The efficacy of third-party service providers is difficult to gauge without variable cost ratio implementing performance metrics and measurement tools. You may never know if they are billing for idle time, accessing non-work websites, accurately reporting issues, etc., if you don’t set expectations and check that they’re met. Some companies find that the cost of outsourcing is offset by the overhead savings created by delegating certain processes to an external provider. Conduct a cost analysis to determine if outsourcing your AP processes could improve efficiency and reduce operational costs.
- This is especially the case for paper-based processes and those manually entering data, chasing down approvals, and heavy PO-based processes.
- Benchmarking your AP organization to your peers can help you identify the greatest opportunities for improvement and ROI.
- This information is then used to develop a customized solution that aligns with the client’s specific needs and business objectives.
- When executives consider outsourcing accounts payable, they usually come across keywords such as in-house teams, AP automation, SaaS services, or shared services centers.
Define and track SLAs based on what’s important for your business.
When considering accounts payable outsourcing, it’s essential to understand the services provided by accounts payable outsourcing companies. They offer a range of technology, personnel, and value-added consulting services to help manage your accounts payable processes more efficiently. Some of the most frequently outsourced processes include invoice receipt and processing, vendor management, and payment processing.
The comprehensive guide to accounts payable outsourcing
Relying heavily on an external service provider for essential financial tasks can be risky. If the provider experiences technical issues, service disruptions, or even goes out of business, your AP function could come to a halt, causing delays in vendor payments and impacting cash flow. One of the most significant drawbacks of AP outsourcing is the reduced control over your financial processes. When you delegate AP tasks to an external provider, you’re no longer overseeing the daily operations directly. This can make it difficult to track progress, resolve issues quickly, or ensure that the provider is meeting your company’s accounts payable needs.
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They’ll even negate many of the problems that have plagued AP departments for decades. For example, the average salary for an in-house AP clerk in the United States averages around $45,366 annually, not including benefits and taxes. Outsourcing lowers these costs by providing access to a team of experts at a fraction of the price. For instance, Costa Rica – consistently ranked as the top nearshore destination in Latin America – offers a deep pool of highly skilled talent at a labor arbitrage that averages between 30-50% for North American organizations. And with many North American organizations having established operations in the region, there is a large talent pool that is familiar with US operational requirements, schedules and pace.
Use performance monitoring tools
A reputable provider delivers instant access to accounts payable best practices, best-in-class talent, and automation tools that maximize AP performance while giving internal teams the bandwidth to become true business partners. Even after the initial transition phase, active management and oversight of the outsourcing engagement are crucial. Regular performance reviews and audits should be conducted to evaluate the provider’s adherence to agreed-upon service levels and key performance indicators (KPIs).
Challenge potential partners to detail a robust transition process that includes documentation, effective training, change management, and a structured solution for deploying automation tools. Make sure you understand how the transition will occur, how you will know it’s completed, and how the outsourcer measures success. But an exceptional partner should also have the tools and expertise to help you work smarter in a post-pandemic world. Increased resources – Outsourced AP solutions are generally going to come equipped with technology (i.e. AP Automation platforms) to handle their workflows.
Additionally, if managing AP tasks distract your team from core business goals, outsourcing can free up resources to focus on strategic initiatives that drive your objectives forward. Choose an outsourcing provider with robust security measures, including encryption, secure data storage, and compliance with data protection laws. Outsourcing firms specialize in AP management, ensuring not only efficiency but also strict compliance with evolving regulatory standards. These providers stay at the forefront of industry best practices, offering insights and strategies that might be beyond the scope of an in-house team.