Third-Party AP Companies vs In-House AP Teams

Accounts Payable (AP) is the engine that keeps your business running smoothly. It ensures your vendors are paid on time, keeps cash flow in check, and maintains solid relationships with suppliers. But when it comes to managing AP, businesses often face a tough choice: should you keep things in-house or turn to third-party accounts payable companies?

Each option comes with its own set of pros and cons, and the right choice depends on your company’s unique needs. In this blog, we’ll break down the key differences between in-house AP teams and third-party accounts payable companies, so you can confidently decide which option works best for your business. Let’s dive in and explore what each approach has to offer!

Let’s Understand in Detail!

In-House AP Teams

Definition

An in-house AP team is a group of employees within your company responsible for handling all your accounts payable tasks, from invoice processing to payments.

How It Works

In-house teams work closely with other departments, managing AP directly. They control the entire process, customise workflows, and communicate easily across the business.

Key Characteristics

Full Control: You oversee every step of the process, ensuring it fits your company’s specific needs.
Quick Communication: Being internal means instant feedback and problem-solving.
Customisation: Processes are flexible and tailored to your company’s preferences.

Third-Party Accounts Payable Companies

Definition

Third-party accounts payable companies are external providers that handle your accounts payable processes, using their expertise and technology to manage tasks like invoice processing and vendor payments.

How It Works

These companies take over your AP functions, using automation and specialised teams to streamline payments and compliance. They integrate with your systems and provide real-time reporting.

Key Characteristics

Expertise: They bring specialised knowledge and experience in AP.
Advanced Technology: Automated tools and systems ensure efficiency and accuracy.
Scalable: Services can grow or shrink based on your business needs.

Want to know more about Accounts Payable? Check out our ultimate guide and optimise payables for your business.

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.

Discover how we optimised accounts payable for a global beverage producer and distributor. Read the full case study to see how we boosted efficiency and streamlined processes!

What’s the Bottom Line?

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.

FAQs

What are the key qualities to look for in the best third-party accounts payable companies?

When evaluating third-party AP companies, consider factors like their expertise in your industry, use of automation and technology, transparency in reporting, data security protocols, and flexibility to scale services as your business grows. The best providers should also offer strong customer support and a proven track record in compliance.

What are the less obvious pros and cons of accounts payable outsourcing?

Beyond cost savings and efficiency, outsourcing AP can offer indirect benefits like reduced risk of internal fraud and more reliable cash flow management. However, potential downsides could include a learning curve in establishing communication between your internal team and the provider, as well as possible delays in adapting to custom internal processes.

Why should you outsource accounts payable?

Outsourcing accounts payable helps businesses save time and reduce costs by streamlining invoice processing, improving efficiency, and ensuring compliance with industry regulations. It also allows finance teams to focus on more strategic, value-added tasks, while leveraging expert resources and technology for enhanced accuracy and control.

Originally published Mar 15, 2018 12:03:55, updated Oct 08 2024

Topics: Accounts Payable Process