How to Do Accounts Payable Outsourcing Right the First Time: Top FAQs Answered

Considering its direct impact on the company cash flow, regulatory compliances and supplier relationships, accounts payable (AP) is one of the most critical aspects of any organisation’s finance function. However, this complex web of processes can also get quite laborious and time-consuming, prompting finance leaders to team up with experienced accounts payable service providers.

While sourcing AP to a third-party vendor is a go-to solution for businesses across industries, there is one common question that troubles every finance leader – how to do accounts payable outsourcing right the first time?

Let’s face it – outsourcing accounts payable to an unreliable partner that fails to understand your organisational needs can do more harm than good. Therefore, it is important to know all about accounts payable outsourcing before you jump on the bandwagon. What AP tasks can you outsource? How much money can you save by teaming up with a sourcing agency? What things to consider while choosing a partner?

If you’ve been wondering how to do accounts payable outsourcing effectively, read on to find out the most frequently asked questions that about AP outsourcing.

1) Why should I consider accounts payable outsourcing for my business?

For any business, its accounts payable processes have a huge impact on its cash flow and supplier relationships. However, many businesses continue to struggle with manual data entry of paper-based documents or inefficient processes. This usually leads to expensive discrepancies and inefficiencies.

Many businesses consider AP services to reduce operational costs – however, there are many more benefits of outsourcing accounts payable processes. These include freeing up resources, improving process efficiency, eliminating errors and adding scalability to a business by establishing future-ready shared service centres.

2) Which accounts payable tasks can I outsource?

Some of the key accounts payable tasks that companies outsource include:

• 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
• Maintain details of authorised and disputed invoices
• Supplier statement reconciliation
• Effective quality check at bottlenecks/failure modes in every process
• Supplier payment run: Ad hoc/weekly/monthly runs, including international payments
• Supplier helpdesk: Dealing with chasers, supplier queries and escalating issues

 3) When should I outsource my accounts payable function?

Some of the signs that indicate you should outsource your accounts payable include:

• Heavy reliance on manual data entry of paper-based documents
• Frequent processing errors and discrepancies
• Delayed payments
• Hampered supplier relationships
• Failure to identify cost saving opportunities
• Using outdated software
• Lack of standardised processes
• Inexperienced staff

 4) What are the main benefits of outsourcing accounts payable to a third-party vendor?

Some of the key benefits that most businesses can expect from an outsourced accounts payable are:

ELIMINATION OF ERRORS: Businesses using outdated systems and tools such as Excel spreadsheets to record accounts payable are more prone to costly errors. The best accounts payable outsourcing providers can implement latest software or automated systems that are able to recognise and extract information directly from invoices with minimal human intervention.

REDUCED OPERATIONAL COSTS: More often than not, cost reduction is one of the primary drivers for finance leaders to take to AP outsourcing. While the exact savings depend on the size of the organisation, vendors it deals with and the number of transactions, many businesses have saved 30%-50% of their original costs. Add all the savings up and it’s a substantial annual saving to the business.

EXPERT ACCOUNTS PAYABLE TEAMS: By utilising the expertise of an experienced accounts payable service provider, a business can redesign & streamline current processes, recognise inconsistencies between the current and desired state, and then plan for further optimisation. A good finance & accounting outsourcing company will deliver valuable benefits which increase exponentially in the form of the learning curve effect.

FUTURE-FOCUS: Many AP tasks like data entry and matching invoices to POs can be quite tedious and drain out onshore resources completely. Once a business outsources its payables, the staff that was previously tied up with repetitive jobs can now be applied to revenue-generating or strategic accounting activities. Additionally, you also have the option to limit the number of staff dedicated to AP processes which in turn would reduce overhead expenses.

5) What technology and software can I expect from a specialist partner?

An experienced accounts payable outsourcing partner will have the capability to work with all major collection procurement systems. Some of the major software packages you should look out for include:

• SAP Business One
• Oracle E-Business Suite
• SAP Concur
• Kofax
• Yardi
• Tally
• Docuware
• Access
• Sage
• Realpage
• Microsoft Dynamics NAV

RELATED BLOG: Curious to know of the factors to consider before automating your accounts payable function? Read the article to find out!

 

6) What are some of the key qualities I should look for while choosing a sourcing agency?

• Industry expertise and experience
• Knowledge of industry-standard tools and software
• Flexibility and attention-to-detail
• Transparent communication
• Compliance with geography-specific standards like GDPR and SOC
• Standard security measures
• Certifications/Accreditations

7) How much money can I save by outsourcing accounts payable to a specialist vendor?

Even though accounts payable outsourcing offers a range of benefits, cost saving has traditionally been one of the key drivers for finance leaders to take to sourcing. However, the exact cost saving depends on a range of factors like company size, transactional volume and number of suppliers a business is engaged with. Several businesses have saved costs ranging between 40-60%. Additionally, streamlining processes and improving efficiency also adds to overall savings.

8) What are the data security measures that I need to put in place while outsourcing?

When a business decides to outsource finance & accounting activities, it inevitably ends up sharing sensitive financial information with a third-party vendor. Therefore, it is important to have proper data security measures in place.

For the UK, a reliable accounts payable outsourcing company will ensure that they comply with ISO information security standards, the UK Data Protection Act, GDPR, and/or any other relevant standards. For the US, security standards such as SOC, ISO, EU-US Privacy Shield, and/or HIPPA and HITECH certifications can be considered.

Lastly, it is important to ensure that data is stored in highly secure servers with limited access on a need-to-know basis.

9) Can I outsource specific tasks or do I need to outsource the entire accounts payable function?

It’s entirely your decision whether you wish to outsource accounts payable in its entirety or pick & choose certain key activities. An experienced accounts payable outsourcing company will always offer the flexibility and will ideally, work with you to provide a customised offering based on your organisational needs.

10)Will I lose control over my business if I outsource my accounts payable?

Absolutely not! Outsourcing does not equate to loss of business control. A specialist partner will function according to the structure and rules laid out in your business contract. In fact, they will customise their services according to your specific organisational needs. At the end of the day, whether the specialist will take care of the entire accounts payable function or just a few of its activities is entirely dependent on you. They will not have the final say in your business decisions or strategies.

RELATED BLOG: Choosing an accounts payable outsourcing company is a critical decision that must involve proper research & evaluation. Read this article to find out all the important questions you must ask your potential partner.

 

Still Wondering How to Do Accounts Payable Outsourcing Right? Speak to an Accounts Payable Optimisation Expert!

QX Global Group is a leading finance and accounting service provider working with businesses across industries in the UK and US markets. We leverage a mix of the right people, processes and platforms to enable finance transformation for our clients. Partner with QX to get the support you need to transform your accounts payable function. Get in touch today to speak with our finance transformation experts for a no-obligation consultation.

Originally published Jan 24, 2022 05:01:40, updated Jun 07 2022

Topics: Accounts Payable Process