Third-party accounts payable companies vs in-house AP teams

An effective accounts payable outsourcing process can help your business with revenue recognition, lead to cost savings and help you maximise profitability. In addition, it can also help an organisation build stronger supplier relationships and ensure a smooth cash flow.

When dealing with such a critical function, should your business try third-party accounts payable companies, or stick to the in-house model? Let’s first define the two terms:

In-house accounts payable team: The AP division working as a part of the larger accounting team within a company.
Third-party accounts payable companies: On-shore, near-shore or off-shore providers of specialist accounting services.

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In-house AP teams vs. third-party accounts payable companies

KEY FACTORS	IN-HOUSE ACCOUNTS PAYABLE TEAM	ACCOUNTS PAYABLE OUTSOURCING COMPANIES
Cost	On paper, most in-house teams cost a lot more than any type of outsourced services. However, in many cases, the efficiency a handful of in-house resources may be higher than that of a larger team of offshore AP professionals.	Near-shore will cost a less than an in-house team. Off-shore AP teams can cost between 30-50% less than an on-shore team. The key challenge is to find quality accounts payable outsourcing companies who are able to lower down the cost-per-invoice while delivering a high level of quality.
Control	In-house teams are directly under the control of relevant Finance Managers and Finance Directors. They also fit well within the company’s culture and are aware of all the written policies and the unwritten rules. This gives an FD or FM a high degree of control over the team.	Loss of control is one of the most common fears when it comes to third-party AP providers. The team sits in a remote location, the staff may come from a different culture and may not be fluent in your language, and they may even have different working hours. Choose a provider with a dedicated team working seamlessly as a part of your team to resolve these issues.
Efficiency and productivity	In-house teams can be highly efficient, as long as they are adequately staffed and have specialists handling the job. In addition, it is also essential that they adhere to best practices and follow a standard process. However, many organisations find it difficult to implement best practices and technology. This can lead to a plateauing of efficiency and productive levels.	Specialised accounts payable outsourcing service providers often have optimisation platforms, quality management processes and experienced staff. This helps them to improve efficiency and overall productivity. If you are able to find a reliable partner with these attributes, then outsourcing can help you exceed current levels of efficiency
Innovation & automation	Implementing digitisation or automation initiatives is a mammoth undertaking. Organisations that have a clear understanding of their processes as well as technology can expect good results while conducting the activity in-house. However, for teams that do not have enough bandwidth, or do not have the capability to successfully implement new technology in-house, this can often be a stumbling block.	Providers that focus only on staff may not be able to help you with innovation and automation initiatives. However, if the AP services provider has experience of helping other businesses implement innovative technologies, they can play a key role in the success of your digitisation and automation drives. Also, companies that do not have technology expertise can benefit by outsourcing to a provider who specialises in that area.
Staffing issues	UK simply doesn’t have as many skilled accountants as it needs. Recruiting and retaining staff can be a major challenge; in addition, staff holidays, absence due to inclement weather or sickness can often leave a business in lurch. The expectation of processing staff to move up the ladder can also lead to shortage of people able and ready to pick up the tedious tasks.	Staffing flexibility and the ability to ramp resources up and down is one of the most attractive aspects of outsourced AP services. With the right kind of service provider, companies can negotiate a holiday/sickness cover, ensuring that not a single productive hour is lost during the year. Choose a service provider with a proper staff training and knowledge transfer plan in place to ensure quality and uninterrupted services.

As we can see from the above points, top accounts payable outsourcing companies will, in most cases, be able to provide equal or better quality compared to the in-house teams. Innovative and tech-savvy outsourcers may also be able to help organisations with innovations; for example moving from a paper-based process to a digital accounts payable system.

However, not all AP service providers are equal. For organisations that shop from the bottom of the pile, it is not uncommon to experience loss of productivity, drop in accuracy, loss of control and lack of any overall reduction in the cost. In order to reap the benefits of third-party AP services, it is imperative that you make a wise choice. Go for a provider that has the people, processes and technology in place to satisfy your specific goals.

Need help?
QX is one of the leading accounts payable service providers in the UK and we have helped our clients improve AP efficiency and supported their digitisation & automation efforts. If you have any questions around F&A or AP outsourcing, please don’t hesitate to get in touch with us. Our AP experts would love to help.

Originally published Mar 15, 2018 12:03:55, updated Jan 29 2024

Topics: Accounts Payable Process