Outsourcing Accounts Payable Services: Fix Errors, Save Money

Do you need help with inefficiencies and errors in your accounts payable processes? Outsourcing accounts payable services could be the solution you’ve been seeking. With the finance and accounting outsourcing market booming and steady 11-13% growth expected to continue over the next three years, now is the perfect time to consider this game-changing approach.

The accounts payable department is the backbone of any business’s financial operations. It ensures vendors get paid correctly and on time, keeps records, and manages cash flow. However, in-house AP departments often need help with mistakes in the data they enter by hand, missing payment deadlines, and needing more resources.

Outsourcing accounts payable services is a great way to end all those struggles. Experienced outsourcing providers have dedicated teams, streamlined workflows, and advanced technologies that ensure efficient and error-free AP processes.

Explore the benefits of payable outsourcing services and how they can transform your finances. This comprehensive guide will show you all the advantages of partnering with a reputable outsourcing provider, from cost savings to improved accuracy and scalability to access to advanced accounting systems.

What is Outsourcing Accounts Payable Services?

Outsourcing accounts payable services means hiring an external company or service provider to care for your business’s accounts payable (AP) functions and processes. Instead of maintaining an in-house AP department, you outsource these tasks to a specialized third-party vendor.

The benefits of outsourcing accounts payable processes are numerous. Firstly, it lets you focus on what you do best while leaving the time-consuming and complex AP tasks to the experts. Outsourcing providers have dedicated teams and specialized knowledge to ensure accurate and efficient handling of invoices, payments, and record-keeping.

Additionally, outsourcing accounts payable functions can lead to cost savings. You don’t have to hire, train, and keep an in-house AP team on your payroll, which saves you money. Outsourcing providers often use economies of scale and advanced technologies to offer their services at a lower cost than maintaining an in-house department.

Common Accounts Payable Errors and How to Fix Them

Accounts payable processes are prone to errors, which can significantly impact a business’s finances. Some common mistakes include:

1. Duplicate payments: Accidentally made a mistake and paid the same invoice twice, an unnecessary expense.
2. Incorrect data entry: Manual errors, such as incorrect vendor information, invoice amounts, or payment dates.
3. Missing invoices or documentation: If you misplace or lose invoices, reconciling accounts and making timely payments can be challenging.
4. Late payments or missed discounts: If you don’t process invoices and make payments on time, you’ll have to pay late fees or miss out on early payment discounts.

Outsourcing accounts payable services can help fix these errors by implementing robust processes, using advanced accounting system, and employing experienced professionals. Outsourcing providers usually have strict quality control measures to catch and correct any mistakes before they happen.

Also, outsourcing companies often use automated invoice processing systems that reduce manual data entry, which means less chance of human errors. These systems can also flag potential duplicates, so invoices are paid only once.

With their expertise and specialized focus on AP processes, outsourcing accounting services can streamline workflows, improve accuracy, and mitigate the risk of costly errors that can plague in-house AP departments.

Cost Savings with Outsourcing Accounts Payable Services

Outsourcing your accounts payable services can save you a lot of money. When you outsource, you don’t have to worry about paying salaries and benefits for your AP staff or spending money on training, office space, equipment, and software licenses. Plus, you can avoid indirect costs from mistakes and inefficiencies in your AP processes. Cutting costs and focusing on what matters to your business is wise.

Outsourcing accounts payable services can be more cost-effective for small and medium-sized businesses due to the fixed fees, economies of scale, specialized expertise, and advanced technologies offered by outsourcing providers.

When comparing in-house AP costs to outsourcing costs, consider total ownership expenses, including direct and indirect costs. Outsourcing can boost accuracy, speed, and visibility, improving efficiency and savings.

Choosing the Right Outsourcing Accounts Payable Services Provider

Selecting the proper outsourcing accounts payable services provider is crucial to ensuring your outsourcing partnership succeeds, and you get the most out of it. Here are some critical factors to consider when choosing accounts payable outsourcing companies:

1. Look for a provider with experience in handling AP processes similar to yours. They should have a good track record.
2. Check their service level agreements and turnaround times for processing invoices and payments to ensure they match your needs.
3. See if they have good technology and automation to improve efficiency.
4. Make sure they have robust security measures and comply with regulations.
5. Consider their pricing and ability to scale services based on your business needs.

