Topics: Accounts Payable Process, Finance & Accounting Outsourcing

Accounts Payable Challenges and How Their Solution Lies in Accounts Payable Outsourcing Companies

Posted on November 23, 2023
Written By QX Global Group

How Accounts Payable Outsourcing Solves AP Challenges.

Every business encounters its own set of challenges regardless of its size or industry. Amongst these, managing cash flow often tops the list. A dwindling cash flow could stem from various factors like delayed customer payments, unforeseen expenses, or suboptimal inventory management. However, one crucial aspect often overlooked is the management of Accounts Payable (AP). 

Effective AP management holds the power to conserve cash, maintain amicable supplier relations, and provide a granular view of your cash situation. Many times, multiple inefficiencies in the accounts payable (AP) process can be the reason for a weak cash flow. This is when businesses scramble to check what is wrong with their accounts payable process and do some course corrections. However, companies will be served well if they can address the core challenges of the accounts payable process. While many challenges can appear impossible, companies can look at accounts payable outsourcing services to drive efficiency in their process. 

Can Accounts Payable be Outsourced? 

The simple answer is yes, and you can outsource accounts payable and the entire Procure to Pay function that is integral to your business’s finance and accounting arm. This includes accounts payable, invoice processing, PO management, etc. When you outsource accounts payable, you are essentially partnering with a reputed outsourcing provider whose team has a history of processing accounts payable for companies across domains in the UK. Your outsourced accounting department will ensure you can easily handle your accounts payable, not miss out on invoices, and strengthen your reputation amongst suppliers.  

What are the Challenges Faced in Accounts Payable? 

There are plenty of challenges that the accounts payable business process outsourcing services can solve. Let’s take a look at them: 

  • A slow manual process

    If your company is still depending on paper-based, manual accounts payable processes, then it is looking at approval times that are lengthy, which, in a worst-case scenario, can result in payment delays. If the invoice approval process is long drawn out, so is the payment process. It can result in a domino effect, which can ensue late payments, delayed shipments, and inventory issues. This becomes a problem for your O2C cycle wherein the customer’s orders might not be fulfilled on time, further impacting business growth, which then affects credibility and getting favourable payment terms from suppliers, creditors, and more.
    Solution: Accounts payable outsourcing can help your company transition to a more modern, digital approach to accounts payable, wherein an advanced tech stack removes or minimises manual processing to speed up the AP cycle.  

  • Payment Duplication 

    Think of a scenario wherein you make a payment once, then make a payment again because of duplication. This typically happens when you cannot pay the first invoice on time; it gets lost among the many invoices you receive, the supplier sends a second invoice, and you end up paying twice. If your business works out of distributed locations and there is a lack of clearly defined guidelines regarding which site is responsible for making the payments, you can face the invoice duplication problem. This problem can also rear its head if there is a lack of process standardisation that makes it easy to track vendor payments. 
    Solution: Your accounts payable outsourcing partner will focus on setting a standardised process that helps monitor and track all invoices and implement automation solutions to ensure timely payments and improve vendor relationships.  

  • Tech Led Transformation

    According to Gartner, 90% of businesses say tech is critical for meeting organisational goals. The problem is one of budget. As business leaders are tasked with cost optimisation, they need to prioritise tech investments and choose functions that they believe can deliver increased tech ROI if they benefit from the right technology. This requires prioritising tech investments towards areas expected to offer a higher technology ROI. Consequently, the finance and accounting sectors may receive only minimal attention when it comes to tech spend. But why leave to chance the potential benefits that advanced technologies like AI and ML can provide for accounts payable enhancement?
    Solution:  The right accounts payable outsourcing companies can deliver expert support for process optimisation and technology upgrades. They can also suggest and implement the right digital transformation strategy to transform your finance and accounting initiatives.

  • Supplier Mismanagement

    Inherent inefficiencies in accounts payable can result in suppliers either not getting paid on time or not paid at all. Invoices might not be ready, multiple purchase orders might have been placed for the same material, or a slow and laborious approval process means payments are delayed intermittently. This results in vendor management problems wherein suppliers/vendors lose trust in your business, and some might even refuse to do business with you. Your company might also end up not getting good payment terms from suppliers, and orders will stop being fulfilled at short notice if such a need arises. The situation will be such that established players in the domain might not work with you, and you will be forced to work with new, less reputable players, which can harm your business.
    Solution: Accounts payable outsourcing companies can manage every aspect of accounts payable, whether it is effective supplier management or any other. Rest assured that your relationship with your supplier will not suffer because of AP inefficiencies.  

  • Scalability

    A growing business needs an accounting department that can grow to meet its increasing finance and accounting requirements. Many companies are forced to do more with less because of the growing skills shortage in accounting. Managing the length and breadth of the accounts payable process becomes a problem, and inefficiencies creep in. The team is spread thin and is under tremendous pressure to manage all AP responsibilities, resulting in errors and delays.
    Solution: Accounts payable outsourcing services enable your company to benefit from an outsourced accounting department that seamlessly extends your in-house team. You can add more resources to your team quickly and with relative ease to support growing business needs.

How can I improve my AP process? 

The AP process can only be improved if you think strategically and identify the gaps. If you believe your supplier queries aren’t being addressed quickly, this pain point must be handled promptly. On the other hand, if you think your TAT is suffering because of legacy technologies, it will be in your best interest to address technology challenges. AP process improvement can also be achieved by building capacity on demand. This can be achieved with accounts payable outsourcing that benefits in two ways. You get access to the best accounting talent when you need it, and the cost-effectiveness of this move will help you invest more resources in other strategic aspects of finance and accounting.  

Your core focus should be on identifying an outsourcing partner that aligns well with your needs and how your accounting team works. This guarantees seamlessness, which delivers high ROI. QX leverages the best accounting talent and advanced technologies to ensure high processing accuracy for your accounts payable operations and, at the same time, decrease operations costs through process efficiency.  

Contact QX to learn how we can help you address AP challenges.  

Originally published Nov 23, 2023 07:11:18, updated Nov 29 2023

Topics: Accounts Payable Process, Finance & Accounting Outsourcing


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