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Are you tired of dealing with supplier invoices, vendor payments, and other messy accounting tasks? You’re not alone!
Many businesses still manage accounts payable the old-fashioned way, which is full of manual work and has the potential for human errors. However, there is a strategic solution to these problems—outsourcing accounts payable.
Now that we’ve acknowledged the common challenges in managing supplier invoices and vendor payments, let’s explore how outsourcing accounts payable can be the game-changing solution your business needs.
Understanding Accounts Payable Outsourcing
Accounts payable outsourcing refers to having an external service provider that handles the company’s accounts payable processes and activities. Outsourcing accounting functions include:
Invoice Management
The outsourcing provider receives and logs supplier invoices, verifies their accuracy, and enters them into the provider’s systems on the client’s behalf, removing the need for manual invoice processing on the client side.
Payment Automation
Check or bank transfer payments to the client’s suppliers are handled on the client’s behalf by integrating with the client’s accounting system and automating the payment process for the client.
Vendor Administration
The outsourcing partner takes charge of maintaining comprehensive supplier master files, handling supplier inquiries, managing tax forms, and performing reconciliations of supplier statements for the client. This lightens the vendor management workload for the client.
Insights and Reporting
The outsourcing provider has a dedicated analytics team focused on providing meaningful data, customized reports, and actionable insights specifically aimed at improving the client’s accounts payable processes and performance. Key metrics such as invoices processed, payment cycle times, and opportunities to enhance processes are also gauged for more accurate reporting.
The Benefits of Outsourcing Accounts Payable
Outsourcing accounts payable (AP) functions can offer businesses several benefits. Based on Deloitte’s Global Outsourcing Survey, 65% say that outsourcing helps them focus on their main business activities without distractions.
Here are the other advantages of outsourcing accounts payable:
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Cost Savings
The third-party service provider provides the expertise and specialized tools to optimize the AP process. With this, hiring an in-house staff and allocating office space and technology infrastructure is unnecessary, leading to decreased operational costs.
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Enhanced Accuracy and Compliance
Professional AP outsourcing services have strict quality controls and compliance measures in place. This ensures accurate record-keeping, timely payments, and adherence to regulatory requirements, reducing the risk of errors and fines.
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Improved Efficiency
The key idea is that the outsourcing provider will leverage their expertise to customize the accounts payable workflow for each client company based on that client’s unique policies and procedures already in place.
Rather than taking a one-size-fits-all approach, the provider studies the client’s existing approval rules, early payment discount programs, and other accounts payable processes that the company has developed over time to fit its business.
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Scalability
Outsourcing providers offer flexible scalability to handle growing AP volumes. As the company expands, providers rapidly adapt without extensive hiring and onboarding. Their existing infrastructure and expertise support fluctuating needs to match changing business demands. This scalability empowers strategic growth.
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Access to Expertise
It’s given that the outsourcing providers are experts in AP processes. The knowledge they have in the field makes it possible for them to implement best practices and stay up-to-date with industry trends and technology.
Considerations Before Outsourcing Accounts Payable
While the benefits are compelling, it’s essential to consider some factors before deciding to outsource your accounts payable functions:
1. Data security and privacy
Protecting sensitive financial data is crucial. Ensure your outsourcing partner has robust security measures and complies with data protection regulations.
2. Service provider selection
Research potential partners, review their track record, and seek referrals to ensure they can meet your specific needs. Your choice would determine if outsourcing your accounts payable is the right decision.
3. Integration with existing systems
Ensure that the outsourcing provider’s systems seamlessly integrate with your existing financial and ERP systems for a smooth transition. Before entering into an agreement, ensure you’re on the same page.
If your business is still working around the traditional accounting methods, work with a service provider that can introduce your business to automation.
4. Service Level Agreements (SLAs)
Clearly define service level agreements, including turnaround times, response times, and performance metrics. Setting clear SLAs and performance metrics is crucial to holding outsourcing partners accountable for meeting expectations and delivering consistent, high-quality service.
5. Cost structure
When considering outsourcing accounts payable, it is important to fully comprehend the pricing model and cost structure to guarantee it matches your financial plans and projected return on investment (ROI).
Pricing may follow a per-transaction structure, with costs tied to volume or a fixed monthly or annual fee.
Outsourcing Meets Innovation With Magellan-Solutions!
Accounting tasks don’t have to be complicated by outsourcing accounts payable. With Magellan Solutions, we simplify your accounting processes. May it be accounts payable, accounts receivable, and invoice processing backed by innovative technologies.
Contact Magellan Solutions today to experience a better way of not only handling payments but also maximizing cash flow. The first step toward efficiency starts here – let’s talk about how we can help your business save time and money.