Ultimate Guide to Outsource your Accounts Payable in India

Accounts payable is simply the money owed to vendors or suppliers. A company purchases items on credit that must be paid back within a certain time frame.

Most businesses have an accounts payable department, which is critical to managing finances and maintaining positive relationships with suppliers. Accounts payable functions can include invoice processing, POs, data entry, and other activities, but a company's accounts payable workflow is much more than just recording and paying invoices.

Improving cash flow and unlocking savings can be accomplished by optimizing the overall accounts payable process.

What is Accounts Payable Outsourcing?

Accounts payable outsourcing occurs when a third party is hired to manage your company's Accounts Payable process. These BPO providers have all of the tools and technology required to handle all of your company's accounts payable functions. However, AP outsourcing does not and should not end there. Top-tier providers will not simply assume these responsibilities; they will optimize them by introducing new capabilities and developing more efficient business processes to enable growth.

Challenges of in-house accounts payable

An accounts payable department that manages the AP process on its own (in-house) is most likely overwhelmed, especially if your company is small and receives a large number of invoices each day.

Another significant issue is the amount of time staff spends responding to supplier inquiries. Companies cannot expect to extract value from their AP departments unless these tactical and manual issues are addressed. This means that lowering processing costs, improving workflow, driving back office efficiencies, and making better-informed decisions all fall by the wayside.

Benefits of Outsourcing Accounts Payable

While handing over control of your accounts payable may seem daunting, outsourcing accounts payable to a trusted partner has the potential to provide numerous benefits, including:

• Saving time and money
• Access to new payables solutions and tools
• Improved workflow
• Increased security

Companies can streamline their business operations, refine their processes, and increase revenue with the right provider. A well-established accounts payable software service will improve cash flow and make the overall AP process more efficient, lowering costs and strengthening relationships both within the company and with vendors.

Accounts Payable Outsourcing vs. Accounts Payable Automation

When your Accounts Payable operations are failing, you may wonder whether you should automate or outsource the process, and what the difference is.

AP automation streamlines invoice processing workflows, from receipt to approval routing, matching PO and receipt to invoice, review and exception management, and final payment approval. In a nutshell, it streamlines each invoice so that it is easily accessible, tracked, and paid on time. A company will use third-party software to automate accounts payable, but the company will keep all AP processes in-house and will require staff training within the AP department.

Outsourcing your accounting is a little different. It entails, as previously stated, hiring a third-party provider to manage all AP operations. It avoids the cost of implementing accounts payable software and does not consume company resources to run the AP process. It also provides a business with a library of technology and tools, which typically includes AP automation - offerings that create a competitive advantage.

Pros of Outsourcing Accounts Payable

If you haven't already realized it, the advantages of outsourcing accounts payable are numerous. Outsourcing provides a one-of-a-kind opportunity to completely redesign the AP process while also saving time and money.

Cost savings

The truth is that outsourcing your AP process is less expensive than other options. Large overhead expenses are avoided because you do not have to hire and train new employees because the third-party provider already has the people and tools in place to streamline the AP process for you. These cost savings help to improve cash flow and the company's overall financial health.

Resources and automation

Outsourced accounts payable service providers will already have the necessary tools, such as software, document management, and reporting tools. This package can and should include AP automation, which unlocks value in various accounts payable processes such as invoice processing, ERP integration, and payment and remittance management.

Secure invoice processing

The world is a big place, and paying vendors has become increasingly difficult. Security issues plague businesses, particularly small and medium-sized businesses that do not have their own security teams. An AP outsourcing provider bridges the gap by supplying sophisticated security measures and technology for AP processes, lowering the likelihood of a company experiencing payment fraud.

Faster Turn around times

There is never enough time in the day, but using a payable outsourcing service with access to the latest technology and time-saving tools allows you to reclaim some of your time. It also creates a fast and accurate accounting system, which streamlines a company's workflow.

Remove the risk of error

Even the smallest error discovered during an audit of accounts can result in not only costs but also compliance issues. Many account payable errors are caused by manual data entry and a lack of control over Purchase Order requisitions, approval, and delivery.

Professional outsourced companies will use advanced technologies, systems, and processes to detect, eliminate, and mitigate errors before they become a problem.

Cutting down on paper invoices and manual data entry

The technology provided by an accounts payable outsourcing provider allows for the elimination of paper and the reduction of manual tasks such as data entry. There will be no more drowning in paper invoices or squandering resources that could be better spent on more strategic tasks.

Cons of outsourcing accounts payable

Because every story has two sides, there are some reasons why a company might want to avoid outsourcing the AP process. Moving your in-house AP department to a third-party provider is fraught with uncertainty and should not be undertaken lightly.

Privacy and third-party concerns

When deciding to outsource AP, a company must hand over all historical data as well as any internal documents, which some may find concerning. It's always a good idea to look into a provider's privacy policies and security measures before working with them to ensure they meet your privacy needs.

Some people may be concerned about this. Make recommendations for researching privacy policies and security measures before engaging with the outsource partner.

Lack of control over accounts payable

Outsourcing AP means giving up control of the entire AP process. The ability to 'pop in' to check on the AP department and see how bookkeeping is going is no longer available. People are becoming more comfortable working remotely via the cloud, but if loss of control is a major concern, it's worth clarifying with a potential provider that open communication and transparency are important to you.

Teething issues

When outsourcing the AP process, there may be some initial challenges as with any change. When a company outsources its accounting department, there is a chance that entries will be duplicated. Before making any changes, an internal meeting with staff should be held to discuss the outsource partner, how this will affect workflow, and what employees can do to ensure a smooth transition.

Tips to help you shift from in-house to outsourcing your accounts payable department

Companies must conduct due diligence on any potential AP outsourcing firms before transitioning from in-house AP to outsourcing accounts payable. Here are some pointers to help you choose the right person for your company:

• Research: Obtain any testimonials and case studies that will provide you with insight into the experiences that other businesses have had with the specific provider. What worked and what didn't for those businesses? Examine the provider's security policies to ensure they are consistent with yours.
• Prepare: When a company decides to outsource its AP functions, everyone must be on the same page. Roles and responsibilities may change, and employees must be informed and educated on what the outsourced company is taking over. Any changes to processes, such as data entry, should also be communicated to avoid duplication or errors.
• Monitor: If you are concerned about not being able to monitor the productivity of the outsourcing firm, you can use a performance monitoring tool. This includes timesheet reports, inactivity timers, detailed project reports, and other features.

Future challenges if you do not outsource your accounts payable

Outsourcing the AP function is becoming more common as businesses realize they can improve operations without investing in technology in-house. Missing out on the opportunity to outsource accounts payables means foregoing cost savings, improved cash flow and workflow, improved vendor relationships, and the peace of mind that your AP processes are being managed with cutting-edge technology and tools.

Being stuck with AP operations that are manual, time-consuming, error-prone, and lack visibility will not allow for future growth and will only lead to more problems down the road. Outsourcing accounts payable eliminates those challenges, allowing a company to compete and thrive in today's business environment.

About Jordensky

At Jordensky, we are committed to providing an experience of the highest caliber while specializing in accounting, taxes, MIS, and CFO services for startups and expanding businesses.

When you work with Jordensky, you get a team of finance experts who take the finance work off your plate– ”so you can focus on your business.

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