The Best Reasons Not to Outsource Accounts Payable
Digital transformation has moved from front office/customer facing initiatives and is now tackling many manually intensive, back office systems like accounts payable. AP automation is now in the crosshairs of both finance and IT, and for good reason. Advancements in optical character recognition (OCR) and sophisticated software solutions like AP Express can process invoices more quickly and accurately, reducing costly errors, identifying fraud, and enabling companies to redeploy personnel to higher value projects.
When organizations elect to modernize their accounts payable processes, two options exist: either implement an AP automation solution or outsource accounts payable entirely. Although outsourcing AP operations sometimes looks attractive from a cost perspective, the costs are rarely lower in the long term due to the hidden, non-financial costs (lost time, decrease in supplier goodwill, etc.). Moreover, there is a very strong argument that AP automation can act as a springboard for ongoing process improvement.
Below are the best reasons not to outsource accounts payable.
- Control – The internal accounts payable teams understand the needs of your business. They know what is important, and what is not. They understand when to make exceptions and when to hold the line. They are company stewards and work in the best interest of your organization, not the outsourcing firm.
- Accuracy – Internal accounts payable teams can detect incorrect and/or fraudulent invoices. They know the suppliers and they are able to spot scams. When armed with an AP automation system, they are able to work more efficiently and spend time investigating dubious invoices.
- Visibility – The best AP automation solutions like AP Express are natively integrated with your ERP system. The system is always up to date with the status of every invoice, giving the organization 100% insight and control over your cash position.
- Supplier relationships – Your organization has a network of strategic and core suppliers that are key to its business. Up-to-the-minute insight into invoice and payment status is critical to maintaining positive business relationships with these suppliers.
- Flexibility – AP automation provides significant flexibility in terms of how you process and approve invoices. Invoices can be accelerated through the process to meet urgent demands of the business. Approval workflows can be instantly altered to reflect changes in personnel and policy. In addition, solutions like AP Express allow approvers to work remotely and approve invoices even when they are out of the office through a mobile app.
- Predictability – Automated solutions provide cost-certainty in terms of what you pay for invoice processing. There are no hidden charges…no costs for integrating with changing ERP requirements…no costs associated with changes in personnel and policy. Outsourcing AP processing does not eliminate the need to integrate with your ERP. In fact, it exacerbates the integration process since the AP processor will be required to synchronize the payment file with the ERP through periodic flat file exchanges. And every time the ERP system changes, the AP processor will need to adjust their output files.
- Ongoing process improvement – Outsourcing represents a one-time cost reduction. In-house AP Automation provides a one-time cost reduction plus a platform for ongoing process improvements across the organization. These include opportunities on payments, improved supplier relations, better internal collaboration, improved cash management practices and more that can lead to a higher and more sustainable ROI.
Like AP automation, outsourcing accounts payable can lead to short term cost savings. However, the cost savings associated with outsourcing is one-time. AP automation delivers significant ongoing benefits to a business that generate an ROI far in excess of outsourcing. Done right, AP automation can indeed turn payables into profit.
Kelsey Ramaley is an Account Manager at Nivo1