There is a constant drive to spend less time on time-consuming and routine tasks to allow more time for executing business strategies. As a result, accounting is evolving through the use of both automation technologies and outsourcing.
Accounting departments are constantly under pressure to get more done with fewer people. Among those various time-consuming and repetitive tasks is Accounts Payable (AP). Different Accounts Payable (AP) functions can be outsourced and automated to save time, lower overheads, and increase efficiency.
Accounts Payable is a well-defined process that revolves around timely payments to the vendor, 3-way matching, correct charge codes, and reconciliation that requires qualified accounting analysts.
An efficient accounts payable process assures on-time vendor bill processing and getting payments out to your vendors on time. Corporations are increasingly turning to outsource companies for wide-ranging Financial and Accounting tasks, including Accounts Payable that require an entire team to manage and ensure the accuracy of the accounting transactions.
Outsourcing your AP processing results in process improvement with faster turnaround times, higher data accuracy, and lower costs. Outsourcing providers are aware of the best practices in the industry and apply them to your processes that result in high maximum accuracy and improvement on ROI, quality, and productivity. Also, choosing outsourced AP solutions helps businesses better allocate in-house resources and allows for greater focus on the essentials.
What to Outsource in AP
Accounts Payable Process involves:
- Receiving the Vendor Invoice
Whether it is an automated AP or manual AP process, it begins with receiving invoices from the vendor. Accurate recording of the invoices is needed so that these invoices can be verified against the purchase orders, receiving reports, expense charge accounts, etc.
- Review of the Invoice
The AP team reviews the received invoice carefully. It checks for vendor ID, items purchased, bill totals, issuing dates, and payment. It compares the invoices to purchase orders to ensure validity.
- Invoice Approval
The invoice is routed for needed approvals based on the Table of Authority. The AP department has already matched invoices against purchase orders and receiving reports for the quantity and price. Certain purchases can be pre-approved, depending on your policies.
The Invoice data is recorded in the company’s accounting system. The invoice and related data must be filed accurately for future reference.
AP will process paper checks or pay through electronic mode with proper authorization and recording. Most suppliers offer a discount for early and timely payments. Therefore, most companies prefer to make payments on or before the approved date.
All the above functions in the accounts payable department can be outsourced to an Accounts Payable Outsourcing service provider. The outsourcing provider assembles a team of qualified accounting analysts that can work directly in your system or on its own cloud platform.
Savings from AP Outsourcing
There are many methods to calculate the cost a company bears to process each invoice manually. For cost calculation, you require:
- Average cost per invoice
- Total number of invoices received and processed
- Approval cycle time
- Discounts captured from the vendor
- Rate of errors and wrong or delayed payments
To calculate the cost per invoice, divide the operating cost of the dedicated AP department by the number of invoices processed. Suppose you process 1,500 invoices per week and the cost to run your AP department is $15,000 per week. It comes to the per invoice cost of $10.
As per the International Accounts Payable Professionals (IAPP) survey, the industry average cost to process an invoice manually is around $8. And this cost rises up to $15.61 if you have to handle invoice errors.
You may need to perform a cost analysis to determine the viability of outsourcing the accounts payable process to an outsourcing AP provider. To perform a quick cost analysis:
- Outsource cost calculation will be based on the AP processes you want to outsource.
- Determine the in-house expenses that the outsourcing process can avoid.
- Estimate the total costs of outsourcing for the specified processes in step
- Deduct the costs of outsourcing from in-house expenses. It will show your estimated savings.
Since accounts payable outsourcing partners have developed robust processes and benefitted from processing a large count of invoices in various formats, they can also help you by producing higher quality data with efficient processes for exception handling.
Scaling Operations Capability
- When moving into new markets, adding multiple locations, and creating more business lines, you need a system that can match your scalability requirement. The expansion requires your focus and more time to devote to essential business operations.
- An outsourcing partner can assist by providing Accounts Payable services that can increase business process efficiency and improve audit controls, i.e., Obligation to Pay Controls, Data Entry Controls, Payment Entry Controls.
- AP outsourcing providers are equipped with the tools, skills, and technology that can help you manage your existing accounts payable functions efficiently. allowing you to integrate new capabilities in your more streamlined accounting environment.
Growing companies support the accounting and finance teams with outsourced Accounts payable. AP automation is further allowing businesses to accelerate the invoice receipt process, shorten the multi-level approval process to reduce processing cycle times.
More businesses are automating, and outsourcing accounts payable to streamline their finance & accounting operations and restructure their internal processes for scalability.
Accounts Payable Outsourcing Results
- Increased Data Accuracy
Accuracy is necessary to maintain your accounting system properly. A multi-step QC process eliminates errors and reconciles quickly if any issue is found with transactions.
- Increased Efficiency
Benefit from the years of experience of your outsourcing service provider. Transfer the transactional routine AP tasks to your outsourcing partner and free up your time for the more strategic tasks.
- Faster Cycle Times
Outsourcing helps you process your vendor bills faster and get those payments out on time.
- Cost Reduction
With outsourcing Accounts Payable, you can avoid expenses of hiring, training daily staff management, and other hassles of running an in-house Accounts Payable process. Outsourcing partner provides you with experienced and trained professionals lowering your costs and improving your results.
- Easy Integration
Where needed, the processing work completed on the outsourcing vendor platform can be easily integrated with your current accounting system.
ARDEM Capabilities in AP
According to a study, 78% of best-in-industry corporations have adopted e-invoice processing. But adopting new technology can be an entirely new challenge for small and mid-cap companies. With ARDEM Accounts Payable Outsourcing Services, you can either utilize your existing process or opt for the configured solution available on our cloud platform. The platform can be further enhanced based on your specific needs.
- Quick Setup, you can have your ARDEM team up and running within two weeks. The ARDEM Project Manager will be your point of contact, available to service your needs.
- Efficient Processing. You are guaranteed high quality, delivered 100% on time.
- Faster and Efficient Payments, always on time.
- Scalability and Growth, ARDEM can grow your team size as your needs grow. We have a large pool of qualified analysts, all with past relevant experience.
Leading outsourcing service providers like ARDEM do not just take over the responsibility for your Account Payable processes but continuously improve and innovate to develop a lasting, valuable relationship.
ARDEM provides Business Process Outsourcing and Business Process Automation Services to established companies to help them improve operational Efficiency and Reduce Costs. For more information, please reach out to us at email@example.com or call us at 908-359-2600.