Fred Chua, CEO of Magellan Solutions, emphasizes, “At the end of the day, you have to understand whether the outsourcing company truly tries to understand your business or just treats it as a simple job description.”

He cautions against outsourcing companies that provide a price and hire people without delving into the client’s organization’s scope, expectations, objectives, vision, and mission. “That’s not the ideal outsourcing company to work with. It has to be a partnership. Our win is your win. Your win is our win kind of arrangement. We cannot grow without growing the business with you.”

Chua emphasizes the importance of finding an outsourcing partner who is committed to deeply understanding your business. “Many of our clients started small and grew with us to make it a bigger operation. That’s what we have done.”

When evaluating potential outsourcing accounts payable services providers, look for a partner that offers essential features and takes the time to understand your company’s culture, vision, and mission. A partner aligned with your goals and values can provide tailored solutions that drive growth and success.

Benefits of Outsourcing Accounts Payable Services

Outsourcing accounts payable services can provide businesses with numerous benefits, including:

Improved Efficiency and Accuracy

Outsourcing providers excel in AP processes, using specialized teams and technology to improve invoice processing, payments, and record-keeping.

Access To Advanced Accounting Systems and Technologies

Outsourcing companies use advanced accounting software and automation tools that many businesses need to afford.

Scalability and Flexibility

Businesses can scale their AP operations quickly to meet changing demands, making it ideal for growing companies or those facing business fluctuations.

Streamlining Accounts Payable Processes with Outsourcing

One of the key advantages of outsourcing accounts payable services is the ability to simplify and optimize AP processes. It leads to improved efficiency and cost savings. Here’s how outsourcing can help streamline invoice processing and AP workflows:

Outsourcing Invoice Processing Automation

Providers use advanced technology, such as OCR, to extract invoice data, eliminate manual entry, reduce errors, and speed up processing.

Digitization of AP Workflows

Outsourcing allows businesses to move from paper-based to fully digital AP workflows, improving visibility, reducing storage needs, and enabling remote access to financial data.

Automated Approval Workflows

Providers implement automated approval workflows to streamline the process, routing invoices to the right personnel for review based on rules and hierarchies.

Integration With Accounting Software

Outsourcing companies offer seamless integration with accounting software and ERP systems, automatically syncing invoice and payment information to reduce manual efforts.

Continuous Process Improvement

Providers continuously optimize AP processes to deliver better service, ensuring efficiency and alignment with business best practices.

Companies That Benefited from Outsourcing Accounts Payable Services

Outsourcing AP services can help companies enhance efficiency, cut expenses, and simplify financial processes. We will explore actual cases of businesses that have outsourced their AP service and the concrete advantages they have gained.

1. Pfizer

To streamline its invoicing process and improve cost-effectiveness, Pfizer, a leading pharmaceutical company, outsourced its AP services to a specialized provider. By doing so, Pfizer enhanced their efficiency and reduced operational expenses associated with handling invoices from suppliers around the globe.

1. Yahoo

Yahoo outsourced its accounting services in 2007 to provide consistent service levels across all customer segments, regardless of transaction volume or value. The company chose Genpact as its outsourcing partner due to Genpact’s eagerness to enter the online/media space and its flexible approach to structuring the engagement.

Yahoo’s accounts payable department faced high operational costs and inefficiencies. To optimize its operations and reduce overhead costs, Yahoo outsourced its AP processes.

1. Sony

The high volume of transactions and manual processing errors contributed to Sony’s AP accuracy and timeliness challenges. The company outsourced its AP operations to an experienced vendor that offered automation technology and skilled personnel.

Transform Your Accounts Payable with Magellan Solutions

Outsourcing accounts payable services offer many advantages for businesses. Outsourcing can reduce expenses by eliminating the necessity for an internal accounts payable department. Outsourcing providers use advanced technologies and knowledgeable staff to enhance productivity and precision in managing invoices and payments. Their dedicated teams and efficient processes help reduce mistakes and speed up the payment cycle.

Outsourcing AP functions provides access to advanced accounting software and automation tools, allowing companies to adapt to changing needs and manage growth efficiently.

If your business needs help with accounts payable, consider outsourcing to a trusted provider to improve efficiency, cut costs, and prioritize core tasks. Contact us to learn how outsourcing accounts payable services can benefit your organization.