AP Outsourcing vs. AP Automation: Which Strategy Suits You?

The Impact of Accounts Payable on Business Growth 

The accounts payable (AP) process impacts business growth in more ways than one. It is the payment your business owes to its suppliers and creditors, which needs to be paid within a pre-determined timeframe. Problems occur when invoices are not paid on time or the lack of cash flow results in delayed payment. Often, profitable businesses cannot pay their creditors on time due to a lack of optimal cash flow management. This results in poor supplier relationships, which can impact business growth. You don’t receive raw materials in time, or your product inventory is not replenished, thus impacting sales. 

This can happen because of several reasons: 

• Did you know that 40% of B2B businesses pay other firms through paper checks? This puts additional pressure on the accounts payable team to track the paper trail of payments, write checks on time, and largely subscribe to a manual process to make payments. This is time-consuming and error-prone, leading to delayed payments. 

• Dependence on legacy finance and accounting tech stack with very little or no automation impacts productivity. It slows down the payment cycle, and such technology fails to scale at the expected speed, again interfering with the accounts payable process. 

• Finance teams face a triple whammy with a shortage of skills, budgetary constraints, and an inability to invest in the right technologies, which means manual and time-consuming processes. Teams are stretched thin, impacting their efficiency. 

Efficiency Drops Across the Board 

A Look at the Efficient Processes; Source: Insight Software

In the above figure, we see inefficiencies creeping into every function of finance and accounting. This is a problem, but solutions exist; powerful combos, such as accounts payable outsourcing and AP automation, can help embed long-term efficiency in the accounts payable process. 

AP Outsourcing vs. AP Automation: Which is the Right Choice? 

Accounts Payable Outsourcing Vs. Accounts Payable Automation 

The us vs. them debate results from an improper understanding of AP outsourcing and automation regarding accounts payable. When your business outsources its AP process, it is harnessing accounts payable outsourcing services that can manage either a part or the whole AP cycle and its various aspects, such as: 

• Supplier direct debit set-up and maintenance 
• Supplier invoice posting in line with financial policies and checks 
• Maintain the supplier ledger and records 
• Document management with in-house customised DMS 

…… and more 

An outsourced team of accounts payable specialists will work as the extension of your in-house team to deliver much-needed scalability and efficiency to your AP process. 

On the other hand, accounts payable automation is the deployment of accounts payable software that automates many of the repetitive tasks that are part of this process and minimises human intervention. This may include features like touchless processing, wherein the need to input data manually is made redundant. Often, this software is integrated with analytics tools to accelerate further AP velocity and suggest improvements to the AP cycle. 

Accounts payable outsourcing can include automation as a subset. In such cases, the outsourced AP provider leverages AP software to improve AP productivity with a leaner team of accountants. Alternatively, the provider can support your finance tech modernisation needs by deploying and managing AP software. 

According to an Automation Anywhere survey, 78% of respondents said that productivity gains were one of the key drivers for automation software deployment. While automation can undoubtedly boost productivity, plenty of spanners are in the works. 

Discover practical tips and insights on how to fully leverage accounts payable outsourcing services.  

Organisations are Unable to Maximise Automation Potential 

While automation is an answer to the finance industry’s skills shortage, integrating AP automation within the complex framework of accounts payable is still a challenge and requires focused expertise; otherwise, automation ROI won’t be forthcoming. According to a McKinsey survey, only 13% of CFOs leverage automation technologies. This happens because they are unclear about the digital transformation opportunities available for the finance function, and their organisation lacks the digital skillsets to make digital finance transformation successful. 

Some leaders seeking to leverage automation to drive new efficiencies in F&A do so half-heartedly, resulting in automation delivering little value or further complexities and expenses. The answer to these challenges lies in the expertise of skilled professionals with vast experience in implementing AP Automation and maximising its potential by partnering with an accounts payable outsourcing services provider. 

Explore how QX streamlined financial and accounting operations for a UK luxury holiday park company. 

AP Outsourcing and Automation Complement Each Other 

Why think of AP outsourcing and AP automation as separate frameworks to make your AP process more efficient and quality-driven? Leveraging both makes solid business sense. One of the challenges CFOs face is that they cannot assign more team members to tasks with more strategic value. Outsourcing AP function can solve this problem, freeing in-house accountants and scaling the AP process to keep up with business growth. More importantly, you can choose an outsourcing provider with accounts payable specialists with process optimisation expertise who can execute and manage technology upgrades and implement automation technologies to accelerate processes and improve accuracy. You don’t have to worry about a lack of expertise or automation knowledge. 

AP Outsourcing and automation can be powerful combinations that transform your AP process. They enable you to reimagine business spending, manage cash flow and supplier/vendor relationships, and meet compliance goals. 

For this to happen, you must work with a provider with a proven track record of helping businesses explore new avenues for cost savings and enhancing supplier/vendor relationships. QX is a reputed account payable outsourcing provider focusing on delivering long-term value by standardising accounts payable best practices and harnessing the power of advanced technology for accounts payable automation. 

Originally published May 09, 2024 06:05:13, updated Dec 04 2024

Topics: Accounts Payable Automation, Finance & Accounting Outsourcing