rebates to improve company cash flow, and generating timely reports to optimise processes further. Managing these tasks, especially in large, rapidly-expanding organizations, can be overwhelming for in-house teams.

Many large corporations outsource accounts payable to offshore teams to avoid staff burnout, optimise costs, and drive focus to core activities. However, over the last few years, small businesses have followed suit and are increasingly looking at outsourcing to streamline payables for their firms. Let us understand how accounts payable outsourcing can benefit small businesses, the most common mistakes associated with such projects, and how you can avoid them.

Accounts Payable Outsourcing for Small Business: Why Is It Important?

In the traditional sense, small businesses have relied on internal teams to perform routine finance functions like accounts payable. However, the competitive nature of the modern-day business scenario demands finance teams to act beyond their traditional roles and contribute to the overall business growth. Against this backdrop, finance & accounting outsourcing has emerged as a no-brainer for small businesses to survive in the cut-throat landscape.

Where do Small Businesses Go Wrong & How to Avoid These Mistakes?

While outsourcing accounts payable can guarantee finance transformation for your organization, there are some other pieces to this puzzle that can determine the success and failure of your outsourcing project as a whole. Let us look at some of the most common mistakes small businesses commit during this process and how you can avoid them:

MISTAKE #1: UNCLEAR OUTSOURCING GOALS

The most basic yet crucial mistake that small businesses make while initiating an outsourcing project is being unclear about what they want to achieve through the project. Business owners/finance leaders often expect a little bit of everything (cost savings, process optimization, automation, etc.), which eventually results in mediocre results.

The best way to tackle this mistake is to have robust, clear initial conversations with your outsourcing partner about your outsourcing goals. Ensure that before any expectations are set, both the parties are aligned and have mutually agreed upon key KPIs.

MISTAKE #2: RUSHED TRANSITIONS

Once business owners take the outsourcing plunge, it is only natural to expect to eliminate the laborious and repetitive payables tasks quickly. In many cases, companies end up dumping their accounts payables on their outsourcing partners, leading to missed details and significantly hamper supplier relationships.

To ‘get it right the first time,’ it is essential for third-party vendors to document the current process properly, understand what’s working & what isn’t and m transition to the offshore model. In addition, organizations must also spend time to help their partners understand the nuances of each vendor relationship to ensure that no relationships are hampered in the long run.

MISTAKE #3: NOT VETTING OUTSOURCING PARTNERS THOROUGHLY

Choosing an outsourcing partner is quite easily the most critical decision you will take during an outsourcing project. Business owners and finance leaders, must therefore spend a good amount of time & effort in vetting the authenticity and capabilities of their potential partners before making a decision. Looking at industry experience, going through testimonials & references, understanding the company values & culture and giving out pilot projects are some things you can do to ensure you pick the right outsourcing partner.

MISTAKE #4: LACK OF CLEAR SLAs

Though this is not common, small business owners are also vulnerable to outsourcing partners who take up work without clear expectations. As a result, organizations feel lost when the quality of work is poor, deadlines are missed and errors start creeping in.

Starting an outsourcing project without a well-defined Service Level Agreement (SLA) is a big no-no. Make sure this document is extensive & detailed with clearly-defined KPIs, deliverables, TATs, and escalation matrix.

MISTAKE #5: DATA LEAKS

When you outsource accounts payable or any other finance activity to a third-party vendor, you inevitably share sensitive financial information with them. Data leaks can damage your reputation, put you at risk of cybercrimes, and spoil relations with suppliers.

Therefore, before you hand over financial data to an outsourcing partner, ensure you have checked the safety measures they take for transferring and storing data. Be on the lookout for ISO ratings and other industry-standard compliance measures.

Partner with QX Global Group for Accounts Payable Outsourcing

QX Global Group is a global Business Process Management (BPM) company offering a wide range of back-office services for small businesses. Since its inception in 2003, QX Global Group has worked with businesses across industries to optimize accounts payable by deploying the right people, processes, and platforms.

We follow a unique partnership approach that allows us to understand your specific organizational needs, devise customized solutions and ensure continued improvements. Get in touch to kickstart your finance transformation journey today!

Originally published Jun 27, 2022 08:06:21, updated Nov 05 2024

Topics: Accounts Payable Automation, Accounts Payable Optimisation, Accounts Payable Process