Whether you are a small business or a large organization, having the right process to manage your invoicing, payment fulfilment, and other related expenses can make managing your accounts payable easier and more efficient. However, it is a complicated process and needs to be handled by experts to ensure its accuracy and efficiency. Two ways to manage the process are hiring in-house experts or outsourcing it to a third party, outsourcing being the better solution. Outsourcing helps with any type of accounts payable challenges. Even if your company is unfamiliar with the term “outsourced”, it is something almost all businesses should consider doing at some point.
Outsourcing accounts payable includes using outside parties to take care of routine invoicing, collections, and payments instead of manually entering these tasks into an invoice tracking system and manually editing payment sequences on your own. When done correctly, outsourcing can provide several benefits for your company. This blog will discuss the accounts payable challenges and how outsourcing can help you overcome these issues.
Accounts payable challenges
Organizations face constant pressure to cut costs, increase efficiency, and reduce risk. However, when it comes to managing your company’s accounts payable challenges, there is no room for shortcuts or questionable practices. If you face accounts payable issues, you should not ignore this important risk factor. It is best to explore the challenges and their impact on your business to mitigate their effects better. Following are accounts payable challenges you must be aware of:
Manual data entry
Generally, the accounts payable personnel enter the information manually, confirm the invoice, and then make the payments to process a vendor/supplier invoice fully. If the data entry is done manually, there is an increased risk of errors, which may result in incorrect calculations, inaccurate payments, and a poor effect on your business’s financial statements. To spot and eliminate errors, you must manually scan through your spreadsheets one by one. This leads to significant time wastage, which could be used for other important business activities.
Managing vendor invoices
If you have numerous purchase transactions and subsequent invoices from your suppliers, it is easy to lose track of them. A lost invoice can be recovered if you speak with your supplier/vendor and request them to re-send it. What if you don’t notice that an invoice is missing? You may not realize it until you receive a reminder from your supplier/vendor demanding immediate payment. It can negatively affect your business’s audit readiness and tarnish your business’s reputation.
Missing purchase orders
Creating purchase orders is crucial because they assist you in avoiding unauthorized purchases and duplicate orders. Purchase orders enable you to track how much money you spend on what items and what items you have ordered. Many business owners skip creating purchase orders because it is a difficult and time-consuming.
Vendor management issues
Maintaining good relations with your suppliers is very important! With short-notice ordering and poor payment terms, you can lose a vendor’s trust and miss out on benefits such as flexible payment terms and short-term ordering. If you manage your business processes manually and in-house, you may spend much time maintaining and repairing damaged business relationships with your vendors/suppliers.
Do not fall for duplicate payments! Suppliers often send you a second invoice if the first one has not been paid off quickly, and you may end up paying for both. If you run a business from multiple locations, it may be difficult to know which office is paying for which vendor invoice. Your financial condition is adversely affected by duplicate payments, and unless you can identify and take action on the outstanding payment, you can lose a considerable amount of money.
Slow and inefficient processing
Manual and in-house processing of your account payables may be time-consuming, and an efficient process may lead to less desirable results. For example, in a medium-sized firm, several employees might need to review a vendor invoice before dispatching the payment. Those approvals might take time if they have to hand deliver or mail out the invoices. Additionally, you can miss an early-bird discount or have to pay a late payment penalty due to the long approval cycles. Without an efficient procedure, you also run the risk of purchases that are not authorized. If you do not set out the rules regarding what merchandise and services you will buy, how much you should spend, and who should authorize them, your expenses and revenues may be severely impacted.
How does outsourcing help?
Accounts payable is an important but complicated business process that takes too much time, costs, and resources to manage on your own or via an in-house accounts payable management team. Outsourcing is one of the best ways to overcome the accounts payable challenges mentioned above. Outsourcing accounts payable process offers you access to the knowledge and experience of expert personnel and relieves you from the stress of investing your time in the process. The time saved can be reinvested in other operational activities. Let us know more about how outsourcing helps efficiently manage the accounts payable process.
Save time and money
Managing your accounts payable process will always result in many mistakes, especially when dealing with smaller companies. This is why it is smart to outsource or automate these aspects of your business as much as possible. Doing so not only streamlines your process but can also save you time and money in the long run. For example, if you outsource all your accounts payable tasks, you would not need to spend as much time re-stocking your inventory or running payments through multiple channels to identify and pay off old invoices. This also means your company would not be tied up with paper-based activities that could become a distraction.
One of the best benefits of outsourcing your accounts payable tasks is that it provides a great learning opportunity. Since different companies have different processes, you can piggyback off of someone else’s expertise by outsourcing your accounts payable tasks. This way, you not only get access to the knowledge of others but also receive a better price than if you were to do these tasks yourself. Additionally, it is important to look for companies that have proven themselves to be reliable and trustworthy. Outsourcing not only helps with accounts payable, but you can also choose outsourcing for accounts receivable service, payroll, etc.
Maintain complete control of your accounts payable process
Another great benefit of outsource accounts payable processes is that you get to maintain complete control of your company’s processes. This is great if you are unsure how to approach an issue or want a chance to try out a new process before making it a standard part of your business. Most importantly, you can decide whether or not outsourcing is right for your company.
Increase transparency by adding a digital touch to your account payable management
Outsourcing your accounts payable processes can help you provide more transparency to your customers and stakeholders. Having the ability to open up accounting software and see all your payments at the same time can provide some reassurance to your customers that everything is running smoothly. This can be particularly helpful if you are selling products or services that require a lot of paperwork or know-how to work properly.
Improve operational efficiency by removing bottlenecks in your accounting process
Another reason to outsource your accounts payable processes is that it can help you remove bottlenecks in your accounting process. For example, you may find that some of your employees are less than efficient in handling certain tasks. By bringing in outside help, you can evaluate the performance of this group and see if you can improve things by encouraging creativity and individuality.
Better customer service with lower response times
By outsourcing accounts payable processes, you can improve your customer service. This can particularly be the case if you outsource to a third party that specializes in providing customer service. For example, let us say you outsource all your customer service tasks to a call center. As a result, you will see a direct improvement in customer service as these teams are used to dealing with a specific type of customer. You might also see this kind of improvement if you outsource your customer service to a third party specializing in providing human resource support.
Accounts payable management is critical for businesses as it plays a crucial role in their cash flow. Proper accounts payable management helps take care of the business’s cash flow but also helps build a strong vendor/supplier relationship. To make this process easier, you can choose outsourcing accounts payable instead of an in-house team. Outsourcing service providers use the latest accounting tools and software to offer you the best services by streamlining your accounting processes.
You can choose to outsource your accounting and bookkeeping processes completely or just choose to outsource specific business processes such as accounts payable, accounts receivable service, payroll, etc. Go for the process that suits your business’s requirements the most.
The outsourcing accounts payable process offers you access to the knowledge and experience of expert personnel and relieves you from the stress of investing your time in the process. Let us know more about accounts payable challenges and how outsourcing helps.