Accounts Payables or Trade Payables are a part of short-term liabilities which are to be paid within one year. It involves invoice processing and can be very mundane at times. Many companies, particularly those in developed countries like the US, choose to outsource their accounts payable.
But should you go for Accounts Payable Outsourcing?
Here are some key factors you need to keep in mind:
It is estimated that outsourcing reduces the costs of the projects by 20% to 30%. It is true for accounting as well. Employing local employees in simple, routine, and mundane works can be costly, particularly because of local regulations, laws, and benefit terms. And the same work, if outsourced, can be done at a fraction of the cost, and it impacts the bottom line directly, making the company more profitable.
Getting Specialized Service:
An Accounting employee does a lot of work. Accounts Payables, accounts receivable, inventory tracking, calculation of compensations of the companies, and many more. They become, like the idiom, jack of all trades but masters of none, and they are prone to making small mistakes. But when you outsource any service, like accounts payable outsourcing, you get a dedicated, knowledgeable workforce taking care of one particular service only: accounts payable. The instances of mistakes come down, and the quality of the work increases because of the specialized service.
Creating Value for the company:
In Accounting, not all tasks create the same value. While functions like company valuation, Company Actions, and other important works create great value for the company, routine works like invoice processing create very little value. Outsourcing such routine, low-value work to F&A BPOs frees the time of the employees of the company to do more important work and create more value for the company.
Avoidance of Error
When Ford Motors created assembly line manufacturing in 1913, the concept of work changed dramatically. A particular employee became an expert in one part of the production only and the efficiency increases by many folds. The same is true for outsourcing to F&A BPO as well. The outsourced employees take care of specific tasks and they become so expert at that, mistakes are avoided.
Avoidance of Frauds
Frauds happen when the concerned employee has something to gain from the unfair transaction. There should be incentives to bend the laws and do some illegal activity. However, when you outsource your projects, this risk comes down. For an outsourced employee, the job is just a job, without any incentives for fraud. It is just some numbers and names without any faces. For that reason, the chances of fraud come down.
Early Payment Discounts
There could be trade rules where early payment ensures some discounts for the company. When you are processing the invoices onsite, you may have other pressing matters and routine jobs like invoice processing go to the back. However, if the process is outsourced, the offsite person will do the invoice processing only and it will help in getting trade discounts.
It has many benefits but you should be cautious about the process as well. You should engage only good companies which can process the invoices effectively and efficiently. There should be a stringent data privacy agreement in place. Finally, it is your decision if you want to outsource your accounts payable process, but hopefully our article can help you to decide.
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 firstname.lastname@example.org or call us at 908-359-2600.