If you're struggling to manage a complicated, manual AP process, it can be tempting to outsource your AP process. You might consider hiring an accounting service or a fractional finance team just to get that towering stack of paper off your desk and get those hours back every month.
Before you can make that decision, you need to balance the pros and cons of hiring outside help—weighing them against the possibility of automating your own AP process to keep your payments, information, and documentation in-house.
If you're concerned about the dwindling efficiency of a ballooning AP department, automation can help with that too.
This article will walk you step-by-step through the process of making that outsourcing decision, explaining what accounts payable outsourcing is, why companies do it, the pros and cons, and the possible alternative of AP automation.
What is accounts payable outsourcing?
Accounts payable outsourcing is just what it sounds like—outsourcing your AP process to an external service. But how does it work?
Outsource services can take many different forms, but at the end of the day, they all share a few essential elements in common:
The outsourced team needs a way to receive your bills and invoices
They need to provide bookkeeping services to enter that data for you
They need to get your approvals for those bills and make payments for you
And those outsource accounts need to mesh back up with your own accounting software
Imagine doing all that with manual AP processes. You'll see immediately that it wouldn't make sense. The implementation alone would be a nightmare, not to mention extremely costly.
You'd be so busy shipping papers back and forth, making sure nothing slipped through the cracks of those manual systems, that you'd be no better off than you were before.
That's why financial outsource industries and businesses have switched to AP automation.
Bills and payments are processed electronically and stored digitally. And the accounts payable outsourcing service usually has remote access to your accounting software to keep your general ledger and expense reports up to date.
An AP outsourced business solution might sound like it operates more efficiently, so it can improve your bottom line. That’s often true. But as a general rule, that's because they're using more efficient technologies.
That isn't to say outsourcing is bad. Not at all. Many companies outsource their AP for a variety of reasons that make perfect sense for their strategic situation.
The point is simply this: If you're considering outsourcing your AP, don't compare apples to oranges, meaning don't compare your current manual process to someone else's automated one.
Instead, understand what automation could do for your own process. Then decide whether to outsource.
Why outsource your accounts payable?
Many companies outsource their back-office accounts payable and/or accounts receivable tasks because they don't want to increase their headcount.
Plus, an accounts payable service or organization can serve each customer in a fraction of the time because they're specialists. They have a lot of AP experience, and they dedicate every resource to that one job.
That might be true, but it isn't the whole story.
Companies that are worried about headcount expansion are often struggling with an equivalent increase in paperwork. More physical bills and invoices. More hand-signed approvals. More hand-signed checks.
The manual AP system that worked when they first started isn't working anymore.
Instead of changing the system, they require more and more people to manage it—to perform data entry, to track down each approval, to catch human errors. It's just not functional.
So, to reduce costs, they find an AP supplier and hire those services out. In short, they finally change their system by letting someone else handle it. And, to make sure both the customer and the AP team benefit from the relationship, that outsourced AP team is probably using automation.
Now, depending on how efficient that service is and how many hours you need from them, they still might be more cost effective than automating your own AP processes and maintaining a lean AP team. But, again, you should compare apples to apples to make that decision.
To do that, let's look at the pros and cons of outsourcing versus automating your own AP and keeping it in-house.
AP outsourcing: the pros and cons
Many of the most valuable aspects of outsourcing your AP are actually shared between both of these choices: you get the pros whether you automate your own system or hire someone else.
Digital records, storage, communication, and issuance of payment
Integration with accounting services like QuickBooks
Secure, cloud-based AP that can be accessed remotely
More efficient use of early payment terms to reduce costs
Easy reconciliation and monthly close
Each advantage on that list is actually a benefit of automation, not outsourcing in and of itself.
Still, that outsourced team didn't have to be trained, right? Many business leaders expect a huge headache in switching from a traditional AP system to a more practical automated one.
But with the right automation solution, switching to automation isn't a headache at all.
Paying your first bill takes anywhere from a few minutes to a few days, depending on the size of your AP department and processes. Even with an enterprise solution, it doesn't have to take weeks or months.
So, why would you really outsource your AP? Here are a few scenarios in which outsourcing might make more sense than automating in-house:
Your growing company doesn't need a full-time CFO, but you do need fractional CFO services, and those financial services come with automated AP as a bonus
You've built strong relationships with your outsourced accounting team, which now also offers automated bill pay services
Hiring outsourced AP from a well-known, reputable company will reassure new clients, manufacturers, investors, or other sources of capital
You've been handling all your AP yourself until now, and you don't want to hire an employee to do it because you don't want to have to manage them
One of the best things about Bill.com is that you can choose our intelligent business payments platform as your AP automation solution whether you decide to automate your own processes or outsource them. In fact, Bill.com is used by over 80% of the top 100 U.S. accounting firms.
Whether you hire someone or automate your own in-house system, you'll enjoy the same intelligent data capture (resulting in fewer duplicate entries and other human errors), the same insight into each purchase transaction, the same efficient tools and utilities in the same web and mobile app.
You'll also enjoy similar time savings. Bill.com customers reported saving, on average, 50% of their time spent on AP. You'll benefit from the performance improvements of automation whether you keep your payable processes in-house or hire a professional.
In addition, you'll enjoy the same availability of your data, the same control over compliance workflows, the same detailed invoice and payment tracking, with the same standardization of your AP process.
You'll know when you were billed and for how much. You'll know every approval workflow was checked and applied automatically. You'll know where every document is located. You'll know which early payment discounts you benefited from.
And you'll have the same ability to pay or get paid by ACH, virtual card, international wire, or paper check. They're all available electronically in the Bill.com app. We'll even print and mail those checks for you.
You'll also have the same ability to integrate your automated AP seamlessly with your accounting software: QuickBooks, Sage Intacct, Oracle netSuite, Xero.
So if you're ready to make AP easy, while getting paid for your sales 2x faster, set up a personalized demo with one of our product experts or start your risk-free trial right now. See for yourself how easy your in-house AP could be, and then decide whether you still want to outsource it. Either way, we're here.
"We transitioned from a paper file system for payables to Bill.com four years ago and have never looked back. Switching to Bill.com has ensured we never lose an invoice again, never forget to pay, and have greater visibility into our payables - both in detail and in summary. It has made actually paying our bills a breeze, cutting down on time spent printing and mailing checks. Now all it takes is a few clicks of the mouse, and our vendors are paid in full and on time, and a perfect workflow to prove it. In this unprecedented period when we are all working remotely, Bill.com ensures we don't miss a beat." — Katherine Harvey, CEO and Co-founder, Bare Bones Broth