Topics: Accounts Payable Process
Posted on February 02, 2018
Written By Priyanka Rout
Any business owner/manager understands the importance of the accounts payable process. As a decision-maker who is primarily concerned with maintaining a strong bottom line, they are keenly aware that the accounts payable function doesn’t generate any returns. Nevertheless, it is an essential activity and if not run accurately it can have a detrimental effect on a business.
On the other hand, a streamlined accounts payable process can be instrumental in keeping suppliers and partners satisfied. This puts CFOs, FDs and MDs in a predicament since they comprehend the importance of accounts payable function, but they also know it won’t have a direct impact on profits.
So, should they really be investing resources in the accounts payable process? What steps can they take to make the process more efficient?
Outsourcing your accounts payable (AP) can significantly enhance your business efficiency and financial health. Here’s a deeper look at why it’s a strategic move:
Traditionally, managing accounts payable in-house involves a considerable amount of routine, repetitive tasks such as data entry and invoice matching, which can be quite mundane for your team. By outsourcing these tasks to specialists, your in-house staff can redirect their focus towards more strategic, value-added activities in accounting and finance.
This not only enhances job satisfaction but also promotes better use of your human resources. Additionally, outsourcing can reduce the headcount needed for these administrative tasks, potentially lowering your overall operational costs and streamlining your department’s efficiency.
Manual accounts payable processes, especially those reliant on outdated tools like spreadsheets, are prone to errors, from data entry mistakes to missed payments. Outsourcing to a provider that utilises modern, automated systems can dramatically reduce these errors.
These providers implement sophisticated software that can automatically extract and process data from invoices, minimising human intervention and the associated risks of error. This leads to more accurate financial reporting and compliance, reducing the likelihood of costly financial discrepancies.
Outsourcing firms typically operate under stringent Service Level Agreements (SLAs), which guarantee a certain level of efficiency and reliability. These agreements ensure that your AP processes are handled professionally and according to internationally recognised standards.
Moreover, outsourcing partners often employ the latest in project and process management techniques, further refining the efficiency of your operations. They measure performance across several metrics such as turnaround time, cost, error rate, and quality of work, ensuring they meet or exceed your business objectives.
Discover how we optimised accounts payable for a global beverage producer and distributor, enhancing efficiency and reducing costs. Dive in to learn more!
Outsourcing AP functions can lead to substantial cost savings, which vary based on the size of your business and the volume of transactions you manage. Many businesses experience a reduction in costs ranging from 30% to 50%. These savings stem from various factors, including reduced labor costs, lower overhead expenses, and minimised costs related to AP errors and inefficiencies.
Additionally, outsourcing can enable businesses to take advantage of early payment discounts offered by suppliers, which, while seemingly small on a per-transaction basis, can accumulate to considerable annual savings.
By partnering with an experienced AP service provider, your business can leverage specialised knowledge and industry best practices that you may not have in-house. These providers are skilled in identifying inefficiencies and gaps in your current processes and can offer expert recommendations for improvements.
This expertise not only improves the immediate effectiveness of your AP processes but also provides long-term benefits as your provider continues to learn and adapt their services to your evolving business needs. This relationship allows you to stay on the cutting edge of AP management without the need for constant internal training and updates.
Your accounts payable process has a huge impact on your cash flow, regulatory compliances and supplier relationships. But many companies still struggle with manual data entry of paper-based documents, leading to costly discrepancies and inefficiencies.
Our accounts payable outsourcing services have helped clients improve the entire payables process. We can deliver higher accuracy and decrease operations costs through process excellence, standardised accounts payable (AP) practices, and strategic use of automation.
We work with most of the major accounts payable software systems, and we can work with almost any software that you prefer. In addition, with the help of our in-house IT, we can help you integrate, implement, enhance and build systems and applications to streamline your processes. We also provide a dedicated Purchase Order system which can help your company digitise and automate supplier payments, where this will add value.
To learn more about how our team can help you, get in touch with us.
Accounts payable is crucial as it involves managing the money owed by a business to its suppliers, which directly impacts a company’s short-term financial stability and relationships with vendors, ensuring continued supply and potentially favorable payment terms.
Effective management of accounts payable optimises cash flow by ensuring bills are paid within terms to avoid penalties and capture early payment discounts. This can improve credit ratings and strengthen supplier relationships.
Accounts payable is key to cash flow management as it dictates the timing and amounts of cash outflows. Managing it effectively ensures that a business can meet its financial obligations without compromising its operational efficiency or financial health.
Originally published Feb 02, 2018 12:02:17, updated Nov 29 2024
Topics: Accounts Payable Process