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Business Process OutsourcingFinancial Services

Why CFOs are Outsourcing Accounts Payable?

By April 19, 2022March 14th, 2024No Comments
Accounts Payable Outsourcing for CFOs

One way to modernize your business & accounts payable is to outsource some of the operations. Outsourcing has been a key term for companies, particularly in high compensation countries. Approximately Three Hundred Thousand positions are outsourced every year, in the USA only.

In 2019, the global market size for outsourcing was over Ninety-Two billion US Dollars. In the field of Finance, 71% of executives outsource some of their services. Among them, account payable is one item that is outsourced regularly.

Accounts Payable is the Lifeline of an Enterprise

Account Payables, also known as trade payables, are short-term debt or current liabilities which are payable within one year. These are products or services of the companies that are bought on credit and supposed to be payable in one year, i.e. are short-term in nature and part of working capital calculation.  

Some of the benefits of Outsourcing Accounts Payable: 

1. Cost-Cutting 

There is no argument that the primary benefit of accounts payable outsourcing, or any outsourcing for that matter, is cost-cutting. The cost of local employees is high due to regulations, benefits, and laws. However, the same work can be done by outsourced resources at a fraction of that cost. The direct benefit of the action can be seen in the bottom line of the company. It is estimated that around 20% – 30% cost can be saved by outsourcing.

2. Getting experienced and specialized services

One of the key benefits of outsourcing is getting specialized services. The outsourcing company will hire only experienced peoples who are specialized in that particular task. On the contrary, the local employee will do several accounting tasks and he or she might not be an expert in accounts payable.

3. Creating Value for the company

The accounting department has various works and not all the tasks create equal value. There are lots of mundane tasks like invoice processing, and accounts payable processing, which have to be done but creates very little value for the company. By outsourcing such mundane tasks not only reduce the cost for the company but also frees the time of internal employees to engage in value-added tasks.

4. Avoiding errors

A specialized accounting team can do a perfect job of avoiding errors. They are trained to do one thing: account payable processing and by doing it day in, and day out they become very experts in that task, and their expertise can reduce costs very much.

5. Reducing fraud

At the end of the day, for an outsourced employee the invoice, irrespective of amount or client, is just an invoice. He or she will not have any incentive to overlook some of the discrepancies. These reduce the chances of fraud. After all, it is just another invoice!

In Conclusion

However, while outsourcing you need to be cautious to select the right agency. You have to select a very good and expert outsourcing agency for your accounting needs. The cost will surely be less than in-house staff, but you should not go for only low-budget companies but look for quality. Data Privacy is another issue. You are sharing confidential data with a third-party company. You have to have a very stringent legal agreement for that.

Overall, the benefits trump the problems. Outsourcing accounts payables creates value for the company and thus the CFOs prefer to go for it. Does your company need it too?

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 pricing@ardem.com or call us at 908-359-2600